Carriers Defend Use of Narrow Networks as Fair, Market-Driven Options for Consumers

Reprinted from HEALTH PLAN WEEK, the most reliable source of objective business, financial and regulatory news of the health insurance industry. By Patrick Connole, Managing Editor March 24, 2014 Volume 24 Issue 10 Health insurers are on the defensive over the way some provider networks for public exchanges are designed, leading to criticism that consumers buying coverage on the new marketplaces don’t have access to out-of-network care. States such as New York are pondering changes to exchange rules this month that would mandate out-of-network coverage, and the federal government on March 14 confirmed that CMS plans to increase monitoring of network adequacy in general and inclusion of providers for low-income populations in particular. Against this backdrop, industry sources say there is an Alice in Wonderland-like quality about the scrutiny of provider networks on exchanges since they say consumer choice is the foundation of the new marketplaces. After all, they contend, narrow networks are in place to help make “affordable” coverage possible, notably for those previously uninsured. Carriers in many markets set up narrow networks with providers who agree to lower reimbursement in exchange for more volume. In some cases, however, these plans have left academic medical centers and other specialists out, which has raised the hackles of some consumers and triggered regulatory reviews. Industry sources in New York say it is not clear what if anything will happen with proposals to mandate out-of-network coverage. The issue is part of budget negotiations and has been mentioned by the state exchange as a possibility for the 2015 plan year. At the federal level, CMS on March 14 released the “CMS 2015 Call Letter to Issuers in the Federally-facilitated Marketplaces,” which included measures that would require issuers to submit network adequacy data to the agency as part of the review process for participating in public marketplaces. CMS will review this data and assess network adequacy for 2015, as well as help refine the network adequacy review process for future benefit years, including continuing to develop a process for collecting provider network data. The review, according to market sources, will help to ensure that qualified health plan networks are sufficient in number and types of providers, so that all services will be accessible to enrollees without unreasonable delay in compliance with applicable regulations. There is also a broader effort to monitor network adequacy, for example, through CMS’s tracking of complaints by consumers. The agency also said starting in 2015 issuers on federal exchanges would have to offer provider networks that include 30% of the essential community providers (ECPs) in their service region, compared with the 20% threshold in place for 2014. As one insurance industry executive tells HPW, speaking anonymously, “if we don’t have the ability to offer a range of products at various price points with a full range of benefits, any limitation on that is something that we don’t want to do. It would be like telling Wal-Mart you can only sell toilet paper if it meets this standard.” And, the source adds, it is not like closed networks were born with the reform law; the concept has been around since the start of HMOs and is also part of the many accountable care organizations sprouting up all over the country. “It is a supply and demand market, even in the health insurance world, and the extent to which regulation limits consumer options and our options to meet consumer demand would just be unfortunate,” the source adds. And to put in dollar-and-cent terms, the New York State Conference of Blue Cross and Blue Shield Plans (NYSCOP) tells HPW that if the state decides to force out-of-network coverage for exchange products, premiums would rise nearly 30% as a result. NYSCOP is a partnership of Rochester, N.Y.-based Excellus Blue Cross Blue Shield and New York City-based Empire BlueCross BlueShield, a unit of WellPoint, Inc. Stakeholders Fear Consumerism May Lose out For some industry players, the idea that narrow networks or out-of-network practices are being questioned is a big drag on market development. “What it is, is a killer for the hope of price competition,” Mark Rust, office managing partner for law firm Barnes & Thornburg LLP in Chicago, tells HPW. “Because one of the key factors in introducing price competition as the health care delivery world evolves is going to be narrow networks. And the proof of that is the degree to which plans on the exchange quickly went to narrow networks to try to deliver to the market a more bare-boned cost product.” States like California, New Hampshire, New York and Washington, among others, are considering more requirements for 2015 to broaden exchange networks or make out-of-network coverage possible, even if as an add-on rider enrollees can purchase in order to keep their favorite providers. Rust, however, thinks the issue has the potential to seep into private exchanges as well, where consumer-driven health plans are starting to thrive. “The move to do that is completely counterproductive to the hope that the exchanges and the markets will help to push down price,” he says. Public exchanges will have a comparatively small slice of the insurance sector, so “where this has its greatest potential impact across society is in the considered move by employers from a defined benefit health plan to a defined contribution,” Rust adds. He explains that if employees are being given more power over their insurance purchasing via exchanges and defined contribution, they need all care and price options on the table for consideration. The message from employer-sponsored health plans to employees is that “‘it’s a defined contribution and that you can make your own choice with the amount we contribute to you. And there are several plans that you can choose from; the only thing is some of them don’t have the university hospitals or you can add some of your additional money and you can have broad networks.’ When this happens you’re going to have consumers saying, hmmm. How much do I really use the university hospitals anyway?” Rust says. Exchanges Attract Fresh Concerns On the other side of the issue are specialist providers who say the attention to network adequacy is nothing new, but that with the advent of public exchanges, it is something that has to be monitored anew. Kirsten Sloan, senior director of policy for the American Cancer Society Cancer Action Network, tells HPW that insurers also should be transparent, so people with special needs, such as those who are living with cancer, know if their own providers are included in the exchange network. “Transparency right up front is very important,” she says. For a long time, the most vital issue for cancer patient advocates was getting covered, so with guaranteed issue in place under the reform law, pre-existing conditions are no longer a barrier to getting insured care. But now, provider networks are a priority issue. “Any time a managed care plan or FFS system has a network of providers that they contract with, we want to make sure they are broad enough to encompass specialists,” including oncologists and other cancer-related care providers, Sloan says. The reaction of consumers on exchanges to what may be a new concept of provider networks is part of human nature, says one academic. Mark Hall, professor of law and public health at Wake Forest University, tells HPW it comes down to the fact that some people don’t understand the importance of network access until they get a serious condition. “The scenario is that they are reasonably healthy and something bad happens and then they have buyer’s remorse,” he says. http://aishealth.com/archive/nhpw032414-02?utm_source=Real%20Magnet&utm_medium=Email&utm_campaign=36379527

