• For each early retiree, spouse and dependent the employer plan can apply for reimbursement of up to 80% of costs, less negotiated price concessions, for benefits between $15,000 and $90,000 (adjusted annually by the medical component of the CPI).

• The effective date of the plan is June 1, 2010.

• Plans are required to use payments to 1) reduce the sponsor’s health benefit premiums or health benefit costs, 2) reduce health benefit premium contributions, copayments, deductibles, coinsurance or other out-of-pocket costs, or any combination of these costs for plan participants, or 3) any combination of the above. Proceeds under the program cannot be used as general revenue for the plan sponsor.

• Only claims are eligible for reimbursement, not premiums.

• Plans must, as part of the application process, become “certified” by HHS, implement design features to generate cost savings for participants with chronic or high cost conditions, agree to provide data and documentation to HHS and adopt policies and procedures to prevent fraud and abuse under the plan.

For more information, please see the link below that leads to the actual guidance released by HHS:

http://www.hhs.gov/ociio/regulations/gate.pdf

Due to the short-term, “first-come-first-served” nature of this program, UHAS encourages interested employers to get in front of this issue as quickly as possible. UHAS stands ready to assist any sponsor that wishes to pursue the reimbursements from this program. Please contact us if you have any questions.

The Patient Protection and Affordable Care Act and its companion Health Care and Education Reconciliation Act encompass a range of comprehensive reforms designed to provide health insurance access to over 30 million Americans not currently covered and change the way insurers do business.

Included among the major tenants of the legislation are such things as:

• Tax credits for small employers who provide coverage
• Elimination of pre-existing exclusions
• Elimination of lifetime and annual maximums
• Individual mandates for coverage
• Requiring employers to assume responsibility for the coverage of their employees
• Creating Health Insurance Exchanges
• Closing the Medicare Part-D donut hole
• Increasing the role of Medicaid
• Providing subsidies for individuals within a certain income range

The majority of these provisions will be rolled out from 2010 through 2014 with specific effective dates occurring throughout.

In the coming weeks, the impact of these provisions will become clearer as they are analyzed and discussed. UHAS intends to continue to explore these fascinating changes in more detail.

For an excellent summary of all the major provisions of this legislation including the timeline of their effective dates, we suggest you visit the Health Care reform page of the Democratic Policy Committee (“DPC”) at the following link:

http://dpc.senate.gov/healthreformbill/healthbill65.pdf

Although the DPC is a political group, this summary is essentially an accurate description of the new legislation and is the best source of the implementation timeline available on the internet.

Please note that UHAS does not necessarily share the political views of the DPC and does not intend for this link to serve as a representation of its support for this organization.

Some of the key conciliatory features of this plan, according to the White House, are:

• Eliminates the Nebraska FMAP provision and provides significant additional Federal financing to all States for the expansion of Medicaid;

• Closes the Medicare prescription drug “donut hole” coverage gap;

• Strengthens the Senate bill’s provisions that make insurance affordable for individuals and families;

• Strengthens the provisions to fight fraud, waste, and abuse in Medicare and Medicaid;

• Increases the threshold for the excise tax on the most expensive health plans from $23,000 for a family plan to $27,500 and starting it in 2018 for all plans;

• Improves insurance protections for consumers and creating a new Health Insurance Rate Authority to provide Federal assistance and oversight to States in conducting reviews of unreasonable rate increases and other unfair practices of insurance plans.

The plan is expected to guarantee coverage for 31 million Americans who lack it, without the controversial government-run plan. The cost of plan is estimated at close to $1 trillion over 10 years and is expected to be paid for by Medicare cuts, additional taxes, and fees charged to pharmaceutical companies and other health industry firms. 

For more information about the President’s House’s proposal, please visit the following White House link:

http://www.whitehouse.gov/health-care-meeting/proposal

In addition, the White House’s website includes a section detailing the republican ideas that are being included in Obama’s proposal, such as personal responsibility provisions and medical liability reform. This information can be found at:

http://www.whitehouse.gov/health-care-meeting/republican-ideas

Though set fee schedules (see posting of 9/24/09 below) would be a great first step in this process, they will not be the “silver bullet” for consumer-driven plans. The problem is that the frontline consumer – the patient — does not understand the complexity and course of services that will be required to treat them for a particular episode of illness, and they will therefore have difficulty in selecting their caregiver based on these fees. Additionally, a set fee schedule does nothing to address the inefficiency and abuses of the fee-for-service paradigm where physicians are paid for the quantity of services, rather than the quality or efficiency of those services. 

