The Department of Health & Human Services has revised applications for people seeking to enroll in a healthcare exchange. The shorter forms are now three pages long for individuals and seven pages long for families.
This Time article provides some background.
As we draw closer to 2014 and full implementation of the Patient Protection and Affordable Care Act (ACA), many healthcare companies are evaluating how their existing capabilities translate into a post-reform environment. Some find that implementation of an exchange product would be a simple addition to a product portfolio, while others are building operational infrastructure specifically to support the exchange. Two previous posts described critical factors for success and common gaps. In this article, we focus on the qualified health plan (QHP) application itself.
Applications to join healthcare exchanges vary by market and type of exchange in a state. While there is a large volume of application activity taking place now for pioneers in the exchange market, other players will likely take part in later application opportunities in the years to come.
States were given a choice to either develop their own programs or elect to participate in a federally sponsored program. State programs are administered many different ways. Approaches range from conducting a standard product filing approach where all licensed health plans are accepted, to administering a competitive proposal process where only a subset of applicants are accepted.
Regardless of the approach in your market, these top five application response principles and project management practices can be applied.
1. Understand requirements. In order to obtain QHP status, proposed plan designs must include essential health benefits (EHBs) prescribed by the federal government. Additionally, depending on market location, some plans can operate their exchange business under existing licensure, while others must file for licensure specific to the exchange. It is critical to first understand market-specific requirements and then understand what is required in the application response. The response may be data- and price-driven, or may include more detailed requests for information about operational, technical, product, network, and price factors. Technical response format requirements can also vary.
2. Develop a work group. Gather a team of subject matter experts (SMEs) that can both provide support to the application response process and stay engaged through implementation of the exchange product. SMEs may include consultants who are well versed in implementing business in new market segments.
3. Determine accountability by requirement. Assign ownership early in the process so that team members are best positioned to support a quality response. One good way for managing work assignments is to develop a work assignment matrix that captures all requirements and assignments. The matrix can also serve as a checklist for application completeness.
4. Set rigorous draft response timelines. The subject matter and content contained in a QHP solicitation or application will be new territory for even the most experienced health plan. Giving SMEs an aggressive timeline to provide draft responses provides stakeholders more time to react to the ideas of the team as well as more time to refine and perfect responses.
5. Provide guidelines for response content. It is a fair assumption that many content writers who are providing input to an exchange application have not participated in a similar work effort in the past. In that case, it is a good idea to provide guidance regarding critical areas contributing to the completeness and quality of content. Examples of response content guidelines include:
• Accuracy: The question was answered and the response is free of ambiguity.
• Completeness: If the question is yes/no, the answer has gone beyond a yes/no response. If there are multiple questions, all points have been addressed.
• Audience focus: The answer does not contain internal jargon or acronyms.
• Solution focus: The customer’s needs have been considered in the response.
• Verifiability: If the response requires attestation, evidence is demonstrated to support it.
A previous post described five critical factors for health insurers to implement in order to successfully sell qualified health plans (QHPs) on new exchanges created by the Patient Protection and Affordable Care Act (PPACA) starting in 2014. As that piece described, departments across the organization will need to support the new program. This post describes five organizational gaps commonly standing between a QHP issuer and exchange readiness.
1. Licensure and accreditation. Regardless of the type of exchange (state-based, federal/state partnership, or federally facilitated), QHP issuers must be appropriately licensed by their states. This requirement will not only affect new health plans. Depending on their present business mix, even established health plans may not possess the proper license from the relevant state authority in order to sell on the exchange. Issuers must also meet stringent accreditation requirements, which may include National Committee for Quality Assurance (NCQA) or URAC accreditation; this process should be started immediately if not already underway.
2. Marketing and distribution. As with any new product, health plans must decide what their target markets will be and assess their abilities to reach them. Keep in mind that the exchange is not the only distribution channel for QHPs; organizations selling on the exchange may also be required to make these plans available outside of the exchange. A unique aspect to marketing in this environment is the navigator program. As described in the “Five critical success factors” post, there is significant variation among navigator programs in different states. Understanding and complementing their roles within plan distribution models will be important. In addition, when preparing for sales outside of the exchange, a successful plan must evaluate, augment, and educate its existing broker network appropriately.
3. Systems and reporting. Although many issuers will rely on their existing information systems for activities such as claims processing or call center operations, some information technology requirements will be new. Most significant is the ability to transfer data between the health plan and the exchange, as well as to reconcile enrollment records between the two. Financial systems will also be impacted. While individual customers will remit payment directly to insurers, Small Business Health Options Program (SHOP) customers may be billed by the exchange. A further layer of complexity is added by federal premium subsidies paid in advance directly to issuers, meaning that issuers must have systems in place to receive and process accounts receivable from at least three different sources. Finally, the health plan must possess the tools and capacity for developing a robust reporting and analytics package that will aid in understanding and monitoring business trends as new membership is acquired.
