Archive for category PPACA

Some Thoughts on the Connect for Health Metrics

Connect for Health has released detailed metrics on enrollments through November and some summary data for the first week in December. Here are some of my thoughts on the metrics. Note that these are  based on my general understanding of the industry and not an analysis of rate filings or other sources.

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What Happens if They Don’t Come?

As the storm continues to gather around the healthcare exchange’s troubles, the news media is beginning to fixate on a new question: What happens if the young and healthy don’t come? At what date have Healthcare.gov and the state exchanges lost the young invincibles that are the key the law’s long term success? Won’t health care reform be doomed when Healthcare.gov crashes on black Friday?

Don’t panic!

The US healthcare system has been compared to a gigantic mega-tanker and that analogy is particularly apt in this case. The exchanges early floundering will certainly impact the course of health insurance rates. However unlike a modern tanker, health insurance carriers don’t have a GPS to pinpoint the course change but are still using tools closer to compasses and half completed current charts.

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HIX Startup Ecosystem

Venture Beat had a recent article on options for startups and venture capital and exchanges.  While Exchanges present an opportunity, new stratups just entering the market should focus on the growing ecosystem around the Exchanges rather  competing directly on or for the Exchanges.

  1. Backend support – While appealing from a public service standpoint, this isn’t a strong option for new investment. Your customer base for HIX back ends is public sector entities. This means long RFP cycles, budgets that are consistently under pressure, and customers whose priorities may change every two years. Brand new startups are unlikely to be able to compete in public sector procurements where references and high fixed cost investments like local staff or high liability insurance requirements.There are also several strong first mover advantages for the existing players. The first is risk aversion of the customer base. Public sector customers are more likely to choose a bad existing stable solution over new innovative solution since the rewards for innovation are relatively small but the penalties for failure are immense. A second concern is budgetary. The original appropriation for Federal grants to state based exchanges ended this year. While it is likely that some money will be available for the 38 states who are currently relying on the Federal Exchange there may be not be resources for a completely new system.
  2. Helping Private Exchanges with new branding – While it may be tempting to compete directly on an Exchange, public or private, it’s important to recognize that insurance product cycles are relatively long, even in private exchanges. All insurance products sold to individuals need regulatory approval by October of the year before they are sold. This means that a new product for 2015 have less than a year to be created, marketed, and approved by regulators. Products sold through large employers do not have the same regulatory deadline but have similar process deadlines where decisions on employer plans are often made over the summer. This is especially true with large changes that may require a coordinated communication plan o employees.At the same time health plans may seek better engagement tools mid year. Tools that can either raise an Exchange plans mind share like enhanced customer service or marketing tools may need to be deployed mid-year after the product development cycle because these pieces are often not required to be filled with regulators or require contractual adjustment with an employer’s workforce. Startups targeting larger contracts in this area also need to be aware of the Medical Loss Ratio(MLR) and whether a portion of the costs of the engagement tool may be considered a claims expense.
  3. Customer education & services – There is definitely a need for better informational products. The difficulty is developing a viable monetization and business strategy for direct to consumer services. Both public and private HIXs will also be working on educated consumers for free. Some Exchanges may seek help in developing these products many will see this activity as a core competency and key differentiator.At the same time HIXs are creating a new class of advisors, navigators. Navigators, health insurance brokers, and accountants, because of the complications of the tax credit, may have the resources to pay for differentiated informational products to offer their clients. These advisers also have a different needs than the average consumer and provide a niche for startups.
  4. Financial services for HIX world – This is another area where focusing on the small and medium enterprises may provide a better solution. Many larger health systems have been preparing for higher patient cost sharing under the guise of “revenue management”. Whether the solo practitioner realizes the impact and has a solution is an open question. An interesting problem/opportunity is the shear number of changes a small office will have to deal with in the next year from meaningful use, the potential changes in billing due to HIXs, and ICD-10. A new startup dealing with only one of these issues may not be able to gain much traction but there is an opportunity to partner with other organizations to provide the full solution suite.Providing direct to consumer tools may be harder and there may be a much more limited market than anticipated in the article. Medicaid and child health plan eligibility, which in most states is free, is based on monthly income so a family that loses the primary breadwinners paycheck may instead qualify for a free health plan rather than require a short term loan. The regulations also require subsidized individuals to have access to non-traditional payment methods offering some possibility for non-traditional payment sources. The regulations also provide for a 90 day grace period so many insurers rather than a third party may become credit supplier for more affluent customers with cash flow problems.
  5. Self-Triage Services – This area is another need but the trick is monetization.

