Group Health Advanced
Key success factors of an accountable care organization (ACO)
1. Ability to identify the population to manage; 2. Ability to understand and manage cost; 3. Ability to manage quality; 4. Ability to integrate care
Risk factors for care management studies
(these should be reported with the study, to ensure reproducibility of results): 1. Demographic variables; 2. Exclusionary conditions that exclude certain members - such as conditions that imply the member is not a good candidate for care management; 3. Exclusionary conditions that exclude certain claims - exclude claims for conditions that disease management does not try to affect (e.g. maternity); 4. Persistency - understand the terms under which a member may enter or leave the group; 5. Chronic prevalence and risk classification - chronic prevalence is defined as the percentage of individuals in a population with the condition; 6. Severity of illness - severity affects claims cost, and therefore the potential for savings; 7. Contactability - this measures whether the manager is able to reach and engage the member; 8. Operational issues - such as the number of eligible members, the number of patients identified, contacted and enrolled, the graduation rates, and the methodologies used
Challenges when calculating disease management savings
(when using the actuarially-adjusted historical control design): 1. Applying the proper trend rate - the trend of the non-chronic population is typically used because the chronic trends are impacted by the disease management efforts. This non-chronic trend must be adjusted for the average risk of the population; 2. Demonstrating equivalence between the baseline and measurement periods - must account for the change in mix of new, continuing, and terminating members and any changes in conditions and co-morbidities. This can be done by re-weighting the claim costs that are used in the savings calculations
Ways ACOs must demonstrate patient-centeredness
1. A beneficiary care experience survey; 2. Patient involvement in ACO governance by representation in the governing body; 3. A Process for evaluating the health needs of the population; 4. Systems in place to identify high-risk individuals and develop individualized care plans for targeted populations; 5. A mechanism in place for the coordination of care; 6. A process in place for communicating clinical knowledge to beneficiaries in an understandable way; 7. A process to allow beneficiaries to access their medical records; 8. Processes for measuring clinical or service performance and using these results to improve care and service
Reasons why a deficiency reserve may be needed
1. A policy is noncancelable, so premium rates cannot be raised; 2. Regulators are unlikely to allow the premium rates to rise to self-sufficient levels; 3. The size of increases needed might trigger an antiselection spiral that makes it impossible to ever break even
Definition of accountable care organizations (ACOs)
1. ACOs are a new category of health care provider created by the ACA as part of the Medicare Shared Savings Program; 2. Definition - a legal entity composed of certified Medicare providers or suppliers. These providers and suppliers work together to coordinate care for a defined population of Medicare FFS beneficiaries, and they have control over the ACO's decision-making process; 3. ACOs that meet specified quality performance standards are eligible to receive payments for shared savings if they can reduce spending growth below target amounts; 4. Medicare beneficiaries will be assigned to ACOs based on where they received certain primary care and preventive services in the most recent 12 months
Common chronic diseases addressed by disease management programs
1. Ischemic heart disease; 2. Heart failure; 3. Chronic obstructive pulmonary disease; 4. Asthma; 5. Diabetes
medicare shared savings program: one-sided vs two-sided
gains only / gains + losses up to 50% shared / up to 60% shared capped at 10% gains / losses capped at 5% (yr 1), 7.5% (yr 2) 10%(yr 3), 15% gains MSR: 5,000 mem - 3.9%; 60,000 mem - 2% / 2%
Types of policies for which policy reserves are required
1. Contracts that use level premiums; 2. Contracts where the value of the future benefits at any time exceeds the value of future net premiums
Additional considerations in establishing claim reserves
(in addition to ASOP #5 considerations) 1. Incurral dating method; 2. Reserve basis - statutory, GAAP, and tax bases differ in their use of margins, interest rates, etc.; 3. Interest - reserves for claims with long payouts may be discounted to reflect interest; 4. Controls and reconciliations - the data used should be tested for accuracy; 5. Insurance characteristics - reserves vary depending on the type of risk covered; 6. Reserve cells - set up separate cells for each homogeneous category of business; 7. Managed care features - such as discounts and provider risk sharing arrangements; 8. Trends; 9. Seasonality; 10. Claim administrative expenses - set up a reserve equal to a percentage of the claim reserve; 11. Morbidity assumptions - for long-term claims, morbidity is reflected in continuance tables; 12. Diagnosis-based tabular reserves - some companies have begun using different morbidity bases for different causes of disability; 13. Use of the case reserves method - very labor intensive, so only recommended for small blocks
Pooling methods
(regardless of the method chosen, a pooling charge must be applied to all groups being pooled to offset the average cost of claim modifications made during the pooling process): 1. Catastrophic claim pooling - forgive large claims; 2. Loss ratio or rate increase limits - put a cap on one of the following: the loss ratio used in pricing, the rate increase proposed, or the aggregate claim dollars a group will be charged; 3. Credibility weighting - weight with the expected incurred claims for the entire pool; 4. Multi-year averaging - combine several years of experience (may give more weight to recent years); 5. Combination methods - for example, use both catastrophic claim pooling and a rate increase cap
Components of the Risk Management Economic Model
(these are the factors that contribute to the financial outcomes of the program): 1. Prevalence of the different chronic disease; 2. The cost of the chronic disease; 3. Payer risk - the most savings for the plan will come when the plan is at financial risk for all the patient's costs; 4. Targeting and risk - members should be prioritized based on the probability of experiencing the targeted event. Those with the highest risk ranks will be selected for the program; 5. Estimated cost of the targeted event; 6. Contact rate - the rate at which the company is able to make contact with targeted members; 7. Engagement (or enrollment rate); 8. Member re-stratification rates - the initial risk rank of the member will be re-stratified after the nurse interacts with the member and assesses the member's risk
Types of coverages for which the development method works well