It is for these reasons that the idea of an episode-based-payment (“EBP”) system has been growing among experts in the health care field. This system works from the concept of bundling services in order to execute a particular course of treatment from beginning to end for a given condition/illness/etc., such as pregnancy, chicken pox, broken bones, etc. In theory, all physician services, ancillary services, hospital services, prescription drugs, etc., associated with complete patient care would be included in one price, thereby making it easier for purchasers to understand the cost of such care. It would also create incentives for providers to deliver care efficiently and allow them to compete fairly on this basis. 

As one could imagine, the actual development and implementation of this system would be complex. A host of issues need to be addressed such as:

• What constitutes an episode of care? What services are included?
• What are the appropriate payment rates?
• How should the bundled fee be allocated and who is responsible for the care?
• How is an EBP system implemented?

We’d like to recommend the following two articles as a primer for these issues and as a great introduction to EBP. One is written by the National Institute for Health Care Reform and can be found at the following link:

http://www.nihcr.org/publications/EpisodeBasedPayments.html

The other article was written by Deloitte and is located at:

http://www.deloitte.com/assets/Dcom-UnitedStates/Local%20Assets/Documents/us_chs_EpisodeBasedPayment_PerspectivesforConsideration_091609.pdf

There are several options that the Democrats may consider utilizing to continue to drive towards passing a health care reform bill that is President Obama’s top domestic priority.  The simplest option is for the Democrat-controlled House to vote to adopt the health care reform bill that has already passed the Senate.  While they may not be thrilled with some of the Senate bill’s provisions, it would enact a baseline reform package into law and they could always negotiate with the Senate in the future on what changes to make to the law rather than having to debate whether any reform package should be adopted.

There are other reform channels available in addition to adopting the already passed Senate bill that are briefly discussed in this New York Times article:

http://www.nytimes.com/2010/01/18/health/policy/18health.html?hpw

Regardless of who wins the Massachusetts Senate seat, we expect some form of health care reform to be adopted this year.

Some of the more critical issues addressed are:

• The need to strengthen the individual mandate
• Allowing a wider variation of premium by age
• Inconsistencies in the grandfathering provisions
• Medical loss ratio considerations
• Clarifications to the definition of Medical Necessity
• Relative benefits of the Senate’s risk-sharing provisions
• Inadequacy of loan provisions for insurance cooperatives
• Need to base excise tax on actuarial value, rather than premiums
• Adverse selection in CLASS provisions

The link for this outstanding letter is:

 http://www.actuary.org/pdf/health/differences_jan10.pdf/

In addition to this, the Society of Actuaries, the American Academy of Actuaries and the Conference of Consulting Actuaries are sponsoring upcoming webcasts on various aspects of Health Care Reform. The first if these is a free webcast on January 25, 2010. Speakers will provide actuaries with an overview of the current status of health care reform, then outline some of the more significant differences between the bills, the challenges those differences will present for the reconciliation process, and which chamber’s approach (if either) would be more viable. For more information, click on the following link:

 http://www.actuary.org/webcasts/health_jan10.asp

This will be followed up with a Health Reform Update webcast on February 9, 2010. Information regarding this event can be found at the following site:

http://www.ccactuaries.org/events/seminars/2010-audiocast-schedule.html#02-10

We strongly recommend these particular learning opportunities for actuaries and non-actuaries alike. Health Reform legislation is going to change the industry in a remarkable way. It behooves all professionals in the health care insurance industry and the employee benefits realm to keep abreast of these developments.

• Expansion of Coverage (including Medicaid)
• Changes to Medicare Payments
• Other Medicaid/CHIP provisions
• Proposals to Control Health Care Cost Trend
• Community Living Assistance Services and Supports (“CLASS”), and,
• Immediate Health Insurance Reforms

According to the study, the net cost over the period 2010-2019 would be $280 million, predominantly derived by the cost of expanded coverage offset by the savings in Medicare disbursements.

