Tag Archives: Lorraine Mayne

Milliman identifies six key questions arising from the Trump/ACA executive order

Milliman has published six questions for consideration by healthcare stakeholders about the Trump administration’s recent executive order, which gives a sweeping command to the leaders of the new administration to unwind certain aspects of the Patient Protection and Affordable Care Act (ACA)—especially those components deemed “burdensome.” It remains unclear how the Trump administration will implement this authority, especially because of the interconnected nature of the ACA, but given Milliman’s comprehension of the law, several key questions arise.

“Milliman has been working with clients across the healthcare system to implement reform since before the Affordable Care Act was signed into law, and we stand ready to assist clients in another round of reform,” said Lorraine Mayne, Milliman Health Practice Director. “The executive order signed on Friday is the first step in a new healthcare reform journey. Based on our understanding of the regulatory authority held by various federal and state entities, we have highlighted several complex questions. We’ve drawn a particular focus on what this may mean for the ACA individual health insurance market, Medicaid, and small employers. Changes for large employers are likely less significant while pharmas and others might not see any immediate differences.”

Strategic questions facing healthcare stakeholders include:

1. Will “hardship” undermine the individual mandate? The executive branch does not have the power to undo statutes—that requires an act of Congress—but the administration could defang the individual mandate via expansion of the hardship exception. It’s unclear if individuals would need to apply for such hardship, if proof of hardship might become part of tax forms (e.g., simply a checkbox), or if the administration could simply opt not to enforce the requirement. Some repeal and replace proposals have called for enrollment penalties similar to those in the Medicare Part B program as an alternative to a mandate—after all, any stable risk pool needs to ensure healthy people have an incentive to enroll. But until any alternative measure is installed, a weakening of the individual mandate may result in lower enrollment by healthy people and a sicker, higher-cost risk pool.

2. Are transitional plans here to stay? Thirty-three states allowed insurers to provide “transitional plans” where insureds have been able to keep their pre-ACA health coverage. The option began with the initial 2014 open enrollment and remains available through the end of 2017. Because pre-ACA coverage was subject to underwriting and risk-based rating, many insureds could maintain lower rates in the transitional coverage while those with less favorable terms migrated to ACA markets. As a result, these transitional plans generally have lower risk and the plans sold through the ACA marketplace have higher risk than if the pools were combined. Insurers anticipated that the expiration of the transitional plans had the potential to introduce new, healthier members to the risk pool and lead to lower rate increases. If transitional plans are extended indefinitely, it could deny ACA plans that relief.

3. What impact could the executive order have on selling insurance across state lines? President Trump argued repeatedly in favor of selling health insurance across state lines during the presidential campaign. And, in fact, the executive order includes a provision calling on agencies to “encourage the development of a free and open market in interstate commerce for the offering of healthcare services and health insurance.” However, it is not clear how this executive order can actually do that; statutory change is probably required. McCarran-Ferguson remains in place, which gives insurance regulatory authority to the states, and thus would seemingly prohibit interstate sales. Practically speaking, it’s unclear why a state would cede authority to allow for a plan from another state to sell insurance in its market or how interstate regulation would actually work.

4. Will the executive order fast-track pending 1115 waivers? The federal government now may be willing to grant more flexibility to state Medicaid programs requested through pending Section 1115 waivers. As of today, there are 11 new Medicaid 1115 waiver applications pending with the federal government. The executive order may encourage the federal Department of Health and Human Services (HHS) to quickly approve these waivers and empower states to make changes. The approval of the 1115 waivers would lead to a number of Medicaid transformation projects for the requesting states, which include, but are not limited to, healthy rewards accounts, work requirements, and integrated mental health programs.

5. Could the employer market be at the center of the action? Over the years, employers have repeatedly expressed concern about the extra burdens placed upon them by the ACA. These concerns related to higher taxes and fees (e.g., the insurer fee passed on to them in the form of higher premiums, the Cadillac tax, and the employer mandate penalties). Employers have also taken issue with increased administrative reporting requirements. Small-group employers have faced even greater changes than the large-group market, with limited plan design choices and restrictive premium structures. Many employers would applaud a loosening of restrictions. It could start with a reduction in paperwork. An easing of reporting requirements for employer groups could signal a relaxation on other requirements.