Cost of the Affordable Care Act to Large Employers

The total cost of ACA to all large U.S. employers 2014 to 2023 $151 to $186 billion Cost per employee, 2014 to 2023 $4,800 to $5,900 Cost per large employer, 2014 to 2023 $163 to $200 million Percentage increase in employer-provided health care costs from ACA 4.3% in 2016 5.1% in 2018 8.4% in 2023 Notes: Large U.S. employers have 10,000 or more employees Source: American Health Policy Institute

Medicaid enrollment grows by more than 3 million

HHS BLOG Posted: April 4, 2014 http://www.hhs.gov/healthcare/facts/blog/2014/04/medicaid-chip-determinations-february.html Medicaid enrollment grows by more than 3 million By Kathleen Sebelius, Secretary of Health and Human Services Because of the Affordable Care Act, 7.1 million people have signed up for quality, affordable, private health insurance options in the Health Insurance Marketplace through March 31. And, according to a new CMS report released today, 3 million additional individuals enrolled in Medicaid or CHIP through the end of February 2014 compared to enrollment before the Health Insurance Marketplace opened on October 1, 2013. Enrollment in states that adopted the Medicaid coverage expansion increased five-fold compared to states that are not expanding Medicaid. We expect enrollment in March to be even higher, although individuals can continue to enroll in Medicaid all year round. Eligibility determinations also continued to grow: between October 2013 and February 2014, 11.7 million people were determined eligible for Medicaid and CHIP by State agencies, up from 8.9 million reported last month for the October – January period. The Affordable Care Act provides states with new opportunities to expand their Medicaid programs to increase access to affordable coverage. In states that expand coverage, most individuals under age 65 with incomes up to 133 percent of the Federal Poverty Level ($15,521 for an individual and $31,721 for a family of four) will be eligible for Medicaid coverage. To date, 26 states and DC have expanded their Medicaid programs. States that have expanded Medicaid saw a much more dramatic increase in Medicaid enrollment than States that have not. According to today’s report, among states that adopted the Medicaid coverage expansion and whose expansions were in effect in February, Medicaid and CHIP enrollment rose by 8.3 percent compared to the months prior to Marketplace open enrollment period. States that have not expanded Medicaid coverage reported an increase in Medicaid enrollment of 1.6 percent over the same period. There's no deadline for states to expand, so we're going to keep working with the remaining states as they decide to come on board. Not only is expanding Medicaid coverage helping many people gain health coverage, it’s a good deal for states: Coverage for newly eligible adult beneficiaries is fully federally paid for under the Affordable Care Act for the first three years, and never less than 90 percent for the years following. Expanding coverage reduces hospitals’ uncompensated care, lowers “cost shifting” to businesses that see higher health insurance premiums as some of the costs of caring for the uninsured are passed on to them, and strengthens local economies. The increase in Medicaid enrollments across the country is encouraging, but more work is left to do to ensure that the millions of uninsured Americans eligible for these programs gain coverage. Medicaid does not have a set enrollment period so people may be determined eligible for coverage at any time. To read today's report visit: http://medicaid.gov/AffordableCareAct/Medicaid-Moving-Forward-2014/Downloads/February-2014-Enrollment-Report.pdf

