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Richard Lieberman

Chief Data Scientist

Mile High Healthcare Analytics

Clear Sailing After King: the Individual

and Small-Group Markets

TODAY’S AGENDA

• Putting King to rest (finally!)

• Getting more people covered

• Transitional policy impacts

• The mandate and its penalties

• Risk adjustment payment transfers

• IVA issues

“30 DAYS IN 30 SECONDS”

• The Cures bill passed the House and will pass the Senate

soon

• Huge changes to inoperability requirements

• The Medicaid mega-rule

• More states are expanding Medicaid: Alaska and Utah

• John Kasich just joined the race for President

• Avalere Health reports: Exchange Networks Have 34

Percent Fewer Providers

King v. Burwell: What Will Life be Like Without the Hype!

• On June 25, 2015, the Supreme Court upheld the distribution of

health insurance subsidies by states where the federal government

is running their exchange

• “A fair reading of legislation demands a fair understanding of the

legislative plan.”

• The Court rejected Chevron deference

• It also embraced the so-called “major questions” rule – the

presumption that Congress does not implicitly delegate major

statutory questions to agencies.

• The Court held “it is instead our task” – the Court’s own duty on such

a major question – “to determine the correct reading of Section 36B.”

What Happens After King?

• The resolution of King allows federal subsidies to continue to be provided to more

than 6 million people

• It calms the political waters surrounding the Affordable Care Act, allowing

implementation to continue in a more certain and predictable environment for the

health-care industry, states, and consumers.

• CBO predicts that 23 million people will be covered in 2016

• With so many covered and the ACA insurance reforms more firmly in place, repeal is

likely to be more a rallying cry for the right than an achievable objective

• ACA will eventually gradually join Medicare and Medicaid as a sometimes contentious

but more ordinary issue on the policy and political agendas

ACA Creates Winners and Losers

• It is impossible to move from a system in which people

with preexisting conditions can be denied health coverage

or charged much higher premiums to a system where

people pay the same premium regardless of their health

without some who have previously benefited having to pay

more

• Some of the winners might perceive themselves as losers

• Prior reforms of the US health care system typically

created only winners

• Medicare beneficiaries are uniformly better off than they

would be without coverage

But Of Course, Repeal is Just Around the Corner!

• Repeal will continue to be a rallying cry for the uninformed, the

misinformed, and the politically naïve

• Ironically, there significant opposition to the ACA from left-wing

liberals– they have been furious since 2009 that a single-

payer system wasn’t adopted

• Congress has already put off a “repeal vote” to the Fall; the

reconciliation procedure is not a vehicle for repealing the ACA

• The candidates that assert they will repeal “Obamacare” on

their first day in office, haven’t read or don’t understand the

Supreme Court majority’s opinion in King v. Burwell

The Challenges Faced by the Industry

• Reaching those who are uninsured, a generally more

difficult population to connect to insurance

• Stabilizing premium increases in the marketplaces as

insurers get a better handle on their risk pools

• Migrating to value-based payments

There is Evidence that the ACA is Increasing Coverage Access

What Happens When Politics Drives Public Policy!

Is Transitional Policy a Little Train Wreck?

• The Administration gave states the option

of letting insurers continue individual and

small group plans that would otherwise

have been cancelled in 2014, because

they did not comply with ACA standards,

until October 1, 2017

• Thirty-five states are allowing issuers to

continue transitional plans for one or

more years

• 21 states are allowing issuers extend

these plans through 2017

Or a Big Train Wreck?

• “Millions of small businesses nationwide —

and an estimated 70% of California's small

firms that offer employee health insurance

— haven't yet faced all the sweeping

changes that resulted from the ACA”

• Colorado has about 190,000 people in

transitional plans- 75,000 with individual

coverage and about 115,000 people in

small group plans

• There are only 140,327 enrolled in individual

market plans

Sources: http://www.latimes.com/business/la-fi-healthcare-watch-

20150413-story.html and

http://www.lifehealthpro.com/2015/03/13/colorado-firm-on-ppaca-

compliance

Individual Mandate Penalties Increase Over Time….