4. Network and medical management. QHP issuers should evaluate the mix of their provider networks to ensure they meet the needs and expectations of the target population and comply with regulatory requirements. In particular, networks must include a sufficient number of essential community providers (ECPs) and meet access criteria by geographic region. Many organizations are exploring narrow network strategies to keep their premiums competitive. Narrow network design requires sophisticated analytics to identify the optimal mix of providers needed. Network reimbursement strategies and new risk arrangements with providers should also be considered for those health plans for which the exchange market represents a significantly different risk environment. In addition to network, medical management may require additional resources to effectively manage plan costs and support and manage the needs of the new membership, which will include newly insured beneficiaries who may drive higher utilization for a period of time.
5. Operational execution. Of course, filling the gaps described above and others will require additional training and, in many cases, additional staff too. Successful QHP issuers will be prepared to invest resources and time across departments to support membership growth as well as new systems and processes associated with exchange participation.
Beginning in October 2013, open enrollment will commence for individual and small group health insurance plans being sold on public exchanges, new marketplaces created by the Patient Protection and Affordable Care Act (PPACA). Because there are still many unknowns regarding how the new market will function, plans must be prepared to work aggressively to position their strategies and resources for initial launch and ongoing operations. The following five tactics are recommended for organizations that plan to offer qualified health plans (QHPs) on public exchanges.
1. Strategy alignment. As with any new line of business, an important first step is to ensure that the strategy of the exchange program serves that of the organization as a whole. For example, will the product compete primarily on price, quality, or access to best enhance the company’s overall marketing and network strategies? The leadership team must be clear about the reasons for entering the exchange and the potential effects it will have on the company’s marketing, finances, and operational performance.
2. Having a champion. Successful QHP issuers will formally identify a senior program lead within their organizations to advocate for exchange participation among internal and external stakeholders. From operational planning through public positioning, this person will clearly communicate the program’s goals and progress, how exchange participation contributes to the overall strategy and mission of the organization, as well as the needs of the stakeholders it serves.
3. Cross-functional team engagement. Adding exchange business to a company’s program portfolio will require input and implementation efforts from employees across the organization. For instance:
• IT resources must be invested to establish infrastructure for transferring and reconciling enrollment data between the exchange and the health plan
• Member services must be staffed and trained to serve a newly insured population likely to have questions about the unfamiliar products, cost sharing, and premium subsidies
• Sales and marketing, product development, medical management, network management, finance, accounting, compliance, and human resources will all be affected as well
Successful exchange participants will devote resources to performing operational gap assessments and develop gap closure strategies, as well as appoint a multidisciplinary core management team to coordinate activities across functional areas.
4. Defining success. A key responsibility of the core management team is to create clearly defined performance metrics for the exchange program. These goals must be specific yet flexible to adapt to continuously evolving regulatory requirements and market factors that will remain uncertain until exchanges reach a mature operational status. For instance, financial and enrollment projections may need to adjust quickly if more small employers than previously predicted decide to seek coverage through the Small Business Health Options Program (SHOP) market rather than through traditional channels.
5. Public policy involvement. At both the state and federal levels, policy surrounding exchanges is constantly being created and refined. While the federal Department of Health and Human Services (HHS) publishes guidance that affects exchanges and issuers nationwide, many details regarding how the exchanges will function, how plans can be designed and marketed, and more are defined at the state level. For example, in Maine, exchange navigators are required to be licensed brokers, while California is considering allowing nonprofits, trade organizations, and schools to help fill the navigator role. The government relations department can help shape emerging policy decisions and stay close to the discussions at all levels so that the rest of the organization can respond quickly to new developments.
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:
| Data Types | Data Elements | Use of Data Types |
| Enrollee-level data | Enrollment effective dates Enrollment plan type Location (e.g., zip code, geographic rating area or both) |
Reinsurance payments calculation Verification of data State parameters selection for reinsurance payments calculation |
| Plan-level data | Benefit year Individual versus small-group |
Reinsurance payments calculation Verification of data |
| Medical claims data | Date of service Paid claim amount |
Reinsurance payments calculation Verification of data |
| Pharmacy claims data | Date of service Paid claim amount |
Reinsurance payments calculation Verification of data |
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.
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.
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.
In the late 1990s, online travel agencies revolutionized the airline industry by publishing fares and allowing consumers to search for and purchase tickets. No longer would consumers have to rely on an agent to filter and present options; travelers could search across all vendors and use their own criteria to evaluate their options and purchase a ticket. The individual and small group health insurance markets are poised for the same sort of dramatic change, driven by the now familiar concept of the online marketplace, known in the health insurance industry as the exchange.
Although the operation of a health insurance exchange is quite different from that of an online travel agency, these distribution channels are similar in their impact on price transparency. Under the old travel agent model, consumers would first search for tickets based on convenience factors (e.g., travel dates and times, routes, etc.) and then use price to differentiate among a few options. Likewise, in the individual and small group health insurance markets, price is often presented after the purchaser has already narrowed the options to a few that meet non-price criteria. In both of these situations, price is applied as a deciding factor after the consumer has already narrowed the universe of choices to a subset of similarly appealing options; and the consumer lacks visibility to the prices of choices that were eliminated in that process. Online markets, on the other hand, allow consumers to see the prices of all or most options at the same time, making price a primary determining factor when making a purchase decision. This new presentation format, which allows consumers to choose one product over another based on a small dollar price difference, discourages significant price variation among competitors for similar products.
