Key COVID-19 questions for providers in value-based contract agreements

Estimates of how the COVID-19 pandemic will financially affect the healthcare sector continue to evolve. Recent attempts to quantify the impact signal the likelihood that, for 2020, the reduction in spending associated with deferred care will outweigh in aggregate the increase in spending required to care for patients with COVID-19. However, at an individual provider entity level, the change in spending will vary based on a multitude of factors such as geography, the nature of services provided, and the demographics of the population served.

What does this mean for the mutual financial responsibilities created through value-based contracts? In short, for any given provider organization, the impact of COVID-19 on its value-based contracts will depend largely on certain actuarial, legal, and strategic aspects of each agreement.

In this paper, Milliman’s Cory Gusland, Anders Larson, and Brian Sweatman discuss 10 key questions that providers should be asking as they assess each of their value-based contracts during this uncertain time.

Milliman Medical Index: Healthcare costs reach $6,553 for the average American, $28,653 for hypothetical family of four

Milliman today released the 2020 Milliman Medical Index (MMI), which measures healthcare costs for individuals and families receiving coverage from an employer-sponsored preferred provider plan (PPO).

“This year healthcare costs grew by approximately 4.1%, which is consistent with recent years but still outpaces growth in gross domestic product,” said Chris Girod, co-author of the Milliman Medical Index.

In 2020, healthcare costs for our hypothetical family of four reached $28,653. Healthcare costs for the average person are at $6,553. While these are averages, the MMI allows for greater specificity thanks to an interactive tool that was first released last year.

“The MMI can now estimate the cost of healthcare for different types of families,” said Paul Houchens, co-author of the MMI. “Using our interactive cost tool, you can choose the demographic factors of your particular family—such as age, gender, and location—and see how they contribute to your family’s own healthcare costs.”

To use the interactive tool, click here.

As it has for more than 15 years, the MMI continues to look at five components of healthcare costs, including inpatient and outpatient care, pharmacy, physician services, and other services.

“Hospital costs have stolen the show in recent years, increasing faster than other components,” said Scott Weltz, co-author of the MMI. “Hospital costs have increased by approximately 15% in the past three years, with other services growing 10% in that time.”

One of the things that makes the MMI unique is that it calculates both employer and employee contributions to healthcare costs, including out-of-pocket costs incurred at the point of care.

“Employers and employees are equally absorbing this year’s 4.1% cost increase,” said Dave Liner, co-author of the MMI. “Over time, economic changes and other forces tend to create an ebb and flow in how cost increases are shared by employers and employees.”

New this year, the MMI contemplates the potential for decreased costs using managed care.

“If we visit the land of ‘what if’ and apply optimal care management practices we could see healthcare costs for the typical family land 25% lower,” said Doug Norris, co-author of the MMI. “To date, this reduction is more aspirational, but huge potential exists in the American system for lower healthcare utilization and more efficient care.”

The COVID-19 pandemic introduces tremendous uncertainty to any estimate of 2020 healthcare costs, with major variables including the duration of the pandemic, the amount of care that may be deferred as a result of it, and the possibility of people losing their employer-sponsored coverage. Thus the 2020 MMI does not include an explicit adjustment for COVID-19.

To view the complete MMI, click here.

Trending in parental and family leave benefits

With an increasingly competitive talent market and changing employee demographics, employers are taking a closer look at their total benefits packages to understand what is driving prospective employees’ wants and needs, particularly relating to parental leave. State and local laws are also changing quickly, creating a regulatory maze that can be difficult to navigate. Milliman conducted a What’s Trending benefits pulse survey specific to parental leave benefits to get a sense of what employers are currently doing and considering in this space.

Parental leave benefits: Results

The results of a 2019 Milliman pulse survey confirmed that many employers are experiencing the issues of complex compliance as a result of changing laws and a competitive talent market demanding more robust leave benefits. Despite these pressures, there was little change in action from 2018 to 2019. Similar proportions of employers to those shown in Figure 1 are considering changes in 2020. Both parental leave benefits that are available regardless of employee gender or birth parent status and paid parental leave separate from vacation/sick time are popular for a significant minority among responding organizations.

