Milliman releases new analysis of Medicaid managed care administrative costs

June 23rd, 2015

By Jeremy Palmer

Milliman today announced new research into the administrative costs associated with Medicaid managed care plans. These plans have become increasingly popular, which is due to the Medicaid expansion provisions of the Patient Protection and Affordable Care Act (ACA) and the continued growth of the managed care delivery system within Medicaid. This information is especially valuable now, with the release of the proposed 2016 Centers for Medicare and Medicaid Services (CMS) capitation rate-setting guidance and the CMS proposed rule for Medicaid managed care. These CMS regulations require greater documentation of Medicaid managed care administrative costs, and may be useful as plans look to establish benchmarks.

We are excited about the addition of the administrative cost report to the annual financial analysis of Medicaid risk-based managed care reporting. This is an area of intense focus for the industry as we look to meet increased expectations of transparency in capitation rate-setting and face regulatory reporting of medical loss ratios.

Among other findings, the analysis demonstrates that Medicaid managed care administrative costs are primarily driven by expenditures for human capital and non-income-based taxes and fees.

The administrative cost report complements Milliman’s annual analysis of Medicaid managed care financial results, which is now in its seventh year. The administrative cost report will be updated annually.

To see the administrative cost report, click here. To view the annual financial analysis, click here.

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Regulatory roundup

June 23rd, 2015

By Employee Benefit Research Group

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

CMS announces national coinsurance rate for 2014 benefit year for transitional reinsurance program
The Centers for Medicare and Medicaid Services (CMS) announced that the national coinsurance rate for the 2014 benefit year for the transitional reinsurance program will be increased from 80% to 100% for non-grandfathered reinsurance-eligible individual market plans’ covered claims costs between the attachment point of $45,000 and the reinsurance cap of $250,000. The U.S. Department of Health and Human Services (HHS) will remit payments to issuers starting in August 2015.

For more information, click here.

IRS issues Affordable Care Act information returns
The Internal Revenue Service (IRS) has published the “Affordable Care Act information returns: AIR submission composition and reference guide.” The purpose of this document is to provide guidance to all types of external transmitters about composing and successfully transmitting compliant submissions to the IRS.

To read the entire document, click here.

IRS releases several draft forms
The IRS has released draft versions of the following forms:

2015 1095-A – Health insurance marketplace statement
2015 1095-B – Health coverage
2015 1095-C – Employer-provided health insurance offer and coverage
2015 1094-C – Transmittal of employer-provided health insurance offer and coverage information returns

CMS technical guidance on how to elect a federal external review process
CMS has issued technical guidance which sets forth instructions regarding the election of a federally administered external review process using the Health Insurance Oversight System (HIOS).

This technical guidance applies to health insurance issuers offering group and individual health coverage that are using a federally administered external review process in accordance with Technical Release 2011-02 (TR 2011-02), available on the Center for Consumer Information and and Insurance Oversight (CCIIO) website. This technical guidance also applies to self-insured, nonfederal governmental health plans and amends prior technical guidance pertaining to such plans that was released on June 22, 2011. These provisions do not apply to plans and issuers in connection with grandfathered health plans.

To read the technical guidance, click here.

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Integrated benefit programs: The future for dual eligibles

June 19th, 2015

By Javier Sanabria

Nationwide, there are about 9.6 million dual-eligible individuals (those eligible for both Medicare and Medicaid), and average spending for them is about $2,500 per month. Traditionally, the healthcare services that this population needs have been funded in silos. There are many programs and demonstrations under way to test the theory that coordinating all benefits under a single umbrella will lead to better care and lower spending. This paper, authored by Milliman’s Melissa Fredericks and Pamela Pelizzari, focuses on the key features of the existing dual-eligible demonstration programs and offers a view of what the next wave of innovation may look like.

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The price of medical care boosts Consumer Price Index

June 16th, 2015

By Javier Sanabria

A sharp rise in medical care prices contributed to a recent increase in the Consumer Price Index (CPI). Although economists and healthcare experts have not clearly identified the reasons for the spike, the 2015 Milliman Medical Index (MMI) indicates that prescription drugs are driving medical costs upward. MMI co-author Chris Girod offers some perspective in this CNBC article.

The so-called medical care index, maintained by the Bureau of Labor Statistics, rose 0.7 percent in April, “its largest increase since January 2007,” the BLS wrote in a report issued Friday.

The BLS report comes three days after the large actuarial and consulting firm Milliman projected 6.3 percent growth in the costs of health care for a typical family of four on an employer-based plan in 2015. That compares to a low-water mark growth rate of 5.4 percent last year.

Milliman’s report is the latest indication that health-care costs, which saw a historic slowdown in their rate of inflation in the years after the Great Recession of 2008, are headed back up toward the trends seen before the financial meltdown. Before the recession, double-digit inflation in health-care costs was common.

“There’s a correlation between the CPI medical index and the MMI, but they’re very different measures,” said Chris Girod, a principal and consulting actuary at Milliman, who added that the MMI looks at a broader range of prices. “The annual increases [in the MMI] tend to be a lot higher than CPI.”

Milliman’s report blamed resurgent inflation on price increases for prescription drugs, particularly specialty drugs. “The rest of the category, the increases were pretty ho-hum this year,” he said. Prescription drug prices overall are expected to increase by 13.6 percent in 2015, according to Milliman’s index.

In the category of specialty drug prices alone, “the annual increases are around 20 percent right now,” Girod said. Those specialty drugs include Sovaldi, made by Gilead, which in a 12-week course of treatment can cost $84,000.

“The drug trends have actually been coming down in the last four or five years until now,” Girod said.

