Perspectives

Health Care Current: August 12, 2014

Private health insurance exchanges

This weekly series explores breaking news and developments in the U.S. health care industry, examines key issues facing life sciences and health care companies and provides updates and insights on policy, regulatory and legislative changes.

Private health insurance exchanges: Bright long-term prospects clouded by continuing uncertainty

Any reasonable person (as I hope I am) who lives in Pittsburgh (as I do) knows better than to let cloudy conditions today obscure the promise of sunny days ahead. So it is with Private Health Insurance Exchanges (PHIX). Their bright future should not be clouded by the high uncertainty and slow adoption we see in today’s marketplace.

My optimistic forecast is drawn from many lively discussions with Deloitte Consulting LLP’s Retail & Exchange Strategies leader, Paul Lambdin. It is based on a simple prognostication of the incentive-driven behavior of key stakeholders over the next several years.

Employer choices will shape the direction, momentum and success of the PHIX marketplace. Employer groups will increasingly find that PHIX models of various stripes are viable vehicles for achieving a range of corporate objectives. These objectives include improved employee engagement; new product offerings; increased competition for health products and services; reduced administrative hassle; greater use of sophisticated technology; a shift to defined-contribution plans; and most importantly, lower and more predictable costs. Some employers will see PHIX as an option to exit the health insurance sponsorship business altogether over the longer term.

PHIX vendors will respond to marketplace needs and opportunities with more compelling value propositions and technical solutions. Today, there is no “killer app” in the PHIX marketplace. As in many early-stage markets, we see great diversity of strategies, sponsors, investors, entrants, technology platforms, products, pricing and more. Over time, a smaller number of more successful players will capture market share and competitive positioning. For these vendors, the most significant competition over the longer term will likely be the public exchanges.

Health plans will be motivated to play both offense and defense in the PHIX marketplace. Many leading health plans are in the competitive mix today, with a variety of proprietary, partnership and third-party plays and participation. For most health plans, defining and pursuing the right PHIX strategy is challenging and involves complex segmentation and forecasting. From one angle PHIX market developments provide health plans with the opportunity to capture new market share. From another angle they represent yet another threat of disruption and disintermediation. PHIX will likely drive substantial market disruption. Most importantly, PHIX market developments will introduce, incent and empower new entrants. In some cases these new entrants are likely to act as replacements for today’s incumbents. Provider-driven alternatives, such as accountable care organizations (ACOs), are examples of full replacement options that are likely to be enabled by PHIXs. Less dramatically but quite importantly, PHIX vendors can assume certain health benefits administrative functions that are today handled by health plans, often as part of administrative services only contracts with large employers. Health plans are therefore motivated to define their PHIX strategies in order to defend their role in the health insurance value chain.

Federal and state governments will also play influential roles in shaping the PHIX future. The most consequential move that government might make would be federal repeal of the corporate tax deduction for employee health benefit costs. This move could have the greatest chilling effect on the PHIX marketplace, but requires a degree of policy, political and legislative alignment that seems highly unlikely in the foreseeable future. Less dramatically and more likely, federal and state governments could take a number of other legislative and/or regulatory measures that could complicate the development, operations and ultimately penetration of PHIXs. However, the most likely influence of government will be in the realm of public insurance exchange administration. If and when government-run exchanges reach critical mass of enrollment, operational excellence and popular acceptance, public exchanges will crowd out some significant portion of the private exchange business.

The PHIX market will continue to evolve at a measured pace as the many stakeholders work through their options to maximize value in a complex and dynamic marketplace. Certainly, the pace of PHIX activity has hastened significantly in the past year. The comparatively slow evolution of the PHIX marketplace should not cloud our vision of how impactful PHIXs will likely be across the U.S. health care system. Private health insurance exchanges may well be the most important private sector-led health insurance market development of the decade.

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Greg Scott was recently named national sector leader of Deloitte’s Health Plans Practice. He not only has an extensive background in professional services but also as a corporate executive and policy leader given prior positions at Anthem and the Health Care Financing Administration (now the Centers for Medicare and Medicaid Services).

