Providing zero-dollar MA-PD premium plans is worthwhile

Medicare Advantage Prescription Drug (MA-PD) plans with a zero-dollar member premium are incredibly popular among Medicare beneficiaries. Many Medicare beneficiaries, especially healthier individuals with limited expected medical costs, are attracted to zero-dollar premium plans that require no monthly financial commitment. In return, the beneficiaries are willing to accept the higher member cost sharing that generally accompanies these plans. Because these plans offer benefits richer than traditional Medicare and include Part D pharmacy coverage for no premium, zero-dollar premium plans routinely perform well during the annual enrollment period as it relates to member retention and growth.

In the MA-PD market, beneficiaries are generally “sticky” in their purchasing practices—this means that they typically would prefer to avoid changing their coverage from one year to the next. Many Medicare beneficiaries value the benefits and level of customer service they receive for their existing health plans and may not want to switch plans or carriers. But is this stickiness strong enough to overcome the loss of zero-dollar premium healthcare, especially in geographic regions where another carrier continues to offer a zero-dollar premium option?

In this article, Milliman’s Brad Piper and Mary Gabe discuss what happens to membership when an organization adds a premium to the zero-dollar premium plan. They reviewed public enrollment data released by the Centers for Medicare and Medicaid Services for individual MA-PD plans from 2016 to 2019 and summarized the membership and premium for each of them. Then they identified the membership change associated with member premium changes.

What role will data play in transforming UK private medical insurance analytics?

Health insurers are relying more on advanced analytic tools as they move from reimbursement services through to provider management, care management, and care delivery services. The sheer volume and complexity of healthcare data can create bias, hinder analysis, and impair decision making. Inadequate data is costly because it is time-consuming to work with and often expensive to address.

Fortunately, data quality tools can identify specific areas of improvement to help actuaries and insurers carry out advanced operational and clinical analytics. In this paper, Milliman’s Joanne Buckle and Natasha Singhal highlight such a tool to assure data quality is properly vetted prior to actuarial analysis. The data quality tool was applied to data collected from five different private medical insurance (PMI) insurers in the United Kingdom. The authors also discuss ways that high-quality PMI data can be used to achieve decision confidence.

Challenges for providers taking on Medicare Part D risk

In January 2019, the Centers for Medicare and Medicaid Services (CMS) released Part II of the 2020 Advance Notice and Draft Call Letter, which contains the proposed methodological changes for the 2020 Medicare Advantage (MA) capitation rates along with Part C and Part D payment policies.

In the letter, CMS issued a request for comments on the potential use of risk-based arrangements for pharmacy benefits in contracts between MA plans and contracted providers. CMS noted that risk-based arrangements in contracting for pharmacy benefits may be another tool to drive down the cost of Part B drugs in MA and Part D drugs for MA and Part D plans. CMS requested information on the barriers, feasibility, benefits, and drawbacks for these types of arrangements between MA plans and contracted providers.

As part of its August 2018 proposed rule, CMS asked how accountable care organizations and Part D sponsors in the Medicare Shared Savings Program “could structure the financial terms of these arrangements to reward Part D sponsors’ contributions towards achieving program goals.” There was also a request for information in that rule regarding “barriers to developing these relationships.”

In this article, Milliman’s Matt Kramer, Simon Moody, and Michael Hunter provide a summary of the key issues providers need to consider before taking on Part D risk, an increasingly common ask from MA organizations, and highlight some of the complexities and common barriers observed when advising provider clients on their strategies for Part D risk.

What is your Medicare Supplement experience REALLY telling you?

Medicare Supplement (Med Supp) carriers often ask, “What’s going on with my Med Supp experience?” It’s a good question. And the answer isn’t always directly in front of you in a report or a chart.

In response to this question, my first question is, “What are you referring to: Loss ratio? Claims costs?” Loss ratio experience is impacted by both sides of the ledger, premium revenue and claims. There may be issues on both sides.

My second question is, “What were you expecting?”