The study is well-conceived and very educational. We recommend it highly, not only for its actuarial analysis but also as a refresher on the pillars of the Senate Health Reform bill.

The paper can be accessed at the following link:

http://www.cms.hhs.gov/ActuarialStudies/Downloads/HR3200_2009-10-21.pdf

Developing a network with top tier discounts is difficult and extremely expensive.  A few carriers are large enough to develop their own highly competitive network of providers (locally and/or nationally) or have a status that ensures their discounts are among the best (e.g., some state laws mandate most favorable discounts for Blues plans).  The remaining insurers (most small to mid-size insurers) usually rent a secondary network for a fee and do not typically get pricing parity with the best discounts offered by the top tier networks.

The result of this discount disparity is that small to medium-sized insurers have difficult effectively competing with larger insurers on cost of services or breadth of physician choice in a given marketplace.

One of the key tenets of virtually all health care reform proposals is to keep a strong level of competition among providers, vendors and insurers. Competition is the cornerstone of a free economy and usually promotes the highest quality of services for the lowest prices by providing incentives for efficiency. But does the current system for network discounts really bring about more efficient use of resources or is it just a mechanism to stifle competition among insurers? Does the current system minimize administrative overhead or increase it?  What is gained in efficiency or quality by having some insurers pay significantly higher prices for provider services than other insurers? Do the network physicians provide higher quality care? Do they provide services in a more efficient manner? No — in offering a deeper discount to the large insurers they either have to make up for it by performing more services or by charging higher (and often MUCH higher) rates for uninsured patients and secondary network insurers.

What if networks based on differing discounts and pricing were not allowed and all providers had to charge the same price for each service regardless of the payer (including the uninsured individual)? In that case, all carriers, regardless of size or presence in a marketplace could have a chance to compete on an equal footing. Competition under this scenario would then be driven by administrative efficiencies, quality of care and efficiency of health care delivery. This would not necessarily mean the end of PPOs and HMOs. Provider networks could be formed based on adherence to practice guidelines, quality scores, outcomes measures, etc. that translate to cost savings based on optimizing medical practices rather than optimizing billing.

The implementation of a set fee schedule for each provider would also allow for greater transparency as we try to foster consumer awareness in the health care marketplace. Have you ever tried to comparison shop a medical procedure today?  Most providers cannot give you a simple answer on how much they would charge for a procedure.  With single schedule pricing consumers would truly be empowered to maximize their consumer driven health plans and be able to make the kind of price vs. quality trade-offs on their medical care that they do in so many other aspects of life.

Although the idea of fixing a provider’s fee schedule for all payers may seem like a radical idea and could cause some upheaval in the insurance industry, maybe it’s time to begin considering it as health care reform is being discussed.

We’d like to know what you think!

Are you receiving the personal and attentive service you deserve? Are you paying too much for your actuarial services?

Though not as large as some firms, we believe our lean structure has its advantages, namely:

• Easy access to our actuaries and principal owner;
• Tighter control over the quality of services; and,
• A streamlined business model that allows for lower charges to our clients.

UHAS has built an experienced team of professionals and network of subcontractors who are technically proficient and service-oriented. Together, we provide the full range of health actuarial services, including:

• FAS 106 Postretirement Medical Valuations;
• FAS 158 Disclosures;
• GASB 45 Valuations;
• Postretirement Medical Design;
• Medicare Part D Actuarial Equivalence Testing; and,
• Self-Funded Medical Plan Consulting.

In addition, UHAS provides the full spectrum of actuarial services for all health-related coverages, including actuarial services to managed Medicaid plans.

Our consultants share a passion for service. Our fast, courteous service and direct and open communication form the foundation of our productive customer relationships.

Call us now  or fill out the contact form below to receive a one-hour credit on future consulting services.

How could this be true given that virtually all actuaries working in the profession work with data, either directly or indirectly, every day? Based on some additional discussions, I believe it is true because actuaries know that the data quality situations/scenarios an actuary can be faced with are endless.  Every situation is different, and all require analysis and, ultimately, professional judgment. This is a perfect lead-in to a discussion regarding ASOP No. 23.

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