Mandate Penalties Are Still A Suggestion!

27-Year Old Individual

Percent of Federal Poverty Level

2015 Plan Year 100% 200% 300% 400% 500%

Individual Mandate Penalty $325 $469 $704 $938 $1,173

Lowest Cost Subsidized Bronze Annual

Annual Premium $0 $860 $2,162 $2,162 $2,162

Difference ($325) $391 $1,458 $1,224 $989

Percent of Federal Poverty Level

2016 Plan Year 100% 200% 300% 400% 500%

Individual Mandate Penalty $695 $695 $875 $1,167 $1,459

Lowest Cost Subsidized Bronze Annual

Annual Premium $0 $946 $2,378 $2,378 $2,378

Difference ($695) ($1,641) $1,503 $1,211 $919

Source of 2015 Results: “Individual Mandate Penalty May be Too Low to

Attract Middle-Income Individuals to Enroll in Exchanges” Avalere Health,

April 24, 2015 (www.avalere.com)

Even for Older People…Penalties Are Minimal

50-Year Old Individual

Percent of Federal Poverty Level

2015 Plan Year 100% 200% 300% 400% 500%

Individual Mandate Penalty $325 $469 $704 $938 $1,173

Lowest Cost Subsidized Bronze Annual

Annual Premium $0 $424 $2,291 $3,407 $3,684

Difference ($325) ($45) $1,587 $2,469 $2,511

Percent of Federal Poverty Level

2016 Plan Year 100% 200% 300% 400% 500%

Individual Mandate Penalty $695 $695 $875 $1,167 $1,459

Lowest Cost Subsidized Bronze Annual

Annual Premium $0 $466 $2,520 $3,748 $4,052

Difference ($695) ($1,161) $1,645 $2,581 $2,594

Source of 2015 Results: “Individual Mandate Penalty May be Too Low to

Attract Middle-Income Individuals to Enroll in Exchanges” Avalere Health,

April 24, 2015 (www.avalere.com)

Are Sicker-than-Average People Enrolling?

• Researchers used Express Scripts data to compare 1 million

Marketplace enrollees to a comparison group of members with

employer-sponsored insurance (ESI)

• There were marked differences in age and medication use between early

Marketplace enrollees versus those who enrolled later

• Marketplace enrollees had both lower overall drug spending and

medication use than did the comparison group with employer sponsored

coverage and lower use of most of the medication classes

• Marketplace enrollees had nearly four times higher odds of using HIV

medications than the comparison group. Out-of-pocket expenses for

specialty medicines were 36 percent higher among Marketplace enrollees

than in the comparison group as well

Monthly Prescriptions Filled, By Month Of Enrollment In The Marketplace

and the Employer-Sponsored Comparison Group, 2014

Julie M. Donohue et al. Health Aff 2015;34:1049-1056

©2015 by Project HOPE - The People-to-People Health Foundation, Inc.

Odds Ratios Of Any Use Of Specific Therapeutic Categories Among

Marketplace Enrollees Versus The Comparison Group, January–

September 2014

Julie M. Donohue et al. Health Aff 2015;34:1049-1056

©2015 by Project HOPE - The People-to-People Health Foundation, Inc.

The Need to Stabilize Premiums

• We know that many issuers guessed wrong in 2014

• This was to be expected; by everyone except the media and the pundits and the partisans!

Fallout from the Payment Transfer

• On June 30, 2015, the risk adjustment payment transfer

system moved approximately $2.2 billion dollars between

issuers!

• $1.7 billion was transferred in the individual market

• Almost every issuer was involved in the payment transfer–

only 18 issuers out of 772 had a zero dollar payment transfer

• Plus, there were an additional $7.9 billion in reinsurance

payments

• Risk corridor impacts will be announced on August 14th

Anyone Doubt the 3-Rs?

• 2 of the three Rs are temporary…if you doubt

them for too much longer, they will be gone!

• Reinsurance and risk corridor programs expire

after the 2016 contract year

• Risk adjustment is a permanent program

• In 2014, many issuers were too inundated with

baseline ACA implementation challenges to give

adequate attention to risk adjustment

• Continuing that approach in 2015 should be

pursued at the issuer’s peril!

