Regulatory roundup

July 7th, 2014

By Employee Benefit Research Group

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

Increased coverage of preventive services with zero cost-sharing under the ACA
The Office of Assistant Secretary for Planning and Evaluation of the U.S. Department of Health and Human Services (HHS) has published its report “Increased coverage of preventive services with zero cost-sharing under the Affordable Care Act.” The report shows that about 76 million Americans in private health insurance plans are newly eligible to receive expanded coverage for one or more recommended preventive healthcare services, such as a mammogram or flu shot, with cost sharing, because of the Patient Protection and Affordable Care Act (ACA).

Under the ACA most health plans must cover a set of recommended preventive services such as screening tests and immunizations at no out-of-pocket cost to consumers. This includes marketplace private insurance plans. The data are broken down across state, age, race, and ethnic group.

To read the entire report, click here.

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Top-down cost-allocation approach to universal healthcare

July 7th, 2014

By Javier Sanabria

A top-down cost-allocation approach may help developing countries set appropriate bundled rates for providers to participate in universal healthcare coverage. Such an approach focuses on averaging the costs of current utilization and actual expenses for hospital groups. One advantage of this practical approach is that it is feasible in situations with limited data.

In this new paper, Milliman consultants discuss their experience utilizing this top-down approach under India’s Meghalaya Health Insurance Scheme (MHIS). The following excerpt highlights the scheme’s objective:

In its first phase of rollout, the Meghalaya Health Insurance Scheme (MHIS) had limited benefits. The government wanted to expand its scope to better serve the population by providing a wider breadth of procedures, including tertiary care specialist procedures in oncology, neurosurgery and cardiac surgery. However, to make its second phase a reality, the Meghalaya scheme needed greater participation by private healthcare providers offering such specialist services. The state needed to offer realistic pay rates to private healthcare providers to attract participants.

Milliman helped the state identify the potential demand and gaps in benefits by conducting an extensive review of hospital utilization data, publications about disease burden and disease registries in the state. This was the basis of recommendations for additional surgical procedures that needed to be included in the scheme to ensure comprehensive coverage.

Milliman was asked to develop indicative prices for recommended additional surgical procedures under expanded benefits. To determine rates, Milliman used a top-down cost-allocation approach to estimate the cost of each procedure, using local hospital utilization and financial information. We developed specific tools to collect data from a representative group of hospitals.

Here are the outcomes and important considerations:

Using the top-down costing approach, we were able to estimate the costs of the following:

• Per-bed-day department cost for the five hospitals in the study
• Cost of 20 common surgeries in MHIS Phase I as a reference point for comparison with existing package rates
• Cost of 160 surgical and 20 medical conditions for tertiary care benefit expansion in Phase II

Developing the final package rates involves additional parameters, making adjustments for inflation trend, capacity utilization, quality, profit margins and specific variations among the participating hospitals. MHIS will need to apply various adjustments for these parameters to arrive at the final cost of each procedure for the social insurance scheme.

If providers are not keeping reimbursements in line with their expenditures to manage a clinical condition, there will be a tendency to pass on the shortfall to the members and deny or avoid admissions for procedures, potentially compromising the quality of care. This makes it critical that frameworks for costing are regularly updated. These frameworks also need to seek wider participation from providers. Apart from recurring medical inflation, wider provider participation and cost impact of new practices should be consolidated in updates.

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Regulatory roundup

July 1st, 2014

By Employee Benefit Research Group

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

GAO report: The range of average annual premiums in the small group market by state in early 2013
The U.S. Government Accountability Office (GAO) released a new report entitled “Private health insurance: The range of average annual premiums in the small group market by state in early 2013.” The report shows the range of average premiums for health insurance products sold to small employers in the small group market of each of the 50 states and the District of Columbia during the first quarter of 2013.

The average premiums reflected information from data submitted by insurers to the Center for Consumer Information and Insurance Oversight (CCIIO) within the Centers for Medicare and Medicaid Services (CMS) of the U.S. Department of Health and Human Services (HHS). They represented an annual average of the premiums paid per covered life by all small employers that purchased a particular product.

To read the entire report, click here.