1. Ability to record incurral and payment dates for each claim; 2. Fairly consistent lag patterns; 3. Short incurral periods relative to the ultimate run out (monthly is preferred); 4. A sufficient volume of business in each cell, in order to obtain reasonably stable results; 5. Availability of either earned premium or exposure data (for volume adjustments and smoothing)
Considerations in assessing MCO quality
1. Accreditation by the NCQA - based on a site visit, a review of the MCO's quality-related processes, and the MCO's HEDIS measures. The MCO will be categorized into one of the following: excellent, commendable, accredited, provisional, and denied; 2. Information may be available from the state department of public health, or the state department of insurance; 3. Review the MCO's credentialing criteria, quality assurance plan, and preventive care programs; 4. Consider performing a site visit
Desired characteristics of provider profiles
1. Accurately identify the provider - is not easy to do when members use multiple providers. Also consider whether to profile at the physician level (which has credibility issues) or at the clinic or group level; 2. Accurately identify the provider's specialty - can be difficult because many specialists provide a lot of primary care. So consider a specialist's mix of routine and complex cases; 3. Help to improve the process and outcome of care; 4. Have a firm basis in scientific literature and professional consensus; 5. Meet certain statistical thresholds of validity and reliability - definitions: a) Validity - the extent to which the data actual means what you think it means, b) Reliability - the extent to which data is consistent and means the same thing from provider to provider; 6. Compare the provider to a norm - can compare to total health plan average results, results from peers (such as all network physicians or those of the same specialty), or budgeted amounts; 7. Cost the minimum amount possible to produce; 8. Respect patient confidentiality and obtain patient consent when necessary
Techniques an underwriter can use to manage selection in a multiple-choice environment
1. Add a loading to the premium to pay for the additional cost of selection; 2. Employee contributions or plan design limits - place reasonable limits on the cost and benefit differentials among plans. For example: a) Limit the spread in monthly employee contributions, b) Limit the spread in benefits, c) Mix favorable and unfavorable cost sharing or benefit provisions among options to avoid one always being the best plan for high risks, d) Avoid covering benefits with selection potential (e.g., infertility) in only one option; 3. Allowing one insurer to offer all the options - this allows that insurer to offset the antiselection from one option with the favorable selection in another option; 4. Participation requirements when multiple insurers offer plans - for example, requiring all insurers to use the same eligibility rules, imposing minimum participation requirements on each option, or redistributing income among insurers through risk adjustment
Utilization management strategies to reduce inpatient behavioral health care costs
1. Addressing psychosocial causes of admissions in order to get early treatment and avert the need for admission; 2. Increasing ambulatory follow up to help prevent unnecessary readmissions; 3. Reducing readmissions through intensive interventions for at-risk patients; 4. Measuring and tracking clinical performance with a focus on outcomes and efficiency; 5. Reducing relapse through effective aftercare planning and use of community and social supports; 6. Coordinating services among multiple agencies and providers; 7. Emphasizing the quality of services provided through supervision, analysis of complaints, satisfaction surveys, and staff training
Data sources for behavioral health care performance metrics
1. Administrative data - includes claims, eligibility information, and various coding sets; 2. Treatment records - contain detailed clinical information; 3. Survey data - from providers and consumers; 4. Access data - from reviews of provider appointment availability; 5. Clinical assessments - involve consumer self-report and provider and caretaker observations; 6. Utilization management data - include requests for care, nonauthorizations, and appeals; 7. Risk management data - include adverse events and medication errors; 8. Predictive modeling data - derived from utilization data and population risk adjustment formulas
Rating parameters used in small group manual rates prior to the ACA
1. Age - many states limited the spread from highest to lowest age rate; 2. Gender - baby groups were usually charged gender-distinct rates. Larger groups were often given unisex rates; 3. Geographic area - geographic factors account for claim cost variations by state and area; 4. Group size - groups have a lower per insured cost as size increases (but states limited the use of group size factors); 5. Industry - factors were applied to risk industries, but were generally limited to a range of only 15%; 6. Managed care and negotiated discounts - most carriers apply the effects of managed care programs through the use of benefit factors; 7. Plan of benefits - most states require that rating factors only account for differences in plan design, and not differences in the types of groups that select the plans; 8. Family composition - carriers typically use structures with two, three, or four tiers; 9. Participation levels - this was not widely used as a rating factor; 10. Tobacco use - many states consider rating based upon tobacco use to be health status rating, and therefore do not allow it; 11. Other possible rating characteristics included employer contribution level, evidence of prior coverage, and percentage of employees that are full-time and part-time
Criteria for underwriting large groups
1. Age and gender - age is highly correlated with future mortality and morbidity. Age-gender factors are good predictors for several medical conditions, such as pregnancy and heart disease; 2. Location or area - there are significant regional and local differences in health care practices and prices; 3. Type of industry - industry risk comes from health hazards, high stress, and employee lifestyles; 4. Financial stability - layoffs result in COBRA coverage and can cause a spike in disability claims and elective medical and dental services; 5. Ease of administration - larger groups have economies of scale, but offset that with added complexity; 6. Level of participation - a 75% minimum participation rule is common, but is often modified to consider participation in all plan options offered by the employer (or through a spouse's employer); 7. Carrier persistency - due to competitive considerations, setup costs for new groups are not commonly recouped in the first or second contract year
Rating parameters allowed in small group manual rates beginning in 2014
1. Age factors (limited to a 3:1 ratio from highest to lowest rate; 2. Family composition factors; 3. Tobacco use factor (limited to a 1.5:1 ratio); 4. Area factors; 5. Plan benefit factors; 6. Provider network factors
Allowable case characteristics
1. Age; 2. Gender; 3. Geographic area; 4. Family composition; 5. Group size (max of 20