COBRA extension deadline considerations for multiemployer plan sponsors

Recently, the Departments of Labor and Treasury and the Internal Revenue Service jointly issued guidance extending certain deadlines related to COBRA continuation coverage.

The extension of deadlines described are based on the “Outbreak Period,” which is defined as the period from March 1, 2020, until 60 days after the federal government declares the end of the National Emergency, or other such date announced by the agencies. The guidance issued by the agencies also includes suspension of time limits related to HIPAA special enrollment rights and filing benefit claims, appeals, and external reviews during the Outbreak Period. These time limits do not begin to run out until the end of the Outbreak Period.

In this Multiemployer Alert, Milliman’s Sean Silva and Eric Walters discuss the COBRA election period, COBRA payment deadlines, and the potential impact on plan sponsors.

Report explores Medicaid managed care programs

Today, nearly every Medicaid state agency uses some form of managed care. The form that accounts for the majority of Medicaid enrollment coverage is risk-based managed care, with approximately two out of every three members enrolled with a comprehensive managed care health plan. Risk-based managed care is the mechanism in which Medicaid recipients receive healthcare benefits, at least in part, in 38 or more states in the U.S., the District of Columbia, and Puerto Rico.

The introduction of the Medicaid expansion population in 2014 generated substantial increases in Medicaid beneficiaries, although enrollment levels are beginning to flatten out or even decrease in certain programs. The enrollment stabilization seen in recent years will likely be disrupted by the enrollment increases attributable to the COVID-19 pandemic during calendar year (CY) 2020, although the full impact on Medicaid enrollment is not yet known.

This report by Milliman’s Jeremy Palmer, Chris Pettit, and Ian McCulla summarizes CY 2019 experience for selected financial metrics of organizations reporting Medicaid experience under the Title XIX Medicaid line of business on the National Association of Insurance Commissioners annual statement.

COVID-19 and proposed ACA market premium impact

Expected costs related to COVID-19 may increase or decrease health insurance premiums in the ACA commercial markets. When setting premiums for 2021, health insurers will consider a variety of factors related to virus, including the acute treatment and vaccination for COVID-19, changes in access and demand for healthcare, lasting effects on population health, economic effects on enrollment and utilization of care, and other operational effects.

The National Association of Insurance Commissioners has released a template to assist state regulators in their reviews of 2021 premium impact assumptions for COVID-19. The template outlines a number of pricing considerations.

As of June 15, 2020, six states and the District of Columbia have publicly released preliminary ACA premium rates for 2021. This paper by Milliman’s Dane Hansen, Andrew Bochner, and Emily DeAngelis examines the reported impact of COVID-19 on these rates.

Critical Point explores artificial intelligence for lung cancer detection

Artificial intelligence (AI) has potential to transform healthcare. One area where AI is being employed is in lung cancer screenings using CT scans. Lung cancer is the number-one cancer killer in the United States, so methods to improve the screening process hold a lot of promise. However, AI technology in this area is not without its challenges.

In this episode of Critical Point, Milliman consultant Bruce Pyensen and Rush University Medical Center’s Jim Mulsine discuss the benefits and the challenges of using AI for lung cancer detection.

What our study says about Direct Primary Care

The Direct Primary Care (DPC) practice model is relatively new and still evolving; there is no single accepted definition of what constitutes a DPC practice. The most commonly used definition is as follows:

DPC physician practices:

  1. Charge patients a recurring membership fee, typically monthly, to cover most or all primary care-related services.
  2. Do not charge patients per-visit out-of-pocket amounts greater than the monthly equivalent of the membership fee.
  3. Do not bill third parties on a fee-for-service basis for services provided.

The Society of Actuaries commissioned us to develop a study on DPC practices with the goal of providing a comprehensive description of DPC and evaluating certain claims that are made about its effectiveness. In particular, our study published in May 2020 sought to provide an actuarial perspective to the robust debate about the impact of this model of primary care on overall levels of healthcare utilization and cost.

We procured a longitudinal claims data set from an employer’s health benefits plan where covered employees and dependents can choose to enroll in a traditional preferred provider organization (PPO)-style plan option or they can choose to enroll in an option that includes a DPC practice membership and waives the medical deductible for all services.* We compared utilization and cost outcomes for about 900 patients enrolled in DPC to outcomes for about 1,100 patients not enrolled in DPC during a two-year period, and risk-adjusted the results to control for differences in health status between the DPC and PPO cohorts.

