In this article, Milliman consultants Jeremy Cunningham, Maureen Tressel Lewis, and Paul Houchens summarize new regulatory requirements for Medicaid encounter data from the final managed care rule. The authors also identify best practices for state Medicaid agencies and managed care entities in the development and submission of encounter data. Additionally, they discuss how improvements to the quality of Medicaid managed care encounter data may change the industry.
Join Milliman’s Jeremy Cunningham, Maureen Tressel Lewis, and Paul Houchens for the webinar “Medicaid encounter data standards” on Wednesday, June 1, at 12 pm EST. They will provide an overview of encounter data standards and the implications of the final Medicaid managed care rule for state Medicaid agencies and managed care entities. The webinar follows a paper published recently about encounter data standards. To register, click here.
The commercial health insurance markets in the United States in 2014 experienced a significant change relative to prior years. These changes were most dramatic in the individual health insurance market, with the conversion from medical underwriting to adjusted community rating in many states, as well as the implementation of the federal and state insurance marketplaces, facilitating premium assistance to many Americans who were previously uninsured. The 2014 edition of Milliman’s annual report on the commercial health insurance market provides an overview of financial results in the individual and group insurance markets. The report also focuses on enrollment changes in the individual market and the impact of the Patient Protection and Affordable Care Act of 2010’s (ACA) risk adjustment and risk corridor programs.
Sponsors of self-funded group health benefits may be able to reduce their healthcare expenditures by entering into a shared savings arrangement with an accountable care organization (ACO). In the latest issue of Milliman’s Benefits Perspectives, actuaries Anders Larson and Paul Houchens highlight some items that plan sponsors should consider regarding such an arrangement. The following is an excerpt from the article.
For plan sponsors determining whether a shared savings arrangement is appropriate, the following are some of the key factors to consider:
• Number of plan participants: For plan sponsors with fewer than 2,000 plan employee participants, independently developing a shared savings arrangement with an ACO may be problematic as the plan may experience significant claims volatility from year to year. Additionally, the plan sponsor may not have the necessary leverage in terms of healthcare service volume to garner favorable terms with the ACO. For plan sponsors with limited size, exploring a shared savings arrangement as part of a purchasing coalition or through an insurer may be beneficial; however, the outcome of the shared savings calculation might not be shared directly with individual plan sponsors.
• Geographic dispersion: ACOs generally have a localized geographic focus. Therefore, for employers with employees dispersed across the country, having an ACO manage the majority of the employee population may be an impossible task. For such employers, they should evaluate how their third-party administrators are building networks on a regional basis. A benchmarking exercise (discussed in the next section) will allow the plan sponsor to determine if its plan is well managed at a regional level. If the network is built with a focus on high-quality, cost-efficient care, the employer may capture the same financial benefits of a shared savings arrangement. Additionally, to the extent a private exchange could contract with ACOs on a regional or local level, the private exchange may offer purchasing power that could not be created independently by a plan sponsor.
• Current healthcare utilization and cost: A plan sponsor that already enjoys partnering with a high-performing provider delivery system may have little financial incentive to deviate from its current arrangement. Employers with predominantly young adult employees also are unlikely to have the same financial savings opportunity from better utilization management as employers with a significant portion of employees with high-risk chronic conditions. Employees with high-risk chronic conditions create a larger variance in potential costs for a plan sponsor, as well as management opportunities for an ACO. As one of the first steps in evaluating whether a shared savings arrangement may be beneficial, plan sponsors should have their healthcare utilization and costs benchmarked relative to expected costs for their participants’ demographics (including population health), plan designs, geographic location, and provider discount level. Such an analysis will identify utilization management opportunities for a shared savings arrangement.
Approximately one in 68 children has been identified with autism spectrum disorder (ASD). In July 2014, the Centers for Medicare and Medicaid Services (CMS) issued a letter to state Medicaid directors advising that treatment for ASD should be considered covered under the Early and Periodic Screening, Diagnostic, and Treatment (EPSDT) benefit. Historically, treatment of ASD has been confined to Medicaid waivers. The main emphasis of CMS’s guidance encourages each individual state to submit a state plan amendment, detailing how it will provide ASD treatment services. From a fiscal and rate-setting perspective, there are numerous challenges with the CMS guidance on ASD treatment. Milliman’s Matthew DeLillo, Paul Houchens, and Jeremy Cunningham provide some considerations for states developing an autism spectrum disorder treatment delivery system in this Medicaid briefing paper.
With the insurance marketplace open enrollment period coming to an end in February, the U.S. Department of Health and Human Services (HHS) has released new data on the total number of plan selections in the federal health insurance exchange. This information provides high-level information on the distribution of plan selections, split between new and existing exchange consumers, with further insight into the auto-enrollment process and consumer migration between plans. Three observations from this data:
1. Nearly 4.7 million new consumers selected a plan on the federal exchange, representing 53% of total plan selections. For insurers new to exchange markets in 2015, or priced more competitively relative to 2014, the high proportion of new consumers provides the opportunity for significant market share gains. If 2014 experience is an indication, consumers entering the exchange market will gravitate toward the lowest-cost plans. This is supported by emerging evidence of new market entrants and existing insurers (pricing more competitively in 2015) gaining market share. On a long-term basis, the individual market may experience a high degree of churn in its consumer base, which is due to changes in a consumer’s eligibility for Medicaid or affordable employer-sponsored health insurance that impact eligibility for exchange premium assistance.
2. The majority of existing exchange consumers elected to renew 2014 coverage. A major question going into the 2015 open enrollment period was the degree to which exchange consumers would shop for new coverage in 2015. More than 70% of existing 2014 exchange consumers, approximately 3 million individuals, elected to remain in the same plan for 2015. Although we do not have state- or insurer-level data, this likely has resulted in 2014 market leaders maintaining a large portion of their membership bases. Analysis of enrollment data from first quarter 2015 financial statements and changes in the insurer’s relative price position (RPP) in the exchange from 2014 to 2015 will provide better indication of the price elasticity of exchange consumers at the state level.
3. A large majority of consumers renewing their 2014 plans relied on the auto-enrollment process, increasing the likelihood of net premium increases in 2015. Despite strong encouragement by several journalists and HHS, only 34% of consumers renewing coverage for their 2014 plans elected to go through the active enrollment process. For these consumers, monthly premium assistance amounts for 2015 were recalculated based on their household incomes, ages, and their plans’ 2015 RPPs to the 2015 subsidy benchmark plan. For the remaining 66% of consumers who renewed coverage, monthly advanced premium assistance amounts in 2015 will be equal to 2014 amounts. To quantify the impact to consumers of auto-enrolling versus actively renewing their 2014 coverage, we examined cost differences for consumers who purchased the subsidy-benchmark plan in 2014. As illustrated in the figure below, consumers who purchased the 2014 subsidy benchmark plan and elected to forgo the active enrollment process increase their likelihood of monthly cost increases. For example, based on the distribution of county-level 2014 plan selections in the federal exchange, 79% of 60-year-olds would experience net cost increases of greater than $50 if auto-enrolled, while only 35% who elected to actively renew their 2014 plans would experience such increases.
While 2014 market leaders may have had a large portion of their membership bases renew coverage, a material portion of the membership base may have higher monthly costs in 2015 relative to 2014. This may result in 2015 persistency rates being much different than experienced in 2014.