6. Will essential health benefits be affected? The ACA created the notion of minimum essential health benefit (EHB) categories. Through regulation, HHS allowed states some flexibility in the definition and implementation of EHBs. One such measure was allowing individual states to select a “benchmark plan” to use as a comparative standard. This would allow states to cover the required categories while at the same time recognizing their own mandated benefits. If EHB regulations are relaxed, some modifications to these minimums may occur. The requirement to provide what are sometimes viewed as controversial benefits such as contraception coverage could potentially be modified by an executive order, or when and if the ACA is modified or replaced. Also linked to this issue is the calculation of the actuarial value of the benefits after cost sharing is applied. This process is dictated by law and regulation and will need to be carefully watched as reconsideration of ACA proceeds.

Healthcare costs climb to $23,215 for a typical American family in 2014

Milliman has released the 2014 Milliman Medical Index (MMI), which measures the cost of healthcare for a typical American family of four receiving coverage from an employer-sponsored preferred provider plan (PPO). In 2014, costs for this family will increase by 5.4% ($1,185), resulting in a total cost of $23,215. The employer pays $13,520 of this and the employee—through payroll deductions and cost sharing at the time of service—pays $9,695.

MMI2014_figure1

“The good news is that the annual rate of increase has been declining for years,” said Chris Girod, coauthor of the Milliman Medical Index. “The bad news is that this represents yet another $1,100 jump in costs for this typical family. Even if we are bending the cost curve, there are few other household expenses that increase at four figures per year.”

This year’s 5.4% cost increase is the lowest in the 14-year history of the MMI and is almost a full percentage point lower than the rate of increase in 2013, which, at 6.3%, was the prior record low for this study. Even with the deceleration, the impact over time of high trends is still quite evident.

“Healthcare costs for this family have more than doubled over the past 10 years,” said Sue Hart, coauthor of the MMI. “These costs have increased a total of 107% since 2004.”

Employees and employers have shared the burden of this cost increase. The MMI is somewhat unique among health cost studies because it measures total cost, including out-of-pocket expenses paid at time of service, and it separates the costs into portions paid by employer versus employee. For the fourth consecutive year, employees have assumed an increasing percentage of the total cost of care.

“Since 2010, the total employee cost, which includes both payroll deductions and out-of-pocket expenses, has increased by around 32%,” said Lorraine Mayne, coauthor of the MMI. “Employer premium contributions have increased by 26% in that same period.”

What should this family expect in the future?

“Any number of factors could influence healthcare costs in coming years,” said Scott Weltz, coauthor of the MMI. “The economy is a big one, but there are others: provider risk sharing and increased transparency may contribute downward cost pressure. Specialty pharmaceuticals could introduce upward cost pressure. And while it has yet to materially affect costs, the Affordable Care Act is an elephant that’s about to enter the room. There are provisions in the law that may contribute either upward or downward pressure on employer-sponsored plans; it will take some time before we know how health reform is affecting a typical family that receives coverage through an employer.”

To view the complete MMI, go to http://us.milliman.com/MMI.

Milliman’s top 10 publications of 2013

In 2013, Milliman again published a wide variety of articles and videos, including timely analysis related to issues such as sinkhole peril, improving claims analytics through text mining, predictive modeling and analytics, and Solvency II developments. In addition, we published extensively on ongoing challenges related to managing healthcare costs, healthcare reform, retirement planning, and insurance and risk management issues.

Here are this year’s ten most viewed articles and reports:

10. Fees: What everyone is NOT talking about!
By Douglas A. Conkel

How do plan sponsors ensure that actual fees paid by each participant are fair and reasonable when compared to other participants within the plan?

9. Planning for NAIC ORSA
By Chris Suchar, Joy A. Schwartzman, Matthew G. Killough, Wayne E. Blackburn

Sophisticated risk assessment will be key to complying with U.S. ORSA requirements.

8. Operational risk modelling framework
By Joshua Corrigan, Paola Luraschi

Current methods and emerging practices in operational risk across the world.

7. ACA: An act of unknown consequences for workers compensation
By Derek A. Jones

How will healthcare reform mandates for preexisting condition coverage and broader healthcare access affect workers’ compensation claims and costs?

6. President Obama’s transitional policy for canceled plans
By Hans K. Leida

The November 14, 2013, announcement that health insurance issuers would be permitted to renew certain canceled health insurance policies has raised new questions for the individual and small group marketplaces in 2014.

Continue reading

Are more patients visiting doctors?

A recent American Medical News article suggests that a recovering economy and greater use of preventive care may be contributing to increases in spending on physicians. The article highlights costs related to “physician and other professional services” for the typical American family of four as reported in the 2013 Milliman Medical Index (MMI). Study co-author Lorraine Mayne provides perspective regarding those rising costs.