What did we find out?

What does this mean for the debate about DPC?

  1. Controlling for patient selection in DPC studies is imperative
    For the group that we analyzed, DPC patients were expected to have lower overall healthcare costs than PPO patients due to differences in age, gender, and health status (i.e., mix and severity of medical conditions). We expect that other employers similarly offering DPC as an option will see similar selection patterns; that is, we expect that on average those electing to enroll in DPC in a healthcare plan choice setting will have lower average costs than those electing to remain in their prior plans. It is imperative to control for patient selection in DPC studies; otherwise, differences in cost due to underlying patient differences may be erroneously assigned as differences caused by DPC.
  2. Enrollment in DPC can result in using less downstream healthcare services
    After accounting for differences in health status between DPC and PPO patients, we observed lower utilization of healthcare services for those enrolled in the DPC option, driven primarily by reductions in utilization rates for certain facility services including emergency department services. This result was consistent with claims made by proponents of DPC; namely that the model’s enhanced patient access and continuous primary care resulted in reduced need for downstream healthcare services relative to traditional primary care.
  3. The financing and structure of the total benefits package matters
    While we estimate that patients enrolled in this employer’s DPC option used less healthcare services, our midpoint estimate is that the employer’s net non-administrative costs for patients enrolled in the DPC option were 1.3% higher than if the patients had been enrolled in the traditional PPO option. Our estimate of the change in employer net costs per patient ranged from a 5.2% reduction to a 7.8% increase. However, it is noteworthy that, for this particular employer, there were additional plan costs associated with the DPC option—covering the DPC membership fee on behalf of the employee and waiving the medical deductible for all services (not just primary care).

    Two key tenets of the DPC model are increased provider payments per patient for primary care and reduced patient out-of-pocket costs. Both increase net plan costs for self-funded employers or other payers (by paying comparatively more for primary care services and covering more of the cost for patients). The extent to which the DPC model will result in lower net plan costs will depend on whether the model can drive sufficient reduction in the use of downstream healthcare services (i.e., those not provided by the DPC practice) to cover the larger up-front investment in primary care. Employers reducing patient out-of-pocket costs through the reduction of copays or deductibles—such as was the case for this particular employer—will require even greater reduction in the usage of downstream services.**
  4. Qualitative considerations should not be ignored
    We believe that the consideration of a DPC option for many employers will go beyond purely financial factors. Other considerations may—and likely should—include the impact of DPC on patient access to care, patient out-of-pocket costs, employee absenteeism rates, and employee retention, among other factors. We believe that, for many employers, introducing DPC on a cost-neutral basis while positively affecting these qualitative considerations would represent a sufficient return on investment.

Next steps

Our employer case study is the first of its kind in many respects but there are some key limitations that readers should keep in mind:

  • Our case study focused on a single DPC provider and a single employer; outcomes for other DPC providers and other employers will vary from the outcomes that we observed. Additional data from other sources, for more patients, and over longer durations is necessary to assess the broader impacts of the model.
  • Given the largely grassroots nature of the DPC model there is no standard DPC model of care nor a template for physicians to follow. In fact, there is disagreement among some DPC providers as to what exactly constitutes a DPC practice. Therefore, results among providers practicing this new model may vary more than results would among other providers practicing other more standardized models.
  • Due to the nature of the data set provided for our analysis we were unable to assess the validity of claims that DPC improves the quality of care and patient satisfaction.
  • The DPC model of care is somewhat unique in that it has both direct-to-consumer and direct-to-employer offerings, and the patient selection pattern for each of them is likely to vary materially. Individuals choosing to enroll in a DPC membership on their own are likely to have more healthcare needs than patients not choosing to enroll on their own. Conversely, employees and dependents choosing to switch from a traditional plan option to a DPC plan option are likely to have less healthcare needs than patients not choosing to switch to DPC. Thus, results observed for DPC patients enrolled via an employee benefit, such as those in our employer case study, may not be representative of results for DPC patients enrolled as individuals.

* We are not affiliated with either the employer group or their DPC provider.