For most health insurance products, price is comprised of three primary components: benefit expense, administrative expense, and risk margin. Although benefit expense makes up the lion’s share of the premium or price, administrative cost differentials among health insurers can also materially contribute to premium differences. These differences will become more pronounced and may affect consumer purchasing decisions as the benefit expense component of premium is constrained by the medical loss ratio (MLR) requirements of the Patient Protection and Affordable Care Act (PPACA). These rules effectively create a benefit expense floor, requiring that health insurers in the individual and small group markets spend no less than 80% of premium on benefits (85% in the large group market), or pay a rebate to policyholders. It is likely that MLRs for individual and small group products will eventually settle around the 80% level or higher. In this new world, the importance of managing administrative cost will increase as price competition puts pressure on overall premiums and the MLR rules force administrative cost and risk margin into a fixed share of the premium dollar.
Benchmarking is one of the most effective tools available to help health insurers manage administrative expense. For insurers working to achieve MLR targets through administrative cost reduction, a benchmarking assessment can offer a function-by-function comparison of administrative expenses and staffing levels versus competitors and peers. Such an analysis can help organizations figure out where to target their cost reduction initiatives or determine what cost level is appropriate for a given department, cost center, or function.
For insurers that have already achieved the MLR targets, administrative benchmarks combined with a dashboard view can allow for monitoring of administrative expense variation throughout the year. Optimizing administrative cost is not something that can be achieved overnight; it takes time to plan and implement cost management initiatives, and months or years before the benefits accrue to the bottom line. Thus a dashboard coupled with benchmarks can provide management the tools they need to effectively manage their price competitiveness in this new distribution paradigm.
This article first appeared at Milliman MedInsight.
Starting in 2014, the Patient Protection and Affordable Care Act (PPACA) will provide children greater access to dental care. Pediatric dental care is among the essential health benefits that new health plans must cover within health exchanges as well as individual and small-group plans under the law.
Citing Milliman research, this Washington Post article discusses out-of-pocket maximums associated with these new health plans that make dental benefits richer. Out-of-pocket maximums would curb the cost families incur for expensive dental services compared to annual or lifetime limits.
Here is an excerpt:
Evelyn Ireland, executive director of the National Association of Dental Plans, says families who need expensive dental care such as braces may fare better in dental plans sold on the exchanges than in the plans many employers currently offer.
Nationwide, medically necessary orthodontia costs roughly $6,500 per person, Ireland says. Currently, if a private dental plan covers orthodontia, the benefit typically covers 50 percent of the cost, up to a lifetime limit of $1,000 or $1,500. “So it ends up basically being a down payment,” she says.
Assuming braces are a covered benefit, the family of a child with dental coverage through an exchange might have to pay the maximum out-of-pocket limit – $1,000, perhaps – and owe nothing more that year for the child’s dental care. But any other expenses would be covered, since plans can’t have dollar limits on coverage.
That unlimited coverage will probably add to the premium for pediatric dental coverage, however.
Ireland’s group asked the benefits consultant firm Milliman to estimate how much pediatric dental premiums might change if the coverage provisions of the law were incorporated.
Milliman estimated that premiums currently range from $21 to $25 per child per month, depending on whether a plan covers orthodontia services, among other things. After incorporating the health law’s requirements, Milliman projected that premiums would probably rise to $34 a month, Ireland says.
“That’s a nine-dollar-to-13-dollar-a-month jump, which is a pretty significant increase for a family,” she says.
For more perspective on the effect healthcare reform may have on dental insurance, read Joanne Fontana’s paper entitled “Healthcare reform: What about dental?”
Today, our “Ten strategic considerations of the Supreme Court upholding PPACA” blog series brings us to the topic of state exchanges. With the court’s decision minimizing uncertainty, there may be increased incentive for states to fast-track exchange planning.
Some states have pushed forward aggressively with implementing a state health insurance exchange, while others have resisted. Will the Court decision set exchange efforts in motion in the states that were not already proceeding?
Given the often political nature of this resistance, and the outstanding question of the presidential election and whether a Republican victory could bring about a repeal of PPACA, in many states the delay may continue. With states empowered to opt out of Medicaid expansion, states that have pushed back against exchanges have another front on which to not participate with PPACA.
But states with efforts already under way now have more wind at their backs. The 2014 deadline is becoming imminent, creating an incentive to get moving. And states also face a deadline on January 1, 2013, at which time the federal government will assess whether states have the infrastructure in place to proceed with an exchange. For some states these two deadlines may be enough to begin implementation efforts.
For more insights into state exchanges click here. If you work in healthcare and would like to join Milliman’s State Health Exchange Work Group on LinkedIn, go here.
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