Tag Archives: Daniel Perlman

Nonquantitative treatment limitations in the spotlight

Nonquantitative treatment limitations (NQTLs) continue to be a source of difficulty for many health plans in attaining compliance with the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA). Now that a few years have passed since the implementation of the final rules, we can see examples of MHPAEA enforcement related to NQTLs and the types of NQTLs being investigated and settled. In this paper, Milliman consultants provide perspective.

How the Cures Act affects parity of behavioral health services

perlman_j_danielPresident Obama signed the 21st Century Cures Act (Cures Act) into law on December 13. This lengthy bill has gotten attention mostly for its funding of cancer research, reforms to the U.S. Food and Drug Administration (FDA) drug approval process, funding for opioid addiction treatment, and policies to address suicide prevention and serious mental illnesses. Additionally, there are important provisions related to enforcement of the Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA).

MHPAEA requires parity of benefits for mental health/substance use (behavioral) conditions and medical/surgical (physical) conditions in health plans that cover both physical and behavioral benefits. It applies to self-funded employer-based plans, and also to insured plans in the large group, small group, and individual markets. MHPAEA applies to quantitative items, such as financial requirements (copays, deductibles, etc.) and some types of treatment limitations (such as annual visit limits). It also applies to nonquantitative items, such as medical management practices and drug formulary design.

The quantitative items have historically received the most attention from health plans and employer plan sponsors, perhaps because there is a clear mathematical test in MHPAEA’s implementing regulations for how to comply. We have seen less attention paid to MHPAEA’s requirements for nonquantitative treatment limitations (NQTLs), where the regulations are less specific. However, NQTLs are just as important in the regulations, and in fact they have been the driving factor behind a number of publicly disclosed enforcement actions under MHPAEA or similar state parity laws.

There are two repeatedly occurring themes throughout the parity-related provisions of the Cures Act. First, the Cures Act seeks to strengthen enforcement of MHPAEA generally. Second, it requires the implementing federal departments (Treasury, Health and Human Services, and Labor) to provide further clarification regarding the NQTL rules under MHPAEA.

Here are key provisions of the Cures Act as related to behavioral health parity:

• The Cures Act requires the departments responsible for enforcement to issue a compliance program guidance document within 12 months. This document should provide concrete examples of what does and does not comply with MHPAEA, including actual examples of findings from investigations. For NQTLs, the examples must provide clear detail to explain the finding of compliance or noncompliance. This document is to be updated every two years with further examples of compliance and noncompliance.

• The law requires the departments to prepare a similar guidance document for health insurers and plan sponsors. This also needs to provide examples of how to comply with the disclosure requirements of MHPAEA. The Cures Act requires the guidance document to provide examples of disclosing information related to what NQTLs there are in a plan, what factors are used to apply an NQTL, and how the plan ensures that they are applied at parity.

• The law enumerates several even more specific types of information for which the departments must provide guidance related to NQTL compliance. For example, the final rules implementing MHPAEA state that in order for an NQTL to be compliant when applied to behavioral services, there must be parity between medical/surgical and behavioral care in the “processes, strategies, evidentiary standards, or other factors used in applying” the NQTL. The Cures Act seeks more clarity and examples regarding the meaning of those terms.

• If a plan issuer or sponsor is found to have violated MHPAEA at least five times, this will trigger an audit by the departments of plan documents in order to help improve compliance. It remains to be seen how “five times” will be defined and interpreted.

• The U.S. Department of Health and Human Services (HHS) is required to produce an “action plan” to improve federal and state coordination of enforcement of MHPAEA.

• For each of the next five years, the departments must submit a report to Congress summarizing the results of all closed federal investigations completed in the past year regarding serious violations of MHPAEA. This report must have detail on how many investigations there were, what benefit classes were examined, what the investigations were about, and how the final decisions were reached.

• The Government Accountability Office (GAO) must prepare a report detailing how well insurers and plan sponsors are complying with MHPAEA. The Cures Act specifically lists NQTL compliance as something to be included in this report, along with a discussion of how well MHPAEA is being enforced.

• There is a brief clarification in the Cures Act that benefits for eating disorders (including residential treatment for eating disorders), if provided, must be provided at parity under MHPAEA.

In short, the Cures Act does not introduce new parity requirements per se, but rather seeks greater clarity and enforcement of existing rules (particularly with respect to NQTLs).

