RMI 3501 Exam 3
What is negotiated pricing?
negotiate discounts with providers to lower price paid per unit
Can states regulate the terms of an ASO?
no because its not a traditional insurer
What are some examples of wellness programs?
onsite gyms, stop smoking programs, weight management
what is the objective of the pre-emption clause?
uniform standard of conduct or regulation on a national level for Er-sponsored plans especially important for multi-state ERs
What does a cost sharing arrangement help to control?
# of units utilized (frequency)
how are ASO contract administrators typically compensated?
% of amount of claims paid flat amount per processed claim flat charge per EE flat charge for the ER
What are the incentives of a CDHP?
- insureds are spending their own money until the OOP limit is reached so they will be more careful with their own money - lower trend/premium helps manage possibility of Cadillac Tax
What are the benefits of aggregate stop loss coverage?
1. An improved cash flow for the ER 2. Minimization of premium taxes
What are the two main risks of self-funding?
1. Catastrophic claims 2. ERs inability to provide admin services in a cost effective manner
what are the negatives to negotiated pricing?
1. Could result in cost shifting to the patient (i.e. balance billing) 2. Could create a utilization offset
What are the three components of a CDHP?
1. High deductible health plan (HDHP) + MUCH higher OOP Max 2. Account - EE controlled, EE owned (HSA) or ER owned (HRA) 3. Consumer information to elp insureds be better consumers of HCGS
What are two ways to lower the price paid per unit?
1. Negotiated Pricing 2. Reference Based Pricing + Consumer Information
What are the three broad strategies of HCCC
1. Reduce frequency (# of units utilized) 2. Reduce severity (price paid for unit) 3. Change the mix of services
What are the disadvantages of aggregate stop loss?
1. The advantages are offset partially by the cost of coverage 2. Insurers often want ERs to buy other ocverage or admin services to get agg stop loss
What are the three characteristics of cost sharing arrangements?
1. deductibles, coinsurance, copayment 2. basic controls on moral hazard 3. CDHPS (all examples of POS cost-sharing)
What are the two classes of er-sponsored plans?
1. plans that are funded through an insurance contract - ERISA plans - subject to state regulation 2. plans that are self-funded - ERISA plans -completely beyond state control`
What are the two main solutions to the problems with self-funding?
1. stop loss coverage 2. ASO contract
What is ERISA?
Employee Retirement Income Security Act Federal legislation and the most important EE benefits law ever passed was intended to protect ER-provided pensions
How is an ASO contract similar to a traditional insurance arrangement?
Administrator may agree to continue paying any unsettled claims after the contracts termination but only with employer provided funds
What does ERISA regulation apply to?
All EE benefit plans operated by private ERs or EE organizations some plans are excluded: state and local govt plans church plans individual plans
What is the savings clause?
Allows states the right to regulate traditional insurers conducting traditional insurance fuinctions such as: contracts solvency mandated benefits
What is the incurred variation for claim settlement under stop loss coverage?
Carriers liability is determined by the date a loss took place rather than when a payment was made
Why is there a moral hazard problem with most health insurance plans?
Characterized by low deductibles and low OOP maximums does not provide incentive for patients to behave as traditional consumers because they pay very little
What is the largest component of cost in an insured plan or a self insured plan?
Claims expense
What are Taft-Hartley plans a result of?
Collective bargaining
What happens in a private exchange?
EE is walked through plan choices and spends "Credits" assigned to EE good way to market voluntary benefits
What are the benefits of a taft-hartley plan?
EE's can move benefits between ERs union negotiates on the EEs behalf
What is the consumerism approach?
EE's see the true cost of the plan options EE is given a voucher to spend on plan of their choice voucher often less than the cost of any plan option
How are claims paid under stop loss coverage on an advanced funding basis?
ER does not have to pay the claim to the EE before submitting claim to carrier
What is the reimbursement variation for claims settlement under stop loss coverage?
ER must pay the EE claim before submitting claim for reimbursement to carrier
What is an ASO contract?
ER purchases specific adminstrative services from an insurance company or from an independent third party adminstrator
What are the types of groups eligible for group insurance?
ER-EE group Taft-Hartley Plans (unions, trust funds) Trade associations Creditor-Debtor Group Alumni Associations, Professional Associations MEWAs
True or false: the NAIC has regulatory authority
FALSE
True or false: Contributory financing is a form of cost sharing
FALSE - this is not cost sharing because it does not reduce healthcare utilization
True or false: Insurer has a responsibility to the EEs
False
True or False: States can regulate insurers and ERs
False - States can only regulate insurers
True or False: Federal government can regulate ERs and insurers
False - can only regulate employers
True or false: most ERISA provisions are related to health and welfare
False - only 5% of ERISA provisions are health and welfare related
What is a utilization offset?
Give patients more services that they may not need to make up for discounted rates
What is aggregate stop loss?