It’s a difficult question to answer. Often, Med Supp carriers reply, “Our claims are going through the roof!” That may be so. But what is critically important to understand is the following:

1) Too high relative to what?
2) Where are claims too high?

Without answers to these questions, a carrier is left without a clue about the source, a potential solution, or a basis for future action.

The approach I often use includes measuring historical claims experience relative to benchmark (or expected) values at a refined level and then rolling up the results in total as well as by key risk characteristics. This type of actual-to-expected (A/E) analysis does two things to answer the questions above:

1) It provides an overall claims level measure (referred to here as morbidity level) together with the variation over time as well as specific risk characteristics (which we will expand on later).
2) It can provide the inherent underlying pure claims trend experienced after adjusting the measurements for other influences such as changes in the demographic and/or geographic mix, etc.

The hypothetical case study of InsureU Insurance Company provides a simple example.

Case study: InsureU Insurance Company

InsureU’s actuary, Cliff Diver, provides his boss, CEO Wanda Profits, with quarterly experience reports of among other things the new Med Supp line of business that InsureU has been selling for the last three years in the state of Bliss. InsureU has spent significant resources and capital to enter this market in order to expand membership base and hedge its risk in the commercial Patient Protection and Affordable Care Act (ACA) market. Given the lack of expertise in-house, InsureU turned to the support of consultant Sonny Days to price the product line. Premiums were priced based on various assumptions and expected to yield initial loss ratios in the low 70s. Projected financial results look something like Figure 1.

The launch of the product line had been seen as providing mixed results at best with regard to sales targets. Original sales targets were 800 policies in the first year but only 400 were issued. Competition has been fierce in the state of Bliss but InsureU weathered the storm and, on a bright note, the financial results were fantastic! So fantastic that Wanda convinced Cliff that rates were fine where they were and no rate increase in the first year was necessary. This was in spite of the recommendation by Sonny Days to file for a nominal rate increase equal to expected claims trend.

Fast-forward to year three. As sales have grown, Cliff nervously notices the quarterly reports showing financials going in the wrong direction. See Figure 2.

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Analyzing midyear drug list price reductions

In February, the U.S. Department of Health and Human Services issued a proposed rule that would eliminate the current safe harbor to the Anti-Kickback Statute, which allows manufacturers to provide rebates to plans and pharmacy benefit managers, and creates a new safe harbor that would force the rebates to be passed through to the point of sale.

Some manufacturers have preemptively decreased list prices on popular brand drugs. List price reductions can be effectuated in several ways, including the launch of an authorized generic, the release of a new package for an existing identical product, or a complete reduction in list price on an existing product. The structure of the Medicare Part D program produces interesting, and sometimes counterintuitive, financial outcomes when list prices are decreased and rebates are eliminated. Plan sponsors will want to consider these outcomes during bid preparation and when estimating Part D payment settlements.

In this paper, Milliman’s David Mike, Matthew Hayes, and Stephen Amend analyze the impact of midyear drug list price reductions coupled with a reduction in rebates resulting in identical net price. Their analysis addresses the impact to Part D plans, Part D beneficiaries, the federal government, and pharmaceutical manufacturer payments to plans through rebates and the coverage gap discount program.

Employer-led accountable care considerations for providers

Employers are becoming increasingly involved in the movement toward value-based reimbursement, particularly employers that self-fund the healthcare needs of their employees. Two common strategies currently used by providers to reach the employer market segment are:

• Aligning with a health plan to develop an accountable care product, which steers employees to participating providers in the accountable care network.
• Direct contracting with employers. Typically, an employer offers its employees a narrow or tiered network plan alongside a broader network product offering.

A full economic impact analysis is necessary for a provider to make an informed decision about entering a direct contract with an employer. A provider should consider the three main drivers of the contract:

• Potential revenue changes
• Opportunity to reduce cost
• Range of potential outcomes

An increasing number of employers are seeking accountable care-style solutions. This type of arrangement is still evolving, but will likely continue to proliferate, because it aligns the financial incentives of employers and providers. In this article, Milliman’s Simon Moody and Kim Hiemenz answer some key questions for providers as they consider employer-led accountable care.