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My Take

By Greg Scott, Vice Chairman and U.S. Health Plans Leader, Deloitte Consulting LLP 

 

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Implementation & Adoption

Study: Health care spending slowed mostly due to slow-down in economy

A study by Northwestern economists released in Health Affairs estimates that 70 percent of the decline in health care spending from 2007-2011 is a result of the economic slowdown. The study found that annual spending in health care from 2009-2011 was 2.6 percent below spending growth from 2007-2009. The researchers estimate that each percentage point decline in the employment-to-population rate accounted for a decline of 0.84 percent in health spending per patient from 2007-2011. The researchers estimate that annual health care spending growth would have been 1.8 percentage points higher from 2009-2011 had the recession not occurred. The researchers determined that areas of the country with the largest decline in employment-to-population ratio also had the lowest health care spending increases. Previous analyses have used gross domestic product (GDP) to measure how much of the slowdown in health care spending was due to the economic recession. However, this research relied on the employment-to-population ratio rather than GDP to provide insights at the local level and to avoid potentially confounding effects.

(Source: Dranove, David, Garthwaite, Craig, and Ody, Christopher, “Health Spending Slowdown is Mostly Due to Economic Factors, Not Structural Change in Health Care Sector.” Health Affairs, 33(8), June 2014)

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Study: Bundled payment demonstration in California “did not succeed”

The latest Health Affairs issue features results of a bundled payment project in California. The project, which was implemented and evaluated with the help of the Integrated Healthcare Association (IHA) and RAND Corporation and a $2.9 million grant from the Agency for Healthcare Research and Quality (AHRQ), ultimately “did not succeed” in its goal of broadening the use of bundled payments for total knee and total hip replacement surgeries. The authors that evaluated the IHA Bundled Episode Payment and Gainsharing (BEPG) Demonstration identified four major barriers to the success of the program:

  • Difficulties in developing bundle definitions: The program participants said that reaching consensus among each other about the definition of bundles in the program took too long. There were specific challenges in deciding which exclusions to apply to the bundle definitions (e.g., services related to comorbidities, patients with high body mass index); providers expressed concerns about their financial risk and that the bundles accounted for few cases.
  • Lack of trust and competing interests: The researchers found that health plan participants expected to lower prices compared to what they had paid hospitals under fee-for-service (FFS) arrangements. However, many hospitals–concerned about costs and increased financial risk–sought higher payments than they received under FFS. Hospitals were also deterred from entering into the project because it lacked incentives to steer consumers toward participating hospitals (e.g., by designating hospitals as centers of excellence).
  • Lack of technical infrastructure for processing and paying claims: Health plans faced difficulty making payments under the new arrangement due to software constraints. Ultimately, due to low volume of the patient cases, health plans processed claims manually.
  • Delays and uncertainty about state regulatory decision making: The participating health plans and providers both expressed concern that the state of California might consider the relationships established under the project in conflict with state law, preventing hospitals from employing physicians directly.

Background: For the BEPG Demonstration, IHA convened six health plans, eight hospitals and one independent practice association to test the bundled payments program on total knee and total hip replacement surgeries. According to a follow-up blog on Health Affairs written by two leaders from IHA, the key objective of the BEPG Demonstration was to form more than 20 bundled payment contracts between payers and providers and to evaluate more than 500 cases within the first two years. The IHA authors noted that AHRQ ultimately agreed that their evaluation of lessons learned would be an important addition to the literature around bundled payments.

Related: In July CMS announced it was adding more than 4,100 providers to phase one of the Medicare Bundled Payments for Care Improvement initiative. The program is testing four models of care to determine whether new payment models can lead to high-quality, coordinated care for a lower cost to Medicare. See more in the August 5, 2014 Health Care Current.

(Source: Ridgely, M. Susan, de Vries, David, Bozic, Kevin J., and Hussey, Peter S. Health Affairs, “Bundled Payment Fails to Gain a Foothold in California: The Experience of the IHA Bundled Payment Demonstration,” August, 2014)

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MACPAC: Medicaid enrollees use ED more often, but only 10 percent of visits are non-urgent

Last week the Medicaid and CHIP Payment and Access Commission (MACPAC) released an issue brief about Medicaid enrollees’ use of emergency departments (EDs). Their use accounts for 4 percent of total Medicaid spending. The report found that Medicaid enrollees use the ED more often than individuals with private health insurance and the uninsured, which mostly can be attributed to higher rates of chronic disease and disability and more severe cases in Medicaid populations. Key findings in the issue brief include:

  • Non-urgent visits account for 10 percent of all adult Medicaid enrollee ED visits. This is comparable to the rates for privately insured and the uninsured. Most ED visits are for urgent symptoms and serious medical problems.
  • The researchers found inconclusive evidence to suggest that enrollees’ use of ED is increasing. Patient-reported data on ED use in adults show no change and in children, rates are declining. However, the National Hospital Ambulatory Care Survey found sharp increases in ED use among adults from 1997 to 2007.
  • In 2012 one in four Medicaid enrollees reported visiting the ED because they had difficulty accessing another provider. However, nearly all enrollees have a usual place of care other than the ED.
  • Frequent users of ED (greater than four times per year) tend to use a lot of services in addition to the ED: on average they reported 3.1 visits to primary care physicians, 8.1 visits to specialist physicians and 5.9 visits to non-physician providers.

