Tag Archives: third-party administrators

How can medical management teams help enhance their health plan’s COVID-19 response?

The COVID-19 pandemic has the potential to significantly disrupt and challenge the healthcare delivery system, including health payers. It also presents opportunities for payers to leverage internal resources and deliver value for their provider partners and customers.

Traditionally, the U.S. healthcare system is bifurcated into two major types of organizations: those that deliver healthcare services and those that finance or fund the delivery of healthcare services. There are a few areas where there has been some convergence of these key functions. In particular, the introduction of risk contracts has moved provider organizations closer to the financing end of things and the growth of medical management has moved some payers closer to care delivery.

In this brief, Milliman’s Penny Edlund and Maureen Tressel Lewis highlight some areas where a health plan’s medical management team may contribute to the COVID-19 response.

How will the COVID-19 pandemic affect health payer operations?

The coronavirus pandemic will have a significant and long-lasting effect on healthcare systems around the world. Health insurers, managed care organizations, and third-party administrators provide infrastructure that facilitates the flow of information and funds throughout the healthcare value chain. Payers answer benefit and coverage questions, connect patients to healthcare services, provide reimbursement for services rendered, facilitate financing, and manage relationships with purchasers.

In the current care delivery and financing paradigm, these day-to-day administrative activities are key to making the U.S. healthcare system work. However, the status quo is threatened as customers and providers experience business interruption on a massive scale due to COVID-19.

In this paper, Milliman’s Barbara Culley, Maureen Lewis, and Andrew Naugle identify five key payer functions that are likely to be affected by the COVID-19 pandemic along with actions payers can take to ensure business continuity while enhancing their contributions to the value chain.

Guidance for Medicaid managed care MLR calculations

In May 2019, the Centers for Medicare and Medicaid Services (CMS) released an Informational Bulletin clarifying how payments to subcontracted vendors should be accounted for in the medical loss ratio (MLR) calculation required by 42 CFR §438.8 as established by the Medicaid and Children’s Health Insurance Program (CHIP) managed care final rule published in May 2016. In the May 2019 bulletin, CMS focuses on the responsibilities of a subcontractor in providing data and the proper accounting of subcontractor payments for purposes of MLR reporting. The provisions outlined in the May 2019 bulletin apply to all subcontractor relationships, but CMS specifically highlights pharmacy benefit manager (PBM) arrangements that may include “spread pricing” and rebate retention.

The final rule requires states to complete MLR reporting for the first contract period beginning on or after July 1, 2017. It is anticipated that many state Medicaid programs will be providing MLR data for CMS for the first reporting period during calendar year 2019, so states should clearly articulate this guidance to contracted managed care plans and modify data collection processes and vehicles to collect the necessary detail to meet CMS requirements.

The final rule also stipulates that a managed care plan must ensure that its subcontractors fully comply with all terms and conditions of its contract with a state and must comply with all applicable Medicaid law and regulations. One area in which managed care plans commonly use subcontractors is in the delivery of pharmacy benefits. PBMs maintain and develop pharmacy networks, negotiate rebates with drug manufacturers, and perform other activities that support managed care plans’ obligations under contracts with states. In this paper, Milliman’s Paul Houchens, Ian McCulla, and Amber Kerstiens discuss reporting requirements for PBMs and other third-party vendors under this new CMS guidance.

Understanding trend guarantees when performing TPA selection analyses

There has been increased interest from both employers and third-party administrators (TPAs) about incorporating medical trend guarantees into TPA selection analyses. In general, a trend guarantee is defined as an agreement between a TPA and an employer that compensates the employer in the event that the year-over-year trend in medical claims costs exceeds the negotiated amount.

While trend guarantees may offer a useful hedge against unexpected increases in costs, employers should be diligent in understanding the fine print. A trend guarantee with a lot of caveats and a tiered payout schedule may not have a material impact on the value proposition offered by the TPA submitting guarantees.

Milliman’s Scott Cohen, Paul Sakhrani, and Brian Sweatman offer more perspective in this article.