By James
Gutman - March 10, 2016
It is only mid-March, and we already
have seen a year’s worth of strange regulatory developments affecting Medicare
Advantage (MA) plans and stand-alone Medicare Prescription Drug Plans (PDPs).
And perhaps the strangest one so far involves the CMS March 8 memo that, in
effect, saves Cigna Corp. about $350 million in star-ratings bonus money only
about a month and a half after the agency thoroughly lambasted the company and
put it under “intermediate” sanctions barring new marketing and enrollment in
the two product lines for what the agency called “a longstanding history of
non-compliance with CMS requirements.”
The new developments surround a CMS
policy dating back to the 2012 star ratings that the agency will automatically
lower the ratings of contracts under intermediate sanctions to 2.5 stars, or by
one star in the case of contracts already rated at 2.5 stars or below, if the
insurer involved has not remedied the violations that caused the sanctions by
March 31. MA and PDP sponsors and their trade groups long had opposed the
policy as Draconian, but CMS had not changed it — or indicated that it was
considering this — even in the Feb. 19 “45-day notice” of preliminary 2017
payment rates and policies.
In a March 8 unpublicized Health Plan
Management System (HPMS)-disseminated memo from Jennifer Shapiro, acting
director of CMS’s Medicare Drug Benefit and C & D Data Group, CMS said it
now agrees that changing circumstances surrounding the star-ratings program
mean the agency should reassess this policy. Therefore, it suspended the
automatic reductions “effective immediately and on a prospective basis,” the
memo said. Shapiro explained in the memo that when CMS originally announced the
policy, there were relatively few four-star contracts and fewer than 30% of MA
beneficiaries were in them. Now, on the other hand, 49% of MA contracts,
representing 71% of enrollees, are rated four stars and above.
The principal beneficiary of the policy
change clearly is Cigna, which has about 69% of its MA members in
four-star-or-above plans this year, noted Cowen & Co. securities analyst
Christine Arnold, and even has a five-star plan. It was very unlikely that Cigna
could have remedied the many deficiencies CMS found by March 31, and if the
company didn’t and lost hundreds of millions of dollars in star bonuses, that
could well have affected its bidding strategy for 2017 as well as perhaps its
pending acquisition by Anthem Inc. There are other plans under intermediate
sanctions, including most recently Ultimate Health Plans, Inc. in Florida, but
they pale in size next to Cigna’s about 543,000 MA members.
Did any of those facts enter into CMS’s
decision? It does seem “out of left field” for this change to be made via an
HPMS memo, Avalere Health Vice President Tom Kornfield, a former CMS official,
tells AIS. He says CMS could have been concerned about the impact on
beneficiaries in the next Annual Election Period (AEP) this fall in terms of
possible losses of benefits or even plans offered since Cigna is a large MA
insurer with high star ratings. It also is possible, according to Kornfield,
that Cigna is making rapid progress on remedying the cited deficiencies. But “I’m
not certain I understand why CMS didn’t propose or mention this in the [Feb.
19] Call Letter. That would have been an appropriate vehicle,” he adds.
Asked if there might have been
political factors involved in the decision since the next AEP falls right in
the final weeks of campaigning in a big election year when an adverse impact on
plan premiums and benefits could be an issue, Kornfield says he doesn’t know.
What do you think? And were there other factors, including the potential impact
on provider groups that have been flocking to MA in recent years? Why was this
done when Cigna stands to get big benefits, and not when smaller plans were in
intermediate sanctions in recent years? Is there a mixed message here, as
another consultant says, and, if so, how should CMS change that?
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