HHS annual report to Congress on breaches of unsecured protected health information
The U.S. Department of Health and Human Services (HHS) issued an Annual Report to Congress on Breaches and Unsecured Protected Health Information for Calendar Year 2011 and 2012, describing the types and numbers of breaches reported to the Office for Civil Rights (OCR) (the office within HHS that is responsible for administering and enforcing the HIPAA Privacy, Security, and Breach Notification Rules) that occurred between January 1, 2011, and December 31, 2012. It also provides some cumulative data on breaches reported since the September 23, 2009, effective date of the breach notification requirements.

The report also describes actions that have been taken by covered entities and business associates in response to the reported breaches.

To read the entire report, click here.

Presentation: Coverage effects of limiting the tax exclusion of employment-based health insurance
The U.S. Congressional Budget Office (CBO) has published a 22-slide presentation given by Allison Percy from the Health, Retirement, and Long-Term Analysis Division, at the Fifth Biennial Conference of the American Society of Health Economists. Topics include:

• Effects of the tax exclusion.
• How big is the tax subsidy and how does it vary by income?
• Why would the effect be different today?
• How CBO and and the Joint Committee on Taxation (JCT) model health insurance coverage.
• How CBO and JCT model firms’ offers of employment-based coverage.
• Three approaches to limiting the tax exclusion.

To view the entire presentation, click here.

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S&P: Healthcare expenditures for commercial plans up 3.2% in the year ending February 2014

June 30th, 2014

By jeremy.engdahl-johnson

Data released today for the S&P Healthcare Claims Indices shows that healthcare costs rose 3.5% in the 12 months ended February 2014 compared to the 4.9% rise for the 12 months ended February 2013. Medical costs—inpatient and outpatient hospitalization plus professional services—rose 3.1% and prescription drugs rose 3.5% over the same period. All but prescription drugs rose at a slower pace than a year earlier.

Among the key components of medical costs, inpatient fee-for-service rose 2.6% compared to 4.3% in the earlier period while outpatient fee-for-service costs rose 4.9% compared to 6.3% in the earlier period. Prescription drugs expenditures were up 3.5% versus 1.5% one year ago. These figures, which represent the most current data available, are based on expenditures incurred in the 12 months ended February 2014.

“With the exception of prescription drugs, healthcare expenditures are growing more slowly than a year ago,” says David Blitzer, Managing Director and Chairman of the Index Committee and S&P Dow Jones Indices. “The overall trends in healthcare costs are lower than that seen a year or two ago, but remain one to two percentage points above the overall rate of inflation. The greater growth in prescription drug costs reflects a combination of higher prices for both generic and branded pharmaceuticals and shifting market shares between generic and branded.

“Among the principal lines of business, expenditures for large and small groups and administrative services only (ASO) plans show stable growth rates. Individual plans, where a participant is not part of a group plan based on employment, are the smallest segment as well as the most volatile. While the growth in costs moved down through 2013, the most recent data suggests a jump in expenditures for this category. Because this is the segment that the will be most affected by Obamacare going forward, it is likely to be closely watched as the new healthcare law is implemented in coming years.

“The rise in total healthcare costs at 3.2% over the 12 months ended with February 2014 is slightly greater than the increase in current dollar GDP from the first quarter of 2013 to the first quarter of 2014 of 2.9%. Moreover, the 2014 first quarter GDP was weakened by unusually severe winter weather and a small decline in consumer spending on health services. With healthcare cost trends moderating, the share of GDP devoted to healthcare may be stabilizing as well.”

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Milliman MedInsight picks Microsoft Analytics Platform System to boost performance and efficiency

June 25th, 2014

By jeremy.engdahl-johnson

Milliman announced that its MedInsight® product team has chosen Microsoft’s Analytic Platform System (APS) for its next generation MedInsight release later in 2014. This important technical decision comes after a formal proof of concept that resulted in significant gains in system performance, data loading and refresh cycle times, and data storage.

MedInsight is Milliman’s popular healthcare analytic platform used by hundreds of health plans, employers, at-risk providers/accountable care organizations (ACOs), state governments, community health coalitions, and third-party administrators. Consistently recognized for its superior data integration and warehousing capabilities, the MedInsight business has tripled in size since 2009 and is committed to advancing performance and functionality.

In recent years, the MedInsight team has taken on more complex clients including state all-payor claims database initiatives and large healthcare entities with massive volumes of data. The level of sophistication for analytic requirements has also grown; the types of querying routinely performed by clients have become elaborate and sometimes complicated. This market development—huge amounts of data combined with complex query needs—is one key reason why Milliman’s MedInsight team decided that it needed to augment and strengthen the core infrastructure.