While Exchanges offer compelling opportunities many of big obvious “whale” opportunities may have already passed. Instead new startups may want to focus on supporting the vast ecosystems that will be generated by the Exchanges.

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MOOPs and Long Term Cost Control

While many people have expressed concerns over the administrations delay in implementing the ACA limits on the maximum out-of-pocket (MOOP), the MOOP delay is a broader reflection of the tension in the ACA between coverage and cost containment. Delaying a requirement explicitly for data linkages either shows the difficulty of moving the complex fragmented US healthcare system or signals an administration that is still focused on coverage and doesn’t have a clear focus on how to solve the cost problem.

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Actuarial Considerations for the Evidence of Coverage Regulation

While the evidence of coverage regulation issued last week is primarily a consumer information regulation, there are several provisions of interest for actuaries.  The required distribution dates of the summary of benefits and coverage (SBC) to consumers may impact rate development timelines.  Actuaries may also be asked to review or develop automated methods for pricing the coverage examples. Finally, actuaries may wish to standardize language around the uniform glossary to minimize confusion within and across organizations.

While many states have required renewal notification dates for products many employers particularly small employers may use the renewal notification to start shopping for the next year’s coverage so the required renewal dates tend to drive much of the rate making calendar.The notice of proposed rule making (NPRM) required group health plans to provide participants a new SBC 30 days before any changes to underlying benefits including plan design.  This would have pushed the rate making calendar ahead as carriers moved to provide renewal notices at least 60 days in advance to provide employers with adequate time for analysis of the renewal and potential plan design changes. The new rule allows allows for a group to provide the SBC upon finalization of a contract if the contract is still under negotiation 30 days before the effective date.  However, the negotiation process may be moved earlier as employers seek to finalize coverage decisions 30 days but without the hard deadline there may be less of a shift. Self funded plans must publish the SBC at least 30 days before renewal if there are any changes so smaller self-funded plans that may not have an open enrollment period will need to make sure plan designs are finalized at least 30 days before renewal.

There are two coverage examples that provide an example of the coverage offered by a particular benefit plan.  The current coverage illustrations are for maternity and diabetes coverage. Each coverage example is a detailed listing of the services performed including CPT, DRG, and NDC codes as well allowed amounts. Actuaries may be tasked to build an automated system for generating the coverage examples.  As part of this process actuaries may also be called on to evaluate the coverage examples for completeness and also for some repricing information. For example, the maternity example uses CPT code 59400 which is a bundled payment for maternity may be repriced as separate services and actuaries may be asked to review the repricing algorithm.

The uniform glossary contains simplified explanations of many terms used in health insurance.  While almost all of terms are standard insurance terms actuaries should review the glossary to make sure there is a common insurance terminology used throughout the organization.

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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.

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Direct Pay Medical Homes and ACA Part I : ERISA Plans

Direct Pay Medical Homes (DPMHs) are provider lead alternate payment models.  The patient pays the provider directly a monthly fee and in return receives as many basic services such as office visits, basic labs, and X-rays for no additional fee.  While there is a provision in the Patient Protection and Affordable Care Act (PPACA) allowing for DPMHs to be included as a portion of a qualified health plan (QHPs) or insurance products offered on the state based Health Exchanges.  However, there are a variety of hurdles to be overcome before such plans can be developed.  Some of these hurdles include understanding how DPMHs will count for ensuring that QHPs provide robust coverage and the information flows that must flow between DPHMs and insurance companies.

Before looking at how DPHMs could be included in QHPs, it is actually easier to understand how a DPHM might be included in a plan sold outside the individual and small group markets.  These plans are sold to employers and allow for more flexibility.  The key requirement these plans need to meet are the employer responsibility provisions.  An employer needs to offer a plan that covers “60% of the allowed medical costs”  of participants and meets an affordability requirement.  How would a DPMH interact with these provisions?

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