August 28th, 2013
Self-insured group medical plans are very prevalent and have served plan sponsors well in many respects. However, plan sponsors have experienced increases in per capita medical costs that greatly exceed the Consumer Price Index for all urban consumers (CPI-U) for many years. The vast majority of self-insured group medical plans in-force in 2013 utilize a network of hospitals and physicians where the providers have contracted to provide services at some effective discount off their standard fee schedule known as “allowed charges.” These allowed charges are often determined in conjunction with a Preferred Provider Organization (PPO).
Another reimbursement approach that is getting attention is known as Medicare Cost Plus (MCP). With this method, the plan does not utilize a PPO network to determine the allowed charges covered, but rather the allowed charges are set to be equal to some multiple of the Medicare allowed charges in a given market. Plans commonly will reimburse at 120% of the Medicare allowed charges, but the multiple can vary upward or downward.
The Medicare Cost Plus approach can result in significant plan savings that accrue to the sponsor of the self-insured plan because 120% of Medicare reimbursement is typically less than what is allowed by the commercial PPO networks. The differences are larger for facility (inpatient and outpatient) claims than professional claims. Administrative costs under a MCP reimbursement should be lower due to the lack of network access fees. In addition, medical stop loss premium rates should be lower under a MCP plan because the lower level of allowed charges reduces the level of the insurance carrier.
Employer plan sponsors retain all the traditional advantages of self-insured group medical plans including the ability to not comply with state insurance mandates, avoidance of state premium taxes, and the ability to offer identical plan designs to employees who reside in different states.
The savings that the MCP method offers could be partially or fully offset by additional costs incurred for member advocacy in a MCP plan. The primary issue that employers will encounter with a MCP reimbursement approach is that without pre-negotiated provider reimbursement rates and/or discounts, some providers will not accept the plan reimbursement as payment in full for their services rendered. This can result in members being balance billed by providers after a claim is adjudicated. It could also result in the member not being welcomed by some physicians or facilities in the provider community.
Employers must prepare for these claim adjudication issues and develop a strategy to help plan members deal with providers who contest reimbursements and “balance bill.” Plan sponsors must also engage a qualified ERISA attorney to draft a new plan document and develop compliance procedures associated with the MCP reimbursement strategy.
We think the Medicare Cost Plus reimbursement approach will provide significant savings for some self-insured group medical plans. What do you think? Is MCP a good alternative to the traditional way of determining allowed charges? Will your group explore MCP as an option? Let us know.
July 24th, 2013
A bill was recently introduced in the U.S. Senate that would give employer until 2016 to comply with a health care reform law provision requiring them to offer coverage to full-time employees or pay a fine. The measure, S. 1330, which was proposed by Senator Mark Begich, D-Alaska, follows a one-year delay announced earlier this month by the U.S. Treasury Department. Federal regulators has decided to hold off until 2015 the enforcement of provisions of the health care reform law requiring most employers to provide qualified, affordable health coverage to their employees.
The House of Representatives also has approved bills delaying until 2015 both the employer mandate and the requirement that individuals enroll in a qualified plan or pay a fine. However, before the votes, the Obama administration said the president would veto both bills, even if approved by the Senate, because the legislation on the employer mandate is “unnecessary” and the bill seeking to delay the individual coverage mandate would lead to higher insurance premiums and a greater pool of uninsured U.S. residents, the administration said in a statement. “Enacting this legislation would undermine key elements of the health law, facilitating further efforts to repeal a law that is already helping millions of Americans stay on their parents’ plans until age 26, millions more who are getting free preventive care that catches illness early on, and thousands of children with pre-existing conditions who are now covered,” the administration said in the statement.
However, after the House votes, U.S. Rep. Tim Griffin, R-Ark., said the Obama administration erred in the way it granted employers the one-year reprieve from the law’s coverage and reporting requirements, as well as its refusal to extend the same relief to individuals. “The White House may believe it can unilaterally delay implementation of Obamacare’s employer mandate, but only Congress can change the law,” Rep. Griffin, the primary sponsor of the House bill to delay the employer mandate, said in a statement. “Unlike the president, we know it’s not fair to give businesses and labor unions relief from Obamacare’s job-crushing provisions and leave families to deal with the disastrous consequences.”
So do you think that the delay for the employer mandate should be granted? What impacts will be on your organization if this mandate was not delayed? Let us know.
July 17th, 2013
The Centers for Medicare & Medicaid Services (CMS) has released a Funding Opportunity Announcement for round two of the Health Care Innovation Awards. Under this announcement, CMS will spend up to $1 billion for awards and evaluation of projects from across the country that test new payment and service delivery models that will deliver better care and lower costs for Medicare, Medicaid, and Children’s Health Insurance Program (CHIP) enrollees. Applicants who are requesting more than $10,000,000 in funding are required to submit an external actuarial certification with their application. The application deadline for “round 2” of the grant program is August 15, 2013.
Merlinos & Associates is working with multiple applicants to provide certifications in support of their applications for Health Care Innovation Award funding. If you need assistance, please let us know.