Tag Archives: Bill Thompson

SCOTUS and captive insurance

Bill Thompson offers perspective on what the U.S. Supreme Court (SCOTUS) ruling on the Patient Protection and Affordable Care Act (PPACA) means for healthcare and employee benefit captives in this new article written for Captive.com. Here is an excerpt:

The SCOTUS ruling by itself has little direct effect on the administration of healthcare captives and employee benefits captives.   They should continue on the course they have been taking.   The change towards the integration/consolidation of healthcare delivery systems that is due to PPACA could impact the future professional liability exposure of healthcare captives.  The biggest force that may affect employee benefit captives is the potential for increases in the minimum stop-loss attachment point that is allowed; such a change will greatly reduce the growth in captive arrangements that pool the risks of multiple smaller employers that have self-insured stop-loss coverage.

The full article is available here.

CO-OPs: A void in the Northeast

Politico looks at the uphill climb to establish consumer operated and oriented plans (CO-OPs), one of the provisions of the Patient Protection and Affordable Care Act (PPACA). As you might expect, the progress differs from one state to another:

The efforts are as different as the states where they’re brewing, from rural Montana, where the state’s former insurance commissioner has joined prominent physicians and leaders in labor and business to found a CO-OP, to The Freelancers Union, based in New York, which hopes to bring in some portion of its 150,000 members, among others.

“The $3.8 billion of social capital to start these up is as much money as I’ve seen or expect to see in my lifetime for a project like this,” said Sara Horowitz, executive director of The Freelancers Union. “Not having to meet the return on investment expectations of private capital can make all the difference.”

The idea of a fresh start is alluring to many in the healthcare system.

CO-OPs have the competitive advantage of “writing from a blank slate,” said John Morrison, who heads the National Alliance of State Health Cooperatives, an association set up in 2010 to pool resources as they try to organize.“We don’t have legacy systems — business practices that we’re locked into,” he said. “We can look at the data and target resources to the providers who have the best outcomes. We can focus on primary care, and I think a lot of us will work with the medical home model.”

While there has been progress in some regions, there is one conspicuous exception:

A handful of others are expected to apply independently, but significant parts of the country are not represented. Bill Thompson, principal and consulting actuary with Milliman, said he has heard of little or no interest from New England states.

“There’s a remarkable gap in what’s going on in the Northeast, and we’re scratching our heads,” he said. “The start-up and initial capitalization is there, but it seems to be a void up here.”

Many CO-OP watchers are waiting to see whether major institutional players, such as academic medical centers, might try to jump in. But the law has strict governance restrictions that require a majority of the board to be made up of CO-OP members, with some exceptions for people with special expertise.

How will health costs change from one region to the next?

The cost of healthcare for a typical American family varies from one location to the next. Here is the most recent comparison of those costs across 14 geographic areas, according to the Milliman Medical Index.

How will this regional variation be affected by health reform?

The new underwriting and rating restrictions that will be imposed on individual and small employer group plans in 2014 will have different implications depending on a family’s location. The changes will require that insurance be guaranteed issue (i.e., applicants cannot be turned down), and that it be offered at adjusted community rates that do not allow carriers to “rate up” premiums based on the health status or claim experience of applicants.

Current underwriting and rating rules vary by state, so the effects of these changes will also vary by state. Minimum loss ratio requirements (80% for individual and small group and 85% for large group) may affect insurer rates. The U.S. Department of Health and Human Services (HHS) rule that any rate increase of 10% or more is deemed to be “excessive” will affect rate increase actions. Because states vary in their rate review practices and approval authority, the effect of these changes will also vary from state to state. Further, the Patient Protection and Affordable Care Act (PPACA) encouragement of the development of accountable care organizations (ACOs) and consumer operated and oriented plan (CO-OP) arrangements may affect the way care is coordinated and financed—with differences from state to state. As a result of all these things, the relative cost of care by state may look very different in a few years than it does today.

The cost of retiree healthcare

The Connecticut Mirror looks at Connecticut’s cost for state employee retiree healthcare benefits as the state moves toward a pay-as-you-go approach to funding such benefits. The pay-as-you-go approach is tied in with GASB 45, which requires public employers to calculate the value of “other post-employment benefits” (OPEB). Here is an excerpt from the article:

State officials recently got their first glimpse of the cost of escaping a pay-as-you-go health insurance program for retired workers, and it wasn’t pretty.

But on a long-term basis, the state’s health care consultants said, it’s far less expensive the the current practice of paying the bills out-of-pocket.

A preliminary analysis issued last week to the Post Employment Benefits Commission projected that annual spending, which currently approaches $500 million, will rise on the pay-as-you-go plan so that the average cost over the next 28 years will be $1.9 billion–a total outlay in excess of $53 billion.

If the state adopts a longer-term plan for funding the costs, the annual outlay would jump immediately to $1.2 billion, according to Milliman Inc. of Windsor, which provides health care consulting and actuarial services for the state comptroller’s office–but then stay relatively stable over 28 years, for a total outlay of roughly $34 billion.