The authors list factors driving the use of ED services: two are primary care physician use of the ED for rapid diagnostic work-ups and use of EDs for an expanded set of services that were previously only done through an inpatient setting. The report also found that diversion projects and higher cost sharing do not reduce ED utilization or lead to Medicaid savings.

(Source: MACPAC, “Revisiting Emergency Department Use in Medicaid,” July, 2014)

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Report: IRS provided accurate data on tax credit eligibility most of the time

The Treasury Inspector General for Tax Administration (TIGTA) released a report this month that found that the Internal Revenue Service (IRS) provided accurate information to the health insurance marketplaces 99.97 percent of the time. TIGTA performed the audit to measure whether the IRS had given accurate information about individuals’ eligibility to use the health insurance marketplace subsidies. The report covered a review of more than 101,000 income and family size verification requests from October 1 through October 4, 2013. In addition TIGTA reviewed how well the IRS calculated monthly maximum advance premium tax credits for all of the reviewed requests (120,824 during October 1 through October 14, 2013). TIGTA found 33 cases in which the IRS incorrectly told a marketplace that it could not provide tax information for the requested individuals–a mistake attributed to a computer programming error. The Inspector General recommended that the IRS’s Chief Technology Officer ensure that individuals’ names are updated in the IRS’s database.

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Assister and navigator programs gear up for second annual marketplace open enrollment

Last week the Alliance for Health Reform hosted a briefing to highlight the programs consumers can access to receive assistance in navigating open enrollment for the health insurance marketplaces. During last year’s enrollment period, more than 4,400 in-person assistance programs helped approximately 10.6 million people search and apply for coverage. Brokers also played a role in helping consumers sign up for coverage. The briefing highlighted collaborations between local community partners and assister and navigator programs. These programs relied on community partners for referrals, funding, and buy-in from the communities they served. The Kaiser Family Foundation shared results of their recent survey on consumer experience with these programs, finding:

  • 87 percent of consumers sought help from assister programs because they had a limited understanding of the Affordable Care Act.
  • 83 percent of consumers were seeking assistance in understanding health plan choices.
  • 80 percent of consumers lacked confidence in applying for insurance on their own.
  • Approximately 75 percent of assister programs reported that most or nearly all clients who considered buying private coverage needed help understanding basic terms and concepts such as “deductible” and “in-network service”.
  • 90 percent of assister programs have already been re-contacted by consumers with post-enrollment questions and problems (e.g., advice on appealing a claim, questions on how to use their insurance card) though most marketplace assisters are not trained in these areas.

The Kaiser Family Foundation Survey noted that the Congressional Budget Office projects that 13 million consumers will enroll through the marketplaces this coming year and that many assister programs were stretched to capacity during the last enrollment period.

(Source: Kaiser Family Foundation, “Survey of Health Insurance Marketplace Assister Programs: A First Look at Consumer Assistance under the Affordable Care Act,” July 2014.)

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Implementation & Adoption

On the Hill & In the Courts

CMS reinstates a few RACs to review a limited number of Medicare claims

On August 4 CMS announced that it plans to modify contracts with current Recovery Audit Contractors (RACs) to resume reviews of Medicare FFS payment claims within the next month. The new reviews will be limited to claims such as those for spinal fusions, outpatient therapy services, durable medical equipment, prosthetics, orthotics and supplies and cosmetic procedures and will not include full inpatient status reviews. The announcement said CMS expects to award new RAC contracts this year that will run from 2014 through 2018.

Background: The RAC program began as a demonstration program to help Medicare identify and correct overpayments and underpayments to providers in the Medicare FFS program. During the three-year demonstration program (2005-2008), CMS returned more than $900 million in overpayments to the Medicare Trust Fund, and $38 million in underpayments was returned to Medicare FFS providers. Section 1893(h) of the Tax Relief and Health Care Act of 2009 permanently established the Medicare RAC program. Providers and provider associations most recently complained that appeals to the U.S. Department of Health and Human Services (HHS) related to the audit program were taking an average of 16 months, rather than the statutory requirement of 90 days. In 2013 HHS received more than 384,000 appeals to Medicare payment decisions.

