The MLR requires insurance companies to spend a specified percentage of their income on health care claims and quality improvements. The remaining income can then go to covering administrative expenses, marketing and profits. If too much goes toward the latter, the insurer must pay rebates. These rebates act as an incentive to improve quality and seek lower premium increases.

There are two MLR thresholds.

• Large group plans – 85% must be spent on claims and quality improvements
• Individuals & small business – 80% must be spent on claims and quality improvements

The rebates for 2012 are estimated to be $1.3 billion and are due this August. Here is a break down by market:

• Individual market – $426 million, 215 insurance plans, 3.4 million people, average rebate $127
• Small group market – $377 million, 146 insurance plans, 4.9 million people, average rebate $76
• Large group market – $541 million, 125 insurance plans, 7.5 million people, average rebate $14

The rebates won’t make health insurance more affordable, but that’s not their purpose. The goal is to make insurers better align their premiums with their medical claims costs, forcing them to be more efficient and preventing them from charging too much.

Insurer Rebates under the Medical Loss Ratio: 2012 Estimates

Checks In The Mail: Millions Expected To Receive Insurance Rebates Totaling $1.3 Billion

Healthcare rebates scheduled for August

“Extend Health Inc., a leading provider of health benefits management services, including the nation’s largest private Medicare exchange, received two first place awards from Bethesda, Maryland-based Coventry Health Care, Inc. (NYSE:CVH) for exceptional customer service performance by a partner in 2011.

• Zero customer complaints reported to the Centers for Medicare and Medicaid Services (CMS) by seniors signing up for Coventry private Medicare supplement plans through Extend Health;
• The lowest 90-day plan cancellation rate — called rapid disenrollment — which, at just 0.5 percent, was far less than the typical rate.”

Click here to read the complete news release.

Visit Extend Health to use the ExtendExchange™ platform – the nation’s largest private Medicare exchange.

Anti-fraud efforts by the Health Care Fraud Prevention and Abuse Control (HCFAC) recovered over $4 billion during 2011, and nearly $11 billion over the past three years. In February of 2012 the Medicare Fraud Strike Force busted a $375 million health care fraud scheme, arresting a Dallas area doctor, office manager, and five owners of home health agencies for their alleged participation.

Other accomplishments include:

• Charged 323 defendants who allegedly billed Medicare for over $1 billion
• Charged 1,430 defendants with health care fraud and convicted 743
• Recovered approximately $2.4 billion under the False Claims Act (FCA) in 2011

Seniors on Patrol Against Fraud

CMS is bringing seniors into the effort to control fraud too. In November of 2011 CMS awarded $9 million to the Senior Medicare Patrol (SMP) program to help it continue the fight against Medicare fraud. The SMP program has 5,000 volunteers across the nation. The funds will help seniors learn how to prevent, detect, and report health care fraud.

According to CMS, “the SMP volunteers work in their communities to educate Medicare beneficiaries, family members, and caregivers about the importance of reviewing their Medicare notices, and Medicaid claims if dually-eligible, to identify errors and potentially fraudulent activity.”

Since the program began in 1997, more than 25 million people have participated in community outreach education events, and over 4 million Medicare beneficiaries have received education in one-on-one counseling sessions.

High-Tech Tools

In 2011 CMS added high-tech tools to help it “crack down on waste, fraud and abuse.” In June of 2011 CMS announced that it would begin using predictive modeling technology, similar to technology used by credit card companies, to identify potentially fraudulent Medicare claims and prevent them from being paid. The new tools will help CMS move from its former “pay & chase” approach to one that focuses on preventing fraud and abuse before it takes place.

Visit Extend Health to use the ExtendExchange™ platform – the nation’s largest private Medicare exchange.

The 2012 report also says that premiums and revenue for Supplementary Medical Insurance program (Medicare Part B and Part D) are expected to cover costs.

The CMS press release and link to the report are available here.

Visit Extend Health to use the ExtendExchange™ platform – the nation’s largest private Medicare exchange.

During this webcast you will learn:

• How AGL Resources was able to provide its retirees with more choice and better value for their health care dollars.
• How AGL Resources reduced OPEB liabilities, simplified administration, and made retiree health care benefits sustainable.
• Details of AGL Resources’ decision making process, communication protocol and keys to success.

Register today!

Webinar Details:

April 11, 2012
10:00 am PST/1:00 pm EST

Featuring:

Chasity Miller
Managing Director, Compensation & Benefits
AGL Resources, Inc.

Richard K. Wheeler
Senior Vice President
Extend Health, Inc.

Extend Health: What’s the difference between a state-based health care exchange and the ExtendExchange Medicare exchange platform operated by Extend Health? Are they the same thing?