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Storify: 2015 Milliman Medical Index media roundup

June 10th, 2015

ACA’s influence on the large employer market

June 9th, 2015

By Sue Hart

Hart, SueLast year’s Milliman Medical Index (MMI) report noted that emerging reforms required by the Patient Protection and Affordable Care Act (ACA) had yet to show material direct impact on the cost of care for our family of four because this family is often insured through large group health plans. Some of the most far-reaching ACA reforms are focused on access to insurance in the individual and small employer markets and have more immediate impacts on premium rates in those markets. While this modest impact continues in 2015, there are a number of influences that the ACA may have on costs in the large employer market over the next few years. Some of these influences will directly affect the large employer market—the Cadillac tax is the most visible such change—while others may be indirect, with spillover from provisions in other markets driving change in the large employer market.

Read more…

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Regulatory roundup

June 8th, 2015

By Employee Benefit Research Group

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

GASB improves reporting for health insurance and other retiree benefits
The Governmental Accounting Standards Board (GASB) has unanimously approved two statements that will significantly improve the accounting and financial reporting by state and local governments for postemployment benefits other than pensions (OPEB)—primarily retiree health insurance.

• GASB Statement No. 74, “Financial reporting for postemployment benefit plans other than pension plans,” addresses reporting by OPEB plans that administer benefits on behalf of state and local governments.

• GASB Statement No. 75, “Accounting and financial reporting for postemployment benefits other than pensions,” addresses reporting by state and local governments that provide OPEB to their employees and for governments that finance OPEB for employees of other governments.

Statements 74 and 75 will be available for download at no charge from the GASB website in late June. For more information, click here.

Measuring the generosity of employer-sponsored health plans—an actuarial-value approach
The June 2015 version of the Monthly Labor Review by the U.S. Bureau of Labor Statistics (BLS) contains the article “Measuring the generosity of employer-sponsored health plans: An actuarial-value approach.” The article estimates the actuarial values of employer-sponsored health insurance plans using survey data collected from the BLS National Compensation Survey (NCS) and the Medical Expenditure Panel Survey, which is administered by the Agency for Healthcare Research and Quality. The article shows how reliable actuarial values could be useful to consumers—allowing consumers to compare one plan’s value with another—if such measures were to become available in the future.

To read the entire article, click here.

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Expansion of ASD treatment to a Medicaid EPSDT benefit

June 5th, 2015

By Javier Sanabria

Approximately one in 68 children has been identified with autism spectrum disorder (ASD). In July 2014, the Centers for Medicare and Medicaid Services (CMS) issued a letter to state Medicaid directors advising that treatment for ASD should be considered covered under the Early and Periodic Screening, Diagnostic, and Treatment (EPSDT) benefit. Historically, treatment of ASD has been confined to Medicaid waivers. The main emphasis of CMS’s guidance encourages each individual state to submit a state plan amendment, detailing how it will provide ASD treatment services. From a fiscal and rate-setting perspective, there are numerous challenges with the CMS guidance on ASD treatment. Milliman’s Matthew DeLillo, Paul Houchens, and Jeremy Cunningham provide some considerations for states developing an autism spectrum disorder treatment delivery system in this Medicaid briefing paper.

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GASB 74/75: Are you ready?

June 4th, 2015

By Jeff Bradley

Bradley_JeffThe train has left the station and is on its way—the Governmental Accounting Standards Board (GASB) will shortly finalize standards 74 and 75, which will require for the first time that the net liability for publicly sponsored retiree healthcare plans (and other postemployment benefits) be stated on balance sheets.

GASB expects that final rules will be issued close to the end of June 2015.

It is expected that the new accounting treatments will mirror those of GASB 67/68, which require public sector plan sponsors, as well of those of cost-sharing employers, to book an accounting expense for sponsoring the plan and to show net pension liabilities on financial balance sheets.

GASB 67/68 also mandated the use of fair market value of assets and a standard actuarial cost method to be used to value net the net pension liability.

GASB 74, which relates to reporting by benefit plans, is expected to be effective for plans for fiscal years ending June 30, 2017, and later. This will replace the old GASB 43 standard.

GASB 75, which relates to reporting by state and local governments, is expected to be effective for fiscal years ending June 30, 2018, and later. This will replace the old GASB 45 standard.

In this regard, plan sponsors, especially those that have cost-sharing arrangements with contributing employers, should be ready to book a liability for fiscal years ending on or after June 30, 2017. In addition, liabilities and accounting expenses for contributing entities will need to be booked for fiscal years ending on or after June 30, 2018.

For unfunded plans, liabilities will be calculated using a discount rate equal to the yield for 20-year, tax-exempt municipal bonds with an average rating of AA or higher. For well-funded plans, an expected rate of return on assets may be used as long as the plan’s funding policy is expected to make or keep the plan fully funded. For plans in between, a blended discount rate will be used.

Many other changes are expected in the new standards. We recommend you contact your Milliman consultant for more details.

This blog was originally published at

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Mid-market group medical plan trends

June 2nd, 2015

By Javier Sanabria

Based on an analysis conducted by Milliman’s Terry Bierman and Sarah Coates, the following three trends have emerged in mid-market group medical plans the last 10 years.

1. Consumer-driven health plans (CDHPs) have become more prevalent.
2. Changes in plan designs have shifted more out-of-pocket expenses to employees.
3. Premiums have outpaced inflation, but the percentage of that premium paid by employees electing single coverage has remained relatively constant.

To learn more about the development of these trends, read Bierman and Coates healthcare reform paper entitled “The changing employer-sponsored group medical plan.”

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