March Madness: With Scant Data, Actuaries Rely on Risk Models for Setting 2015 Rates

Reprinted from INSIDE HEALTH INSURANCE EXCHANGES, a hard-hitting newsletter with news and strategic insights on the development and operation of public and private exchanges. By Steve Davis, Managing Editor March 20, 2014 Volume 4 Issue 6 In May, insurance carriers will begin filing their 2015 rates for the products they intend to sell on government-run exchanges next fall. But actuaries are just beginning to analyze the limited information they have on the 2014 exchange enrollees, including their potential risk. While health insurers have more information about enrollees than they had a year ago, they still don’t have much to work with. The health risk profile of enrollees is still a bit of a guess. And there is an expectation that the healthiest people will wait until the last possible moment to sign up, which means carriers will have no information about those who enrolled in late March. A variety of factors could make double-digit rate hikes unavoidable for some products sold on exchanges. According to the latest enrollment numbers from HHS, exchange enrollees are a little bit older and include more females and fewer children than most carriers anticipated. And enrollment numbers are lower than they expected. Rate-setting actuaries must also factor in the insurance tax mandated by the Affordable Care Act (ACA), and the possibility that people in some states will be allowed to remain in non-ACA-compliant plans until 2016. “I think the health plans are still a little in the dark about what their risk will look like. And it doesn’t take much for premium rate increases to exceed 10%,” explains Chris Carlson, a principal and consulting actuary at Oliver Wyman. Carlson says the underlying risk, in a best-case scenario, will increase rates 6% to 8%. Lower-than-expected enrollment could add another 1% to 2%. The insurance tax, which became effective in 2014, may add an additional 0.5% to 1.0% to premiums for 2015 as the tax increases from $8.0 billion to $11.3 billion. The overall impact the insurance tax will have on 2015 rates, compared to what’s built into 2014 rates, is about 0.5%, Carlson says. The percentage increase is dependent on how much total industry premiums change in 2014 relative to 2013 and the mix between for-profit and tax-exempt insurers. “All of a sudden you’re over 10%, and I think that is where the greatest concern comes in.” Some regulators simply won’t approve rates above a certain level, he tells HEX. Carriers also will need to factor in the expected impact of the reinsurance, risk corridors and risk adjustment programs — the so-called 3Rs — when determining their pricing, says Jim O’Connor, a consulting actuary at Milliman. “Carriers will do relatively well for people with some conditions,” he tells HEX. While the temporary risk-corridor program is outside of the pricing formula, it might still be considered because it can protect against mispricing by limiting insurers’ losses and gains. Miscalculations May Cost Insurers During a March 7 session at America’s Health Insurance Plans’ (AHIP) Health Insurance Exchanges Forum in Washington, D.C., O’Connor and Carlson explained some of the strategies being used to price products for 2015. Carriers that miscalculated the average age of enrollees for 2014 could see a significant impact on their underwriting margins, which will affect how they price for 2015. In a model illustration where a health plan has 50,000 members, the carrier could expect to collect about $300 million in annual premium, and to spend about $264 million in claims. But if the average age of the enrollees is just two years older than predicted, the premiums collected grow to $316 million, but the medical loss ratio (MLR) increases by about 1.4%. The impact on the underwriting margin would be $2.3 million. “That’s a fairly significant amount considering the very slim margins for health plans,” Carlson told attendees. Moreover, health insurers with enrollment below the level predicted could face additional risk, he added. “Basically, you are collecting premium that is less than the expected cost of the individuals you’re enrolling,” Carlson tells HEX in a subsequent interview. For every individual that you enroll over the age of 55, you are expected to lose money on that person based on the uniform age-rating curve (prior to application of the 3Rs). Unless you have enough younger individuals to make up for that loss, it’s going to drive up your MLR, he explains, because the 3R risk transfer payments will likely be lower. “That is a concern if the risk adjustment system, coupled with the reinsurance, is over-biased for the unhealthy,” O’Connor explains in a telephone interview with HEX. The model, based on more than 300 million member-months, indicates that the 3Rs might go further than expected to mitigate risk, he says. Carriers could see a drastic change in the profitability of certain enrollees once the 3R calculations are applied. Traditionally high-cost populations, such as women of child-bearing age and older adults, become more profitable, while young adult males move from being very profitable to being less profitable or even slightly unprofitable, O’Connor told attendees. “And then as the males age, they become pretty attractive after the 3Rs,” he