John Barkett: They are not the same thing. The state-based exchanges and the ExtendExchange platform are both marketplaces where carriers can list their products and individuals can shop for and enroll in a plan. The New York Stock Exchange serves the same purpose for firms who wish to list and sell securities and investors who wish to buy them. But the state-based health care exchanges also have the power and responsibility to qualify plans. This is similar to how the SEC must certify a firm before it is permitted to sell its shares on a stock exchange. The regulations that were just released are 644 pages long (Download), in part because states are being tasked with setting up an insurance-world equivalent of both a stock exchange and a securities exchange commission for health insurance.

EH: You forgot an important difference. Some individuals who purchase insurance on a state-based exchange are eligible for subsidies towards their premiums. This is a new entitlement created by the ACA.

JB: That’s right. Individuals and families below 400% of the Federal Poverty Level ($89,400 for a family of four in 2011) that purchase a plan that has been qualified by the state-based health care exchange will be eligible for advance premium tax credits that will defray the cost of an individual or family’s insurance premiums. This is similar to how Medicare operates the Medicare Advantage and Medicare Part D programs as well. When a Medicare beneficiary enrolls in a Medicare Advantage or Medicare Part D plan, Medicare sends a monthly payment to the carrier that covers the majority of the premium. The beneficiary pays the difference. There is no federal premium support for Medigap policies. They must be paid for out of pocket by the beneficiary, although many of our employer clients reimburse their retirees through a Health Reimbursement Arrangement (HRA). The same dynamic will likely play out in the pre-65 markets, as health plan carriers will be allowed to sell individual and small group products subject to some federal guidelines and ultimately approved by state Departments of Insurance, but not requiring qualification by the state-based health care exchange. Individuals or employers that would like to shop for both qualified health plans and individual or small group plans will have to navigate the markets separately unless private exchanges are set up to offer them side-by-side.

EH: I see. So, was the regulation CCIIO just released the final one? What did it cover? And what does an Extend Health client need to know?

JB: There are many regulations that reform our pre-65 insurance markets on the way toward full implementation of the health care reform act, but this was a substantial one. For the most part, the rule is aimed at states, not employers. It gives states guidelines for the following:

• Establishment of health care exchange governance structure
• Minimum health care exchange capabilities
• Eligibility determinations for health care exchange participation and tax credit programs
• Enrollment into qualified health plan
• Certification of a qualified health plan

The rule provides similar guidelines for states that wish to set up Small Business Health Options Programs – “SHOP Exchanges” – which are state-based health care exchanges for employees of small businesses. The rule also details minimum certification standards that must be followed by state-based exchanges when qualifying health plans, and describes which employers will be eligible to enroll their employees into SHOP exchanges.

SHOP exchanges are designed to relieve small employers of the administrative burden of choosing a health plan for their employees by allowing them to offer a contribution that would defray the cost of their employees’ premiums. For 2014-2016, only employers with less than 100 employees (or less than 50 employees; states have the option of choosing either) will be granted access to the SHOP exchange. Starting in 2017, states can decided to grant large employers access to their SHOP exchange.

This rule marks an early but pivotal point in the creation of a well-functioning individual market. It lays a foundation that is still subject to execution risk; we still don’t know how well states will perform in standing up their health care exchanges. (Or if they will perform at all – by our last count 20 states had yet to take any action towards setting up their own exchange.) But should the states succeed they could create the first viable alternative to the group markets for a pre-65 population. This is the big picture takeaway, one that we will be following very closely.

Visit Extend Health to use the ExtendExchange™ platform – the nation’s largest private Medicare exchange.

• Financial relief provided by CMS subsidies
• GASB and FAS liability reductions
• Catastrophic payment relief
• Increased benefit flexibility

However, only a Medicare exchange can reduce an employer’s administrative burden, and only a Medicare exchange can provide post-65 retirees with the flexibility to choose a supplemental plan that meets their needs, often at a lower cost. These are solid reasons to move to a Medicare exchange solution, but employers with certain populations, such as unions that have strong contractual benefits obligations, may prefer not to migrate their full Medicare-eligible population to an exchange.

Understanding that both solutions offer advantages for employers, Extend Health has partnered with Medco to provide an Extend Health EGWP solution. Employers can leverage the power of the individual Medicare marketplace through the nation’s largest private Medicare exchange, recognize savings, and meet ongoing obligations to retain a group prescription drug program where necessary.

Read on to learn more. 

Here’s how it works:

Employers who choose this health care insurance solution work with Extend Health as the single point of contact. Their retirees then enroll in an individual Medigap plan paired with a Medco (EGWP) group prescription drug benefit product. If an employer has retirees who are allowed to opt out of the EGWP, Extend Health will transition them to the individual Medicare Part D prescription drug plan that best meets their needs.

As the single point of contact, Extend Health provides:

• Communications: employer-branded communications explaining the enrollment process, and offer guidance across both the medical and prescription plan offerings.
• Reporting: enrollment reports in both Individual Medicare programs and Medco prescription plan programs.
• HRA Administration: managing reimbursements for both the Individual Medicare and Group prescription plan premiums.