If total claims exceed a specific $ limit, the carrier assumes financial responsibility for those claims that are over that limit, subject to max reimbursement usually expressed as a % of expected claims
What is the benefit to referenced based pricing with consumer information?
Insurer tells consumer the price they should expect to pay for a procedure. This allows the consumer to be able to "shop around" and weed out potentially inflated prices. Has the advantage of lowering the cost of healthcare for the whole market
What is the purpose of a wellness program?
Make employees healthier so they consume less healthcare
What is the pre-emption clause?
Makes void all state laws to the extent that they relate to an employer sponsored plan
What is the top down strategy?
Micro-managing providers to control the supply of services e.g. claims review, utilization review
What is considered a compliant HSA?
Min deductible: $1300/$2600 (single/family) Max OOP limit: $6550/$13,100 contribution limit: $3400/$6750
What is the paid variation for claim settlement under stop loss?
Most common contract insurance carrriers liability is determined by only claims paid during stop-loss period
What is specific stop loss?
Most commonly used with medical expense plans referred to as a big deductible plan or shared funding deductible applied on an annual basis and pertains to each person under the contract
What are the federal reporting requirements under ERISA
Must report form 5500 - enforced by IRS and Dept of Labor self funding plans have additional requirements
What is the difference between non-contributory and contributory financing?
Non-contributory - ER pays the full cost of the plan "defined benefit" Contributory - "Defined contribution" - ER pays less than the full cost, EE becomes more conscious about their consumption
What is the bottom up strategy?
Pay providers by salary or capitation to reduce utilization of services
What is the deemer clause?
Prohibits states from regulating self-funded plans in their state states cannot "deem" a self insured plan to be an insurer
Why is there a minimum number of lives for group insurance?
Protection against insolvency
When an ER or insurer says they want to engage in healthcare cost containment, what is a realistic goal?
Reduce the rate of growth in HC costs to an acceptable level for the ER
How are payments under an ASO contract regarded?
Regarded as fee for service not subject to state premium taxes
What is the advantage of an ASO?
Services may be handled more cost-effectively by 3rd party than if it were handled by ER
What impact did the McCarran Ferguson Act have on regulation?
Settled who has regulatory authroity over insurers exempt insurers from federal regulation fed can only regulate the "business aspects" of insurers
Why do small employers like specific stop loss coverage?
Small ERs with better than average claims history but are too small to qualify for experience rating, benefit from not being in a risk pool
How can an insurer change the mix of services utilized?
Substitute a less costly service for a more costly service Provide incentives for patients and providers to make this substitution
What are the required communication activities under ERISA?
Summary Plan description (SPD) - must be offered by paper Summary of benefits and coverages (SBC)
True or false: waiving copay for generic brands helps control demand for HCGS
TRUE
What is indirect regulation under the pre-emption clause?
ex. NJ tried to create high risk pools for health insurance - pool was financed by a surcharge that applied to hospital days. This indirectly had a financial impact on an ERISA plan and was pre-empted by ERISA
How do states indirectly influence EE benefit plans?
They regulate insurance contracts which are then sold to ERs
What are the advantages to an HSA?
Unused contributions can be carried forward without limit tax free investment income funds can be used to pay for qualified unreimbursed medical expenses
What is a trade association?
Usually ERs in the same industry not necessarily unionized small # of employees possibility of adverse selection admin problems
What are model acts or model laws?
a "template" that can be adopted, adopted with some changes, or not adopted at all
What is direct regulation under the pre-emption clause?
any state that tries to pass a law such as an employer-mandate at the state level is usually found to be pre-empted by ERISA with the exception of the San Francisco Ordinance
What authority does administrator have in an ASO contract?
authority to pay claims from a bank account that belongs to the ER or from segregated funds in the admins hands
What are the disadvantages of an HSA?
because of the contribution limit, consumer may be on the hook for high medical costs during the first year of having an HSA
What can a trust fund do?
can self-insure or purchase an insurance contract enhances portability and reduces coverage gaps
What are some of the problems with MEWAs?
if self insured, MEWA is not regulated by the state and has no access to gauranty funds (solvency issue) Fraud issues - rates are often too good to be true and there are a lot of problems with unpaid claims (when self-insured) Adverse Selection problems - made for the sole purpose of getting insurance(goes directly against reasons for a group)
What is a MEWA?
multiple employer welfare arrangement has a sponsor (insurer, third party) Provides benefits to more than one ER can be insured or self-insured
What are the minimum standards of operation under ERISA?
must be non-discriminatory must comply with all federal benefit laws
What is the goal of the NAIC?
promote uniformity in regulation among states
What are the pros of self insurance?
reap the benefits of good claims experience greater flexibility in plan design
What is the fiduciary responsibility under an ERISA plan?
the plan must exist to benefit the EE must act in the best interest of plan participants an ER must subordinate its own interests