said. The amount of profits will vary by carrier. According to the latest enrollment data from HHS, 55% of exchange enrollees are female, but 53% of the uninsured population is male. Also under the risk-adjustment program, enrollees who have all but nine of the 127 medical conditions identified by CMS could translate to higher profit margins, O’Connor told attendees. Moreover, when combined with the reinsurance program, people with certain conditions could mean a double payment for carriers, he added. Based on one of Milliman’s illustrative models, the average profit margin for a member with certain medical conditions was about 23%. But the margin for enrollees who didn’t have one of those conditions was between -5% and zero. These results were based upon a specific set of assumptions that will likely differ somewhat from actual results, given the demographic distributions emerging on the exchanges. However, directionally they indicate the importance of the 3Rs to the pricing process, he tells HEX. “The problem is that no one really knows, at this point, the real adjustment they’re going to have…because that depends on the health status of the entire state pool for either individuals or small-group,” O’Connor says. Carriers don’t yet know their own risk profile, nor do they know the state’s overall risk profile. Through the use of self-reported health assessment surveys conducted by the federal government, actuaries have attempted to estimate the risk of enrollees, but the results likely won’t be very reliable. Some carriers will have a better handle on their risk than others, O’Connor tells HEX. A Blues plan, for example, might already have 80% of a state’s individual market, and might have a good understanding of the state’s risk factor for the uninsured. But smaller carriers will have a difficult time estimating the risk. For example, Consumer Operated and Oriented Plans (CO-OPs), which have no enrollment history, will find it very difficult to set rates for 2015, O’Connor says. Some carriers decided to be neutral in terms of risk when setting their 2014 rates and might opt for the same strategy for 2015. But O’Connor says that might not be a wise strategy. Two ‘Rs’ Are Better Than One The reinsurance program, which runs for three years, reimburses carriers for individuals who exceed $45,000 in medical expenses in 2014. The threshold was lowered in November — from $60,000 — after the White House gave states and carriers the option of extending non-ACA-compliant plans (HEX 12/19/13, p. 1). The threshold increases to $70,000 for 2015. Typically carriers have a reduction in their 2014 rates of between 6% and 15% because of the program. But those reductions were based on the original $60,000 threshold. Moreover, because the reinsurance program doesn’t coordinate with the risk-adjustment program, an insurer that has an enrollee with a high-risk profile who winds up with more than $45,000 in medical expenses in 2014 could be reimbursed through both programs for the same claim, O’Connor says. “HHS was aware of this, but thought it would be too complicated to integrate those two programs since the reinsurance program only lasts three years,” he tells HEX. ‘Grandmother’ Plans Factor in Allowing members to renew their non-compliant health plans as late as Oct. 1, 2016, is another factor actuaries need to consider when setting rates. Last month, the Obama administration said state regulators and health plans could determine if people now covered by non-ACA-compliant plans could continue that coverage (HEX 3/6/14, p. 8). There is an expectation that people in need of richer coverage will drop their existing coverage in favor of richer benefits on the exchange, while healthier people will continue with their existing plans — dubbed “grandmother” plans by some — until they’re forced to change. And low-income individuals — who tend to have higher morbidity — will migrate to the exchanges for the subsidies and the more comprehensive benefits, O’Connor says. http://aishealth.com/archive/nhex032014-02?utm_source=Real%20Magnet&utm_medium=Email&utm_campaign=36079962

Today's Datapoint

2% … of physicians collected 25% of all Part B payments between 2008 and 2011, according to the HHS Office of Inspector General.

Quote of the Day

The idea that narrow networks or out-of-network practices are being questioned “…is a killer for the hope of price competition…. The move to do that is completely counterproductive to the hope that the exchanges and the markets will help to push down price.” — Mark Rust, office managing partner for the law firm Barnes & Thornburg LLP in Chicago, told AIS’s Health Plan Week.

NEWS INSIGHT

According to a recent report based on nationwide e-mailed surveys, healthcare executives indicated the following responses: • In 2014, 12.35% of respondents indicated they had used locum tenens nurse practitioners in the previous 12 months, up from 4.8% in 2013 • In 2014, 7% of respondents indicated they had used locum tenens physician assistants in the previous 12 months, up from 4.7% in 2013 • In 2013, nurse practitioners and physician assistants accounted for 12% of all temporary days requested at Staff Care, up from 10% in 2012 Source: "2014 Survey of Temporary Physician Staffing Trends," Staff Care, 2014, http://www.staffcare.com/uploadedFiles/2014-survey-of-temp-physicians.pdf