See the following section for a deeper dive into the differences between an EGWP and the Medicare exchange model.

Comparing Benefits of EGWPs and Exchanges

An EGWP, often pronounced “egg whip,” is a Medicare Part D plan that is tailored specifically to Medicare-eligible retiree populations of employers or unions. Employers typically provide an EGWP to deliver a group prescription drug program.

Insurance carriers position EGWPs as a way for employers to lower their cost of providing retiree group medical benefits without fully exiting the group insurance market. The insurance companies pass on the CMS subsidies savings to the employer or union and their members. Employers, unions and beneficiaries can also take advantage of the Medicare Part D donut hole manufacturer’s discount by using a modified version of an EGWP called an “EGWP + Wrap” plan where additional benefits are added to the EGWP.

How Does An EGWP Compare to a Private Medicare Exchange?

Visit Extend Health to use the ExtendExchange™ platform – the nation’s largest private Medicare exchange.

Based on the Justices tough questions to law’s challengers and defenders, anything is possible.

What happened:

Two questions were considered on Day 3. The first question asked whether other parts of the law should be struck down if the individual mandate was struck down. The Solicitor General (SG) argued if the mandate were to be struck down, then the guaranteed issue and community rating provisions should also be struck down, but the rest of the law should stand. The Challengers argued if the mandate were to be struck down, the rest of the law should go with it. The Court appointed a third party lawyer to argue if the mandate were to be struck down, everything else should stay in place. The justices were equally tough on all three arguers, and by the end of the day the consensus was that the court could conceivably go in any of these directions if the mandate were struck down, although some suggested that striking down the mandate while leaving everything else in place was the least likely option.

The second question asked whether Medicaid expansion called for by the Affordable Care Act (ACA) was unconstitutional. The ACA offers to pay 90% of the costs of expanding Medicaid coverage to all state residents earning less than 133% of the Federal Poverty Level. States that refuse to do so could risk losing not only those funds but all federal Medicaid funding. The ACA’s challengers argued that such an arrangement was coercive, a way to force states to spend more on health care coverage for low-income residents at a time when state budgets make that difficult. Justices from across the ideological spectrum questioned the challengers’ argument, but they also pushed the SG for examples of why the Medicaid expansion did not constitute coercion. Many commentators noted that none of the lower courts had ruled that the Medicaid expansion unconstitutional, and one could speculate that the nature of the Court’s questions would suggest it was poised to follow suit.

The Justices will vote on all questions of the case in their private Conference, and then begin to write the opinions, which are expected to come out by the end of June. After researching the ongoings these last few days, it seems the only conclusion to come to is that anything is possible. I don’t envy their task.

John Barkett

Director, Extend Health, Inc. and former HHS analyst
Extend Health, Inc.

Visit Extend Health to use the ExtendExchange™ platform – the nation’s largest private Medicare exchange.

The constitutionality of the individual mandate seems up in the air after tough questions from the bench.

What Happened:

Today the Court heard oral arguments on the constitutionality of the individual mandate (IM).  The Solicitor General (SG), arguing on behalf of the Obama Administration, was faced with a barrage of questions from four of the Justices (Kennedy, Roberts, Alito, Scalia), while the fifth (Thomas) did not ask a question but is widely expected to vote against the constitutionality of the mandate.   Their questions aimed at establishing whether there are any limiting principles that apply to the mandate to purchase health insurance.  In other words, if the Court were to declare the mandate is constitutional, would they be setting a precedent that an individual mandate for any product is also constitutional, or are there aspects of health insurance that make it special in the eyes of the constitution?  The SG’s response, over and over again, was that health insurance is different than other products.

The question of whether health insurance was meaningfully “different” from other products continued to be debated during the challengers’ oral arguments.  The questions of four justices (Kagan, Sotomayor, Ginsburg, and Breyer) seemed to suggest they agreed with the argument the Solicitor General had put forth.  Despite his earlier questions, Justice Kennedy, who is often the swing vote when the court votes 5-4, left room for the possibility that health care is, in fact, different than other products:  “…And the government tells us that’s because the insurance market is unique. And in the next case, it’ll say the next market is unique. But I think it is true that if most questions in life are matters of degree, in the insurance and health care world, both markets — stipulate two markets — the young person who is uninsured is uniquely proximately very close to affecting the rates of insurance and the costs of providing medical care in a way that is not true in other industries.  That’s my concern in the case.”

Oral arguments often but not always signal where a Supreme Court justice is on a given issue.  But many commentators today suggested the challengers presented the more effective argument.

For a more detailed recap of the day’s events, go here.

And for an interesting perspective on whether insurance is different than other products, read this post on Robert Toth’s Business of Benefits blog.

John Barkett

Director, Extend Health, Inc. and former HHS analyst
Extend Health, Inc.

Visit Extend Health to use the ExtendExchange™ platform – the nation’s largest private Medicare exchange.