Healthcare entities generate significant amounts of data every day. Clients depend on their analytic systems to turn raw data into business intelligence, all while accommodating their growing needs.

“We’re very pleased that Milliman selected Microsoft’s Analytics Platform System appliance to power their MedInsight application. These types of data-intensive and complex big data challenges are what we designed the Analytics Platform System to support and are looking forward to our joint customers reaping benefits from the solution,” said Eron Kelly, General Manager SQL Server Marketing at Microsoft.

Milliman’s MedInsight team has always been a leader in turnaround time for the typical monthly refresh cycle of data. “APS is a proven, integrated technology that optimizes the relationship between SQL Server software, inexpensive storage, compute resources, and data channels in a massively parallel processing environment,” said Roger Connolly, Milliman principal and Director of Product Development at MedInsight. “We expect client data refresh time to be reduced by as much as 75%, data retrieval time by as much as 90%, while simultaneously improving our long-term storage cost trajectory.”

For more information about Milliman’s MedInsight products, go to

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Federal health exchange risk adjustment model now available in Milliman Advanced Risk Technologies’ MARA software

June 24th, 2014

By jeremy.engdahl-johnson

Milliman has announced the expansion of its Milliman Advanced Risk Adjusters (MARA) software to include greater flexibility for calculating risk scores in and outside of health exchanges. The latest release includes the federal risk adjustment model developed by the U.S. Department of Health and Human Services (HHS) for use in the individual and small group marketplaces starting in 2014. The complex HHS-HCC model set, which employs the hierarchical condition category (HCC) grouping logic, requires specific diagnosis and demographic handling to calculate risk scores.

“Our latest product release is a testament to our commitment to provide healthcare organizations with on-demand risk scoring solutions in support of their reform initiatives,” said Diane Laurent, MARA’s managing director.

The HHS-HCC risk adjustment model is provided in a platform-independent software package that is easy to install in any environment. Clients who wish to tightly integrate the processing engine receive automated processing interface support. Milliman’s MARA product is proven technology with analytical support available from Milliman’s consulting actuaries and other industry experts.

“The MARA tools give the industry on-demand processing of metallic-level and cost-sharing reduction (CSR) risk scores, with completely transparent scoring. Adding the HHS-HCC risk adjustment model means plans and others have another powerful tool for understanding and managing risk in their own technical environments,” added Hans Leida, Milliman principal and consulting actuary.

In addition to the HHS-HCC risk adjustment model, MARA includes a library of more comprehensive, higher-performing risk adjustment tools that are widely deployed in solutions offered by leading healthcare technology providers, including business intelligence, care workflow solutions, and electronic medical records (EMR) vendors. MARA adds insight for population health activities in accountable care organizations (ACOs), primary care medical home programs, and other health-based budgeting, pricing, and risk-based performance measurement programs.

For more information, go to

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Regulatory roundup

June 23rd, 2014

By Employee Benefit Research Group

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

Government agencies issue final rules on 90-day period limitation
The U.S. Departments of Treasury, Labor (DOL), and Health and Human Services (HHS) have issued final rules that clarify the maximum allowed length of any reasonable and bona fide employment-based orientation period, consistent with the 90-day waiting period limitation under the Patient Protection and Affordable Care Act (ACA).

The final rules are scheduled to be published in the Federal Register on June 25, 2014.

DOL announces it will issue proposed rule to extend Family Medical Leave Act protections to all eligible employees in same-sex marriages
The DOL has announced a proposed rule extending the protections of the Family and Medical Leave Act (FMLA) to all eligible employees in legal same-sex marriages regardless of where they live. The proposal would help ensure that all families will have the flexibility to deal with serious medical and family situations without fearing the threat of job loss. Secretary Thomas Perez is proposing this rule in light of the U.S. Supreme Court’s decision in United States v. Windsor, in which the court struck down the Defense of Marriage Act provision that interpreted “marriage” and “spouse” to be limited to opposite-sex marriage for the purposes of federal law.