Financial analysis of ACA health plan issuers

The Patient Protection and Affordable Care Act (ACA) includes risk mitigation programs, also known as the 3 Rs, for individual and small group health insurance markets. The 3 Rs include a permanent risk adjustment program, a transitional reinsurance program for the individual market, and a temporary risk corridor program. The transitional reinsurance and temporary risk corridor programs span from 2014 through 2016, while risk adjustment is a permanent program. The intent of these programs is to mitigate adverse selection and enhance market stability. The 3 Rs also affect financial reporting, and ACA health plan issuers faced many challenges when estimating the financial impact of the 3 Rs on 2014 financial statements. Our research suggests that ACA health plan issuers developed 2014 financial statements in a particularly uncertain environment. In this paper, Daniel Perlman and Dave Liner summarize 2014 3R estimates compared with actual amounts published by the Center for Consumer Information and Insurance Oversight (CCIIO).

Will the increase in the coinsurance rate offer insurers relief?

The Centers for Medicare and Medicaid Services (CMS) recently announced that the 2014 transitional reinsurance program’s coinsurance rate would be 100% rather than 80% as originally stated. This is good news for insurers in the health exchange’s individual market whose reimbursement requests will be paid in full (and then some). In this article, Milliman’s Daniel Perlman, Doug Norris, and Hans Leida discuss the financial implications this change could have on insurers.

For issuers of ACA-compliant plans in the individual market, the increased coinsurance has a fairly obvious direct positive impact on 2014 financial performance: more will be collected than many issuers likely assumed when preparing annual statements for 2014. Any issuer that had computed its transitional reinsurance recovery accruals at year-end 2014 based upon the originally announced coinsurance parameter will now receive an additional 25% (because 100% / 80% = 1.25) given the change in coinsurance. The impact of this change will vary significantly by insurer, but could be material in relation to overall individual ACA market claim costs for many insurers. It may not be uncommon to see reductions in net paid claims of 2% to 4% as a result of this change.

The CMS announcement suggests that the reimbursement requests made by insurance companies may be low enough that the transitional reinsurance program could pay 100% of the coinsurance rate and carry a surplus into 2015. The authors estimated that this surplus would be between $1 billion and $2 billion. In fact, based on new information released by CMS on June 30, 2015, it is now known that the surplus carried forward will be approximately $1.8 billion, in the range the authors predicted.

If, even after the increase in coinsurance, total payouts are less than the $9.7 billion in reinsurance assessments collected, there will be additional funds to roll forward into 2015. These additional funds could help create the same (or similar) outcome for the 2015 plan year by increasing the size of the reinsurance pool by any amount carried forward from 2014. (This could conceivably happen for the 2016 plan year as well, for similar reasons.)

Is there a surplus available to carry forward to 2015, and if so, how big is it? We don’t know for sure…however…[there may be] somewhere between $1 billion and $2 billion unspent.

…The bottom line is that there would be more money available to make reinsurance payments for the 2015 plan year. This is good news for issuers of ACA-compliant individual market plans. However, issuers should be cautious about relying on further enrichment in the 2015 program parameters, as (among other concerns) it is possible that the current parameters have already assumed some amount of carryover.

Cost-sharing reduction subsidies: Financial impact of the simplified methodology

The Patient Protection and Affordable Care Act (ACA) introduced two subsidies for low- and moderate-income individuals to help make health insurance more affordable. These include premium subsidies to lower the initial purchase price of a policy and cost-sharing reduction (CSR) subsidies to lower the cost sharing (e.g., deductibles, copays, etc.) absorbed by individuals at the time they receive care. CSR subsidies, however, are administered in a complicated manner. In many cases the federal government may not reimburse the full cost, leaving the remainder on the shoulders of health insurance companies.

This Healthcare Reform Briefing Paper by Daniel Perlman and Jason Siegel outlines the design of the CSR subsidies under the ACA and its implementing regulations. The paper also describes how, depending on the reimbursement methodology agreed upon between issuers and the federal government, the regulations as currently written may under-compensate issuers of silver-level plans. Issuers should consider the scenarios described in this paper when choosing one of the CSR reimbursement methodologies allowed by the federal government.

The impact of depression treatment persistence on total healthcare costs

Depression is a prevalent and costly disorder. Existing research has shown that many patients suffering from behavioral health conditions, including depression, receive inadequate or no treatment for these disorders. Inadequate treatment often occurs when patients discontinue their prescribed courses of treatment.

The purpose of this research report is to attempt to quantify the impact of depression treatment persistence on post-treatment healthcare costs. Is persistent treatment associated with future healthcare cost savings? Do patients who receive more depression treatment or continue treatment have lower total healthcare cost growth post-treatment than those who received less treatment or discontinued treatment? We conducted a study from a large national medical claims database and compared the relative change in total healthcare costs from the pre-treatment period to the post-treatment period by cohort.

Our results suggest that there is a relationship between persistent treatment for depression and future healthcare cost trend reductions for certain treatment paths and patient cohorts. We conclude with a discussion of the results and of suggestions for future research on this topic.

Read the full report here.