** In addition to increasing an employer’s share of costs, benefit changes can also affect how much care members utilize. This affect is commonly referred to by actuaries as induced utilization, and should be considered by employers when structuring DPC options and by those evaluating the impacts of DPC. For our case study, the benefit design under the DPC option was slightly richer in aggregate than the PPO option, meaning that based on benefit design differences alone, members would be expected to use slightly more services in aggregate when enrolled in the DPC option than when enrolled in the PPO option. This is due to the employer waiving cost sharing for primary care services as well as the medical deductible for all services under the DPC option. Since the difference was relatively small, we conservatively did not apply an induced utilization adjustment in our estimates. If we had, the reduction in demand corresponding to enrollment in the DPC option would have been slightly greater.

Pharmacy Briefing: June 2020

Pharmacy Briefing is a monthly summary of select U.S. Food and Drug Administration (FDA) approvals and launches, treatment guidelines and research updates, and other newsworthy events that have the potential to impact commercial drug utilization or costs.


  • CVS Health publishes 2019 Drug Trend Report
  • Navitus publishes 2019 Drug Trend Report
  • IQVIA publishes weekly report describing the impact of COVID-19 on the pharmaceutical market

FDA Approvals and Launches

  • Darzalex FasPro is approved as a subcutaneous version of Darzalex (daratumumab), a drug used to treat multiple myeloma.
  • Farxiga (dapagliflozin) receives additional indication to treat patients with certain types of heart failure.
  • A generic version of cholesterol drug Vascepa (icosapent ethyl) receives FDA approval.
  • Vesicare LS (solifenacin) is approved to treat bladder dysfunction in patients as young as 2 years of age.
  • Oriahnn (elagolix/estradiol/norethindrone acetate) is approved to treat heavy menstrual bleeding associated with uterine fibroids.


CVS Health publishes 2019 Drug Trend Report

  • The PBM reported, net of rebates, a 1.4% overall trend in 2019, despite a specialty trend of 9.3%.

Read more

Navitus publishes 2019 Drug Trend Report

  • The PBM reported a “net cost per member per month (PMPM) of $78.12 in 2019, which is 16% lower than the forecasted industry average of $93.11 PMPM.”
  • Specialty trend increased 13.1%, with the highest proportion of spend being attributed to analgesic and anti-inflammatory specialty drugs.

Read more

IQVIA publishes weekly report describing the impact of COVID-19 on the pharmaceutical market

  • The report provides timelines of major events and government actions, retail pharmacy initiatives, summaries of commercial payer policies, prescription trends, and many other data points.

Read more

FDA discovers carcinogen impurities in some versions of extended-release metformin, a widely-used diabetes drug

  • The agency has recommended voluntary recalls of the products from five manufacturers.

Read more

AmerisourceBergen publishes Biosimilars Pipeline Report

  • The report summarizes currently available, approved, and in-development biosimilar products, grouped by therapeutic class.

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The Coronavirus Aid, Relief, and Economic Security (CARES) Act temporarily suspends sequestration for Retiree Drug Subsidy Program (RDS)

  • Between May 1, 2020, and December 31, 2020, the 2% mandatory payment reduction in the calculated Subsidy Amount will be suspended.

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CMS finalizing policy permitting manufacturer discount programs to contribute toward annual cost-sharing limits for Patient Protection and Affordable Care Act (ACA) plans

  • Discount programs are permitted, by not required, to be counted toward these limits.

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Generic manufacturer Apotex admits to price fixing, pays penalty of $24.1 million

  • Price fixing occurred from May 2013 to at least December 2015 and involved the sale of the cholesterol drug pravastatin.

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Clinical Trials and Research

Mavacamten achieves all primary and secondary endpoints in phase 3 EXPLORER trial

  • The drug is being studied as a treatment for obstructive hypertrophic cardiomyopathy, a genetic heart condition.
  • A New Drug Application is expected to be submitted to the FDA in the first quarter of 2021.

Read more

Ozempic (semaglutide) demonstrates sustained weight loss compared to placebo in phase 3 trial

  • The drug is currently approved for the treatment of type 2 diabetes and may also provide benefits in preventing and mitigating the health consequences associated with obesity.

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Retrospective study links poorly controlled blood glucose with increased COVID-19 mortality

  • Researchers observed a 10 times greater chance of death among type 2 diabetes patients with COVID-19 and poorly controlled blood glucose. 

Read more