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CMS suspends Open Payments system after finding incorrect records

Last Thursday CMS announced that it was temporarily closing access to the online system for the Open Payments program. After a Kentucky physician found that the system had attributed payments to a Florida physician to his record and blogged about it, CMS investigated the issue. Upon further review, CMS found that one manufacturer had submitted data for a provider attributed to the incorrect medical license. The system took that information and combined it with data on another physician with that medical license. CMS took the system offline temporarily to address the issue. CMS will adjust the timeline for physicians to review and dispute data according to how many days the system is offline.

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CMS finalizes Medicare payment rules for acute- and long-term care hospitals and Medicare hospice benefit

Last Monday CMS released final payment rules updating Medicare inpatient prospective payment system (IPPS) rates for acute hospitals and long-term care hospitals (LTCHs) and a rule updating hospice payment rates and the wage index. The specific Medicare provisions updated in the final rules include the following:

Reaction: In a statement released last week, the American Hospital Association (AHA) expressed disappointment that CMS had made cuts to the Medicare DSH payments. AHA further noted that DSH payment cuts are “significantly higher” than were previously proposed. Additionally, AHA said that the scoring refinements made for the HAC penalty program will continue to penalize one in four hospitals even if they improve their care quality. AHA urged Congress to develop alternative proposals.  

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On the Hill & In the Courts

Around the Country

Florida’s FFM to see an average premium rate increase of 13.2 percent in 2015

Data released last week by the Florida Office of Insurance Regulation (FOIR) revealed that consumers will see an average increase of 13.2 percent in premium rates for individual health plans offered under Florida’s federally-facilitated marketplace (FFM) in 2015. A total of 14 companies filed applications to offer qualified health plans in the marketplace next year, three of which did not participate in 2014. Of the 11 returning companies, eight aim to increase their premiums from 11 to 23 percent on average, and three requested rate reductions ranging from 5 to 12 percent. FOIR also provided county-by-county estimates of 2014 to 2015 silver-level plan premium changes for two example cases. Miami-Dade is Florida’s largest county by total population:

Average silver-level plan premium, subsidy and cost for Miami-Dade residents (2014-2015)

Silver plans make up 70 percent of plans purchased in Florida’s FFM. The rate filings are pending federal review by HHS. Last year state legislators in Florida voted on a bill, which Governor Rick Scott signed, to suspend the state’s authority to review, alter and/or approve premiums for plans sold to individuals outside of employer-based insurance for the 2014 and 2015 plan years.

Response: On Wednesday officials from the White House issued a statement arguing that most consumers who live in Florida will see lower monthly premiums over this year in 2015. Calculating average prices for the second-lowest priced silver-level plan sold on the marketplace in Florida, the administration found that approximately 75 percent of residents will see premiums fall relative to the 2014 rates for these plans. Administration officials stated that the FOIR estimates looked at plans in the individual market–both on and off the state’s insurance marketplace–whereas the Administration’s estimates focused only on individual market plans sold through the state’s marketplace.

(Source: Florida Office of Insurance Regulation, “Insurers Release 2015 PPACA Individual Market Health Insurance Plan Rate Data Compliant with Federal Regulations,” August 4, 2014)

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Arkansas plans to request changes to its Medicaid ‘private option’

A public notice released on August 1 by the Arkansas Department of Human Services (DHS) expresses the state’s intent to submit amendments to the Health Care Independence 1115 Demonstration waiver, the state’s private option under Medicaid. Specifically, Arkansas plans to implement the following changes for private option enrollees:

  • Independence Accounts: Beneficiaries with income greater than 50 percent of the federal poverty level (FPL) would be enrolled in Independence Accounts, accounts to which individuals would make $5-$25 monthly contributions based on income. Enrollees would use the account to pay deductibles, co-payments and co-insurance for Medicaid services up to their out-of-pocket limit. To encourage individuals to contribute, eligible enrollees may receive $15 in rollover funds if they make at least six timely monthly payments, which they can use to offset plan premiums if they disenroll from the private option and enroll into private health insurance plans.
  • Cost-sharing: Enrollees who fail to make monthly contributions could face higher co-pays or co-insurance, with the timing linked to their incomes. Poorer enrollees (50 to 100 percent of the FPL) in this group would be required to pay co-payments after receiving services; enrollees at 100 percent or more of the FPL would pay cost-sharing at the point of service.
  • Non-emergency medical transportation: The plan would set limits on non-emergency medical transportation for all individuals who are not medically frail.