The proposed rule would change the FMLA regulatory definition of “spouse” so that an eligible employee in a legal same-sex marriage will be able to take FMLA leave for his or her spouse or family member regardless of the state in which the employee resides. Currently, the regulatory definition of “spouse” only applies to same-sex spouses who reside in a state that recognizes same-sex marriage. Under the proposed rule, eligibility for FMLA protections would be based on the law of the place where the marriage was entered into, allowing all legally married couples, whether opposite-sex or same-sex, to have consistent federal family leave rights regardless of whether the state in which they currently reside recognizes such marriages.

For additional information on the FMLA, including information and fact sheets on the proposed revisions, click here. Comments must be received within 45 days following publication in the Federal Register.

Also, to read the entire proposed rule, click here.

HHS report shows premium affordability, competition, and choice in the marketplace in 2013-2014
A new report released by the HHS finds that people who selected silver plans, the most popular plan type in the federal marketplace, with tax credits paid an average premium of $69 per month. In the federal marketplace, 69% of enrollees who selected marketplace plans with tax credits had premiums of $100 a month or less, and 46% premiums of $50 a month or less after tax credits.

The report also looks at competition and choice nationwide among health insurance plans in 2013-2014, and finds that most individuals shopping in the marketplace had a wide range of health plans from which to choose. On average, consumers could choose from five health insurers and 47 marketplace plans. An increase of one issuer in a rating area is associated with 4% decline in the second-lowest cost silver plan premium, on average.

To read the entire report, click here.

IRS updates FAQs on the Additional Medicare Tax
On November 26, 2013, the Internal Revenue Service (IRS) issued final regulations implementing the Additional Medicare Tax as added by the ACA. The Additional Medicare Tax applies to wages, railroad retirement (RRTA) compensation, and self-employment income over certain thresholds. Employers are responsible for withholding the tax on wages and RRTA compensation in certain circumstances.

The IRS has since updated 58 frequently asked questions (FAQs) on the matter. To view the updated page, click here.

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Prices determine plan selection on ACA exchanges

June 23rd, 2014

By Javier Sanabria

A recent Managed Healthcare Executive article suggests that individuals’ decisions to purchase plans on the health exchange were largely price-driven. According to the article, Milliman’s Tom Snook agrees that buyers were more price-sensitive than many anticipated.”

Managed Healthcare Executive published the graphic below showing the percentage of plans selected by tiers.

Offering less expensive plans under a “copper” tier has also been suggested, although data is needed to establish rates and learn who may benefit from such plans. In the article, Snook addresses the challenges insurers face setting rates for existing tier plans ahead of 2015:

Because of the confusion accompanying the rollout of the insurance exchanges, [insurers] have not yet yielded much insight into how accurate rate setting will be for 2015. However, this lack of data is not surprising to executives of health plans. “They knew going in that they would be flying not entirely blind but close to it for 2015,” says Snook. “Even if they know their risk profile they don’t know how they compare to the rest of marketplace.”

…“There is a sense that 2015 may be the first real year of ACA experience,” he says. However, he believes that health plans are still likely to see a lot of unexpected developments and that it will take several years for things to settle into a recognizable pattern.”

For more of Tom Snook’s perspective on healthcare reform, click here.

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Regulatory roundup

June 16th, 2014

By Employee Benefit Research Group

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

Private employers spent $2.36 per hour worked for employee health benefits in March
The U.S. Bureau of Labor Statistics (BLS) has published a news release highlighting employer costs for employee compensation during March 2014. The release states that private employers spent an average of $29.99 per hour worked for compensation during the month. Health insurance was the largest individual employer benefit cost at $2.36, accounting for 7.9% of total compensation costs.

To read the entire release, click here.

IRS advisory committee publishes 2014 Report of Recommendations
The Advisory Committee on Tax Exempt and Government Entities of the Internal Revenue Service (IRS) has issued its 2014 Report of Recommendations (Publication 4344, Rev. 6-2014). Healthcare topics relevant to employee benefits include “The Affordable Care Act and government employees.”

To access the entire report, click here.

CMS’s Retiree Drug Subsidy Center releases welcome kit
The Retiree Drug Subsidy Center of the Center for Medicare and Medicaid Services (CMS) announced the release of its Retiree Drug Subsidy (RDS) “welcome kit” to help new account managers, authorized representatives, actuaries, and designees become acquainted with the RDS Program and its role-specific tasks.

To access the welcome kit, click here.

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Storify: 2014 Milliman Medical Index media roundup

June 13th, 2014