Direct Pay Medical Homes and ACA Part II : Qualified Health Plans

In the first part of the series, I discussed how direct pay medical homes (DPMHs) might integrate in health plans sold to larger employers.  In this post, I’ll discuss the additional challenges to including DPMHs in health plans sold in the individual and small group markets.  These challenges include needing to adequately address how the services and costs of the DPMH are included but also include significant information exchanges between the DPMH and the health plan.

Health plans coordinating with a DPMH in the individual and small group market  face the same challenges of including the services of the DPMH in reporting for the health system as the ERISA plans discussed in the first part. Health plans will need to understand how DPHM services are included in actuarial value calculations. Health plans sold in the Exchanges will also need to include the subscriber fee of the DPMH in the premium of the plan for accurate comparison shopping.

Health plans in the small and individual market also need to collect and pass onto health plans diagnostic information for risk adjustment.  The risk adjustment program in the the post 2014 marketplace will require health plans to report information relating to the risk of their members. Health plans who enroll only low risk members will need to transfer money to health plans who enroll high risk members.  The goal of risk adjustment is to disincentivize health plans from cherry picking healthy members.

Even though the DPMH does not coordinate with the wrap around health plan there will be strong incentives for the DPMH to report risk adjustment data to the health plan. To the extent that a non-reporting DPMH provides all of the care for a member, the member will appear as extremely low risk.  This may be accurate in the case  of smaller DPMHs that provide preventive and routine care.  Health plans coordinating with larger DPMHs, who can provide for most of the care for an individual with chronic conditions, will likely under report the risk of the population without DPMH data.  Since the ACA risk adjustment system penalizes health plans for the relative and not absolute risk of a health plan, an under reported population will face increased premiums as premiums are transferred to health plans with better reporting.   The wrap coverage for non-reporting DPMHs will therefore increase over time.

Reporting the risk adjustment data will likely to eat into the “40% insurance tax” savings.  The reporting of the risk adjustment data is likely to be in the form of encounter data that is similar to claim data.  While the DPMH will not need to argue with the health plan about payment on the encounter data, this data is still subject to audit for risk adjustment purposes. Also, the DPMH may not have the IT infrastructure to provide this information since it does not submit claim data on a regular basis.

DPMHs also face additional constraints in the small group market.  The maximum deductible allowed in the small group market after 2014 is $2,000 for an individual and $4,000 for a family indexed like HSA limits.  These limits may provide too rich of a benefit outside of the DPMH to drive some of the coordination changes in current results.  The plans also may prove to costly to members who have to pay the DPMH subscription fee as well.

DPMHs may provide an effective method to bend the cost curve but the ACA makes the current strategies for integrating with health insurance more difficult.   The ACA’s drive to ensure comprehensive coverage requires a health plan to understand what services are provided in the DPMH and report on those services.  The risk adjustment in the individual and small group market may cut into the savings from the “insurance tax” and minimize the clean break from health plans DPMHs seek.

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