Reinsurance Parameter Changes in 2015 and 2016

2014 2015 2016

Attachment Point $45,000 $45,000 $90,000

Reinsurance Cap $250,000 $250,000 $250,000

Coinsurance Rate 100 percent 50 percent 50 percent

Initial Validation Audits in 2015

• CMS has cancelled the audits for 2015

• First “practice” audit will occur in 2016 for the 2015 contract

year

• However, the two “practice” audits are now reduced to one

• Secondary “audit-driven” payment transfers still begin in

2018 for the 2016 contract year

Cancelled IVA Audits are a Mixed Blessing

• No 2015 audit is one less thing to deal with

• But there is likely to be significant incidence of diagnoses

that will not substantiate against the medical record upon

audit

• Unlike Medicare-Advantage’s “paper tiger” RADV audits, the

commercial IVA process will impact every issuer

• Issuers should conduct mock-audits on larger sample sizes

• Issuers need baseline risk score accuracy data at the level of

provider groups

Well, Can’t We Just Code with Abandon?

• Just because there are no IVA audits in 2015, doesn’t mean

that it’s time to party

• The dissemination of accurate risk adjustment knowledge is

so limited, that issuers need to use the “breathing room” to

teach clinical documentation to their providers

• Develop incentive programs around clinical documentation

• Consider a shared savings approach- it may be difficult to rely

on percent of premium capitation

False Claims Act

• The government still has the False Claims Act, which has been

dramatically expanded under the ACA

• Overpayments now have to be reported to HHS within sixty days of detection

• Elements a False Claims Act violation:

• defendant makes a false statement or engages in a fraudulent course of

conduct

• do so with the required scienter (intent or knowledge of wrongdoing)

• the statement or course of conduct is material

• the statement or course of conduct caused the government to pay out

money of forfeit moneys due

Two Active Court Cases

• U.S. v. Isaac Kojo Anakwah Thompson

• U.S. District Court for the Southern District of Florida (15-

20012-CR-ZLOCK/HUNT)

• Criminal fraud case

• Olivia Graves, on behalf of herself and the U.S.

• Humana is defendant in this case

• U.S. District Court for the Southern District of Florida (10-

23382-CIV-MORENO)

• False Claims Act case

Department of Justice is Trying Out a Fraud Theory Against Alleged Risk Adjustment Violations

Try Typing “Medicare Advantage Whistleblower” into Google

MHHA Risk Adjustment Advisory Service

• Most risk adjustment staff inside health plans and vendors have learned about

risk adjustment from the Medicare-Advantage Participant Guide or just by trial-

and-error

• The Medicare-Advantage Participant Guide is several years old (last updated in

2008), incomplete, and geared to Medicare-Advantage

• Most risk adjustment professionals are too reliant on vendors; many of which have

limited knowledge of risk adjustment

• Commercial risk adjustment is far more complicated than MA

• The MA revenue management strategies, while seemingly applicable on the

surface, will not work without modification

MHHA Risk Adjustment Advisory Service

• It has become apparent that while most risk adjustment

professionals have their “hearts in the right place” and

want to do right by risk adjustment, there is rarely a

“grown-up in the room.”

• Mile High Healthcare Analytics will serve as that “grown-

up” in the room

• Our team can teach, advise, improve data, build analytical

systems, and oversee vendors

Composition of Risk Adjustment Advisory Service

• Our team is comprised of clinicians, data management experts, senior-level policy wonks,

and health plan operations experts who have “had a seat at the table” when key risk

adjustment decisions have been made

• Our clinicians can train physicians and risk adjustment staff on how to maximize risk

adjustment operations and how to oversee vendors supporting the risk adjustment process

New Risk Adjustment Educational Series

Learn More and Register at:

http://www.healthcareanalytics.exp

ert/educational-series/

QUESTIONS?

Send your questions to:

mhh@healthcareanalytics.expert

CONTACT INFORMATION

Richard Lieberman

rlieberman@healthcareanalytics.expert

720-446-7785 (voice)

www.healthcareanalytics.expert