The state expects that these changes would help promote accountability and personal responsibility among enrollees, and that the Independence Accounts would provide stability to individuals if they were to transition off of the private option and onto private health insurance plans.

Background: Arkansas’s private option was the first to be approved by HHS. In March Arkansas lawmakers voted to approve the state’s alternative Medicaid expansion plan. Under the private option, Arkansas provides new Medicaid enrollees premium assistance to purchase qualified health plans through the state-federal partnership marketplace. Arkansas estimates that approximately 225,000 individuals will be eligible under the demonstration, which will operate during calendar years 2015 and 2016, and a significant portion of enrollees will be affected by the requested changes. Public comments to the proposed changes may be submitted until September 1, 2014. For more information on the demographic composition of the expansion population, see the April 29, 2014 Health Care Current.

Related: Last week a Gallup poll found that Arkansas ranked first out of the 10 states that saw the largest drop of their uninsured population since the individual mandate took effect. Arkansas’s uninsured rate dropped from 22.5 percent in 2013 to 12.4 percent by midyear 2014—a 10.1 point drop. Gallup found that states that experienced the largest decline in uninsured expanded Medicaid and established a state-based or state-federal partnership marketplace.

(Source: Dan Witters, Gallup, “Arkansas, Kentucky Report Sharpest Drops in Uninsured Rate,” August 5, 2014)

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California’s statewide HIE to operate by the end of 2014

Last week the California Integrated Data Exchange (Cal INDEX) announced that it would be developing a statewide health information exchange (HIE) with $80 million in funding from Blue Shield of California and Anthem Blue Cross. The initial funding will cover operation costs for three years and will help Cal INDEX integrate approximately 30 provider organizations into the HIE. The ultimate goal will be to give health care professionals (including physicians and nurses) secure access to health information records for nearly 9 million individuals. Cal INDEX will be modeled as a public utility. The database will contain information such as diagnoses, lab tests, visits with providers and procedures; the data will be aggregated into longitudinal patient records to provide a more complete view of a patient’s health and medical history. The data will also be made available, after de-identification, to researchers wishing to improve population health. Cal INDEX is expected to be running by the end of 2014; funding for the HIE will come in the long term from provider subscriptions to feeds from the database. 

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Around the Country

Breaking Boundaries

Mobile apps help fuel the fight against Ebola

Last week African leaders gathered in Washington, D.C. for the African Summit, and top of mind in the midst of the Summit was the current Ebola outbreak that threatens West Africa and beyond. The U.S. Centers for Disease Control and Prevention (CDC) maintains that Ebola is not a major threat in the U.S., but the range of this recent outbreak is a reminder of how quickly infectious disease can spread. In an effort to manage infectious disease outbreaks, health care workers and governments are now using technologies such as mobile apps and related mobile tracking tools.

Sub-Saharan Africa is the world’s poorest region, but mobile text messaging has made it easier for the public health infrastructure to respond. The CDC has distributed free mobile app versions of software that transmits diagrams to assist field workers attempting to contain this most recent Ebola outbreak. These technologies are similar to a phone-based system called mTrac (Medicine Tracking System) used in Uganda to transmit texts and help keep remote AIDS and vaccine clinics stocked with drugs and provide health care workers with real-time updates. During a 2012 outbreak of Marburg virus, a disease that has similar symptoms to Ebola, Uganda’s Ministry of Health used mTrac to send almost 1,000 SMS messages to hundreds of health workers in the affected districts.

Analysis: There are more mobile phone subscribers in Sub-Saharan Africa than in the U.S. or Europe, and the cellular market in Africa is expected to grow to 1.12 billion subscribers by 2017. In countries like Kenya, more than 90 percent of the population now have their own mobile device or have access to one through a relative or village elder, while only about 1 percent has land lines. In the developing world, mobile health is not simply a valuable adjunct to improving healthcare quality, but a critical part of the health system infrastructure. Strategies to battle infectious disease outbreaks in developing countries include countering misinformation, empowering health teams and ramping up efforts to track and monitor the situation. With limited resources, health care leaders should consider focusing on maximizing available tools and technologies such as mHealth tools.

Though the promise of these technologies could be great, there is a need for standards on how to use the data, as well as more evaluation into what strategies work. The Fogarty Center at the National Institutes of Health funds the training of researchers in the developing world and has started an initiative to support research on mobile health tools and interventions for an array of health issues.

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Breaking Boundaries
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