Identifying rising risk patients can reduce costs for healthcare organizations

Identifying future high-risk, or rising risk, patients can help healthcare organizations reduce population health costs through early intervention. In this paper, Milliman consultants Ksenia Whittal and Abigail Caldwell examine predictive models to determine if an enhanced model can better identify individuals with rising risk relative to traditional prospective risk adjustment models. The authors also assess the capability of these models to select members whose costs will increase in the future year.

Controlling rising medical costs

The 2017 Milliman Medical Index noted that medical expenditures (inpatient, outpatient, and professional) made up about 80% of the total cost of healthcare for a family of four, and that nationally the cost increases from 2016 to 2017 were about 4%. However, many employer plans have experienced much higher cost increases, especially in certain areas of the country. In 2016, for the first time, independent physicians made up less than half of the practicing physicians in the United States, according to an American Medical Association (AMA) study. Physicians who work with hospitals charge a facility price at their offices, which could result in increases in costs and significant discrepancies in prices for the same services. Additionally, hospitals have continued to merge with each other, and while these mergers offer the potential for lower costs by increasing efficiencies, a 2016 study by Northwestern University, Harvard University, and Columbia University found that prices at merging hospitals actually increased 7% to 10% if the hospitals that merged were within the same state. Given these factors, along with general price inflation and increased utilization, plan sponsors should consider ways to mitigate costs using any or all of the strategies below.

Price transparency and quality

Providing price transparency, coupled with information on quality of care, is a way to promote consumerism within a health plan so that both the plan sponsor and the members who are receiving benefits can save costs. There are various vendors that offer plan sponsors and members the ability to “shop” for surgical procedures and doctors based on price and quality metrics. Cost and quality advantages can result from steering members to specialized “Centers of Excellence” for a given procedure.. Members can be incentivized to choose the lower-cost facilities or physicians (without sacrificing quality) through a reduction or elimination of member cost–sharing, or even with rebates (that is, the plan will “pay” the member to choose a lower-cost alternative).

Narrow networks and carve-outs

Another way to steer members toward cost-effective facilities is through the use of a narrow network. Most health plans offer a narrow network option (for both insured and self-insured plans), which limits member access to a smaller pool of doctors and hospitals within their larger networks. The narrow (or preferred) network promises better discounts on claims than regular in-network claims, and the plan sponsor can encourage members to use these facilities by reducing member cost-sharing within the narrow network. The plan is designed to have an additional tier of cost-sharing, with the preferred network having the lowest member cost-share. Furthermore, plan sponsors with direct contracts can consider carving out a particular facility from in-network if the facility is not a cost-effective, high-quality option (and there are other options available to the members).

Alternative payment strategies

In addition to steering members through plan design and incentives, certain plan sponsors can look to alternative payment strategies to further control costs while ensuring that quality of service does not suffer. For example, a bundled payment can be used in place of fee-for-service for certain procedures with predictable episodes of care (e.g., total joint replacement). The plan sponsor pays the same amount regardless of days spent in the hospital or rehab visits, which can help to reduce unnecessary services. A plan sponsor can also enter into a shared savings arrangement with a group of providers, such as an accountable care organization (ACO). An ACO is a group of doctors and hospitals whose focus is on providing coordinated care to certain members within a plan. Ideally, the main goal of both the ACO and the plan is to keep costs low without sacrificing quality. If successful, both share in the savings achieved. Plans with a large enough membership can enter into these alternative payment strategies on their own; for smaller plans, they may be able to contract through their insurance carrier or third-party administrator.

This article first appeared on LaborPress.org.

An Overview of the Bundled Payments for Care Improvement Advanced Model

In January, the Centers for Medicare and Medicaid Services announced a new voluntary bundled payment model, Bundled Payments for Care Improvement Advanced (BPCI Advanced). This model starts on October 1, 2018, and creates a replacement for the current BPCI initiative. This paper by Milliman consultants Samuel Bennett and Pamela Pelizzari outlines the major provisions of the newly announced BPCI Advanced model.

Employer-sponsored coverage: “Expanded” voluntary benefit offering

Voluntary benefits are products offered through an employer but paid for partially or solely by employees through payroll deductions. The attraction of these benefits is that they can offer group rates to employees that they would likely be unable to obtain on their own. Voluntary benefits can also help fill coverage holes when an employer cuts back on or eliminates a specific benefit program. Voluntary benefits are a good way for employers to enhance their employee benefit offerings at little or no cost.

Voluntary benefits have historically encompassed a few basic policies. Today, however, many employers are expanding their offerings to consider their employee demographics (age, marital status, family members), lifestyle, and financial habits. Decisions regarding which benefits should be offered should be made with care. Voluntary benefits should provide clear and convenient options that are easily accessible by employees when needed.