For those that responded, the number of weeks of available leave increased for both birth and non-birth parents from 2018 to 2019 for the 6-11 weeks and 12+ weeks categories. Yet the percentage of pay decreased slightly.

Family leave benefits

More employers are considering paid family leave benefits in 2020 that are separate from, and in addition to, PTO or vacation/sick time, and above and beyond the care for newborns/newly adopted children. While only 9% of respondents in 2019 (5% in 2018) said they currently offer this benefit, 23% of respondents said they were considering offering it for 2020. Similar to parental leave, the number of weeks offered is trending up while the percentage of pay is trending down.

Conclusion

With competitive and regulatory pressures on employers to shore up parental leave programs, relatively few are taking definitive action. Of those that are, mitigating the potentially significant cost increases by lowering the percentage of pay while increasing the number of weeks of leave is a common strategy. As state and local laws continue to evolve, employers will need to pay special attention in order to ensure compliance.

This article first appeared in the Health and Group Benefits News and Developments: April 2020.

If you would like to receive the Health & Group Benefits newsletter directly, send an email here.

Overview of proposed price transparency rule

The Transparency in Coverage proposed rule from the U.S. Departments of Treasury, Labor, and Health and Human Services aims to make healthcare pricing less opaque. Health plans commonly come with cost-sharing requirements, and these cost-sharing levels have increased over time. Most healthcare providers do not prominently list, post, or publish the prices for their services.

In this paper, Milliman consultant Daniel Perlman explains more about the Transparency in Coverage proposed rule and its potential implications for the industry. He also presents some examples of how price transparency works outside of healthcare in markets that share some common features with the healthcare market.

How will the coronavirus affect health insurance enrollment?

In the United States, the COVID-19 pandemic has put millions of people out of work. A portion of the newly unemployed and their families are expected to seek health insurance coverage. Some have been furloughed, which allows them to keep their employer-sponsored health insurance while applying for unemployment benefits. Others may be able to find employer-sponsored health insurance coverage with parents or spouses.

Before the Affordable Care Act (ACA), newly uninsured adults and families could purchase Consolidated Omnibus Budget Reconciliation Act (COBRA) coverage, individual market plans, short-term plans, enroll in Medicaid, or participate more fully in federal health options for which they were eligible. Today, newly unemployed adults and their families have the following additional options not available prior to the ACA:

  • Individual market plans through the state or federally run marketplaces with federal premium assistance for qualifying households
  • Expanded Medicaid coverage in 36 states
  • Young adults (under age 26) can enroll in their parents’ employer-sponsored insurance

In this brief, Milliman’s Annie Man and Barbara Dewey discuss the health insurance options available to the newly unemployed and how this may affect the ACA individual market.

Pharmacy Briefing: May 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.

Highlights

  • FDA issues emergency use authorization for remdesivir for the treatment of COVID-19
  • National Council for Prescription Drug Programs (NCPDP) issues guidance for pharmacy-led COVID-19 testing
  • Eli Lilly introduces Lilly Insulin Value Program allowing those with commercial insurance or without any insurance to fill monthly insulin prescriptions for $35
  • Express Scripts publishes “America’s State of Mind Report” examining recent utilization of mental health medications

FDA Approvals and Launches

  • Generic version of Proventil HFA (albuterol sulfate) is approved to prevent and treat bronchospasms.
  • Koselugo (selumetinib) is approved to treat neurofibromatosis type 1 (NF1), a rare genetic disorder.
  • Ontruzant (trastuzumab-dttb) is launched, the fifth biosimilar to Herceptin (trastuzumab).
  • Ongentys (opicapone) is approved as an add-on therapy to treat Parkinson’s disease.
Continue reading