Here is an excerpt from the article:

In a Milliman Medical Index [sic] released in May, physician and other professional services for an average family of four that receives health care benefits through an employer-sponsored preferred provider organization plan cost about $7,000 in 2013, a 5.2% increase over 2012. That’s 32% of the total health cost of $22,030 — $12,886 through employer subsidies, and $9,144 from employee payroll deductions and out-of-pocket costs.

Overall, health spending went up 6.2%, the third consecutive year the growth rate decreased after reaching a peak of 7.8% in 2010. Outpatient procedure spending in 2013 has grown the fastest, at 9.2%, followed by pharmacy-related costs at 7.9%, and inpatient care, at 5%. Milliman said a shift in many procedures from inpatient to outpatient care was reflected in their growth rates. Spending on physicians was counted as professional services no matter whether the care was outpatient or inpatient.

In 2013, about half of the 5.2% cost increase to PPO plans was due to more patients going to physicians for more services, said Lorraine Mayne, principal and consulting actuary for Milliman, a health consulting company. She said part of the annual increase had been flat for the previous two years.

Mayne said it’s likely that some families had postponed health care to avoid paying for their out-of-pocket share. But an improved economy and more people being employed and insured probably have contributed to the rise in physician utilization.

Figure 3 below illustrates healthcare spending in 2013 under five separate components.

Figure 5 below shows the annual rate of increase in costs under the five components.

To read more press coverage of the 2013 MMI, visit Storify.com/MillimanHealth.

Healthcare costs for American family of four exceed $22,030

Milliman today released the results of its 2013 Milliman Medical Index (MMI), which measures the healthcare costs for a typical American family of four receiving healthcare benefits through an employer-sponsored preferred provider organization (PPO) plan. The cost of care for this typical family in 2013 is $22,030.

“For the second consecutive year, the increase over the prior year on a percentage basis was the lowest in the history of the study—and yet the total-dollar increase still exceeded $1,300 for the fourth year in a row,” said Lorraine Mayne, principal and consulting actuary with the Salt Lake City office of Milliman.

“The cost for our typical family is split between employer and employee, with the employer paying about $12,886 in employer subsidy while the employee pays the remaining $9,144 in the form of payroll deductions and out-of-pocket costs,” said Scott Weltz, principal and consulting actuary with the Milwaukee office of Milliman. “While both employers and employees share the burden of financing annual cost increases, our study shows that this year employees continue to take on a growing share of the overall costs.”

In addition to highlighting which costs are borne by employers and which are borne by employees, the MMI also tracks cost increases based on different categories of care, including inpatient care, outpatient care, physician and professional services, and pharmaceuticals.

While the Patient Protection and Affordable Care Act (ACA) has dominated many discussions of healthcare costs since its passage, the law has not materially affected cost of care for families covered by large employer-sponsored plans such as that exemplified by the MMI.

“In addition to the usual discussion of healthcare cost drivers, this year’s MMI includes discussion of how health reform is—and is not—affecting families with these sorts of employer-sponsored plans and how these plans fit in the larger context of a changing healthcare landscape,” said Chris Girod, principal and consulting actuary with the San Diego office of Milliman.

To view the complete MMI, go to www.milliman.com/mmi.

Cause and effect…and effect

American Medical News looks at the cost drivers underlying this year’s average of $20,728 in healthcare costs for a typical American family of four. Here is an excerpt:

Milliman breaks down the model family’s health care spending by category: physician services, inpatient stays, outpatient care and pharmacy costs. Spending on physician services grew at the lowest rate of any of the care components in the Milliman index, Mayne said, and that’s been true for several years.

“Some of the other categories are catching up,” she said. As a result, physician services now account for 32% of the medical index, at $6,647 — but inpatient hospital expenses were nearly as high a share, at $6,531.

So that’s what’s underlying the cost increases. What are the downstream implications for employers and the employees receiving insurance through their employer? CNN/Money delves into that question:

Over the past five years, 40% of working adults have seen their employer-sponsored benefits reduced or eliminated entirely, according to a survey by the National Endowment for Financial Education, or NEFE.

Harris Interactive conducted the survey on behalf of the nonprofit, polling 2,210 adults in the U.S. — more than half of whom were employed.

An overwhelming majority, or 72%, of those who saw their benefits cut said their health insurance coverage was hardest hit, NEFE said. As employers cut back, employees shouldered more costs, including higher deductibles and co-pays, as well as more expensive premiums.

This year, workers’ out-of-pocket costs rose 5.8% to an average of $3,470 for a typical family of four, according to data compiled by independent actuarial and health care consulting firm Milliman Inc.

The trend of employees taking on more of the cost share is not new and has persisted more often than not in recent years. Just roll back the calendar one year and consider what we posted last May 31.