Milliman recently conducted an employer-based survey focused specifically on the menu of “expanded” voluntary benefits. Across a range of voluntary benefits, employers indicated which benefits they were currently offering in 2017 as well as those benefits they planned to offer in 2018.

Voluntary benefits already offered in 2017
As shown in the table in Figure 1, accident insurance options, standing desks, and critical illness insurance options were the top three offered voluntary benefits in 2017. Others also leading the pack included paid leave for new parents and to care for dependents, telemedicine, financial education/counseling, and wearable fitness devices.

Voluntary benefits planned to offer in 2018
The table in Figure 2 shows that the top three voluntary benefits where employers planned to expand in 2018 were financial education/counseling, student loan repayment program, and pet insurance. Other options of interest included paid leave for new parents and to care for dependents, telemedicine, standing desks, and identification of insurance options.

Health insurance (i.e., medical, Rx, dental) still makes up the main health and welfare offering. However, an ever-expanding range of voluntary benefits gives employers more flexibility and employees more options. As a general rule, the selection of a voluntary benefits programs must be strategic. These benefits must be chosen, managed, and communicated with care, keeping in mind the employer’s overall financial goals as well as its employee population needs. There are many voluntary options available but an employer should only choose those that will provide the most relevance and appreciation to its employees.

This article first appeared in the March 2018 issue of Health and Group Benefits News and Developments.

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

Regulatory roundup

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

2019 Medicare Part D benefit parameters published
The Centers for Medicare & Medicaid Services (CMS) released the Medicare Part D standard benefit parameters and the cost thresholds and limits for qualified retiree prescription drug plans for 2019.

For more information, click here.

CMS’ RDS Center now accepting Medicare Beneficiary Identifier (MBI) in retirees files
Effective as of April 1, 2018, the CMS’ Retiree Drug Subsidy Center is accepting Medicare Beneficiary Identifier (MBI) in retiree files. Plan Sponsors and Vendors should take note that the use of MBI is not mandatory within the RDS Program and that RDS will continue to accept SSN and/or HICN or RRB indefinitely. For information on the use of MBI in RDS retiree file formats please reference the following pages in the RDS User Guide:

• Retiree File Layouts
• Retiree Response File Layouts
• Weekly Notification File Layouts
• Covered Retiree List File Layout and Format
• RDS Reason Codes

For more information, contact CMS’ RDS Center.

Paid family leave gaining traction in the United States

Beginning January 1, 2018, New York joined three other states to offer paid family leave in the United States. California, New Jersey, Rhode Island, and now New York all offer paid family leave programs funded through employee contributions. Washington state will begin offering paid family leave in 2020, funded through a combination of employer and employee contributions. Washington, D.C., will begin offering paid family leave in 2020 through employer contributions.

As more states implement paid family leave programs and the federal government continues to discuss it, paid family leave benefits as part of health and welfare programs have gained traction. Almost 60% of U.S. employers offer or are planning to offer paid leave in 2018 for new parents, and just under 50% offer or are planning to offer paid leave in 2018 to care for a sick family member.

Details of paid family leave programs vary from state to state. Employers with employees in multiple states need to navigate these different requirements in designing their programs. A summary of paid family leave requirements by state is shown in Figure 1.

In addition to the difference in benefits summarized above, details such as eligibility, waiting periods, and qualifying events, as well as how the benefits are delivered, differ from state to state. Most states provide the benefits through a state fund, although some allow for private insurers to participate in paid family leave, such as New York and New Jersey. New York also allows employers to self-insure their benefits.

As governments and employers (where self-insuring is an option) consider the cost of paid family leave programs, it is important for them to consider the following:

  • There is limited data available with regard to utilization of paid family leave benefits.
    • Although there is experience with respect to other paid family leave programs offered in states such as New Jersey it is important to adjust for differences in design and demographics of individual groups.
    • It is also important to consider disability claims related to maternity, as bonding with a newborn is generally where a majority of employees utilize paid family leave benefits. In New Jersey, approximately 85% of claims are for bonding with newborn children.
  • There will be administrative costs associated with the program.
  • Employers who self-insure in New York are required to hold a minimum security deposit to fund unexpected losses, which is determined at the employer level using assumptions prescribed by the New York Department of Financial Services (DFS). Also, the employers are required to submit their experience with DFS on an annual basis.

Some states and employers have taken the lead in implementing paid family leave programs in 2018. As others consider implementing paid family leave it is not only important to consider the cost of the program, but also the design, delivery, and funding. All of them are important to an employer’s leave management strategy.

This article first appeared in the March 2018 issue of Health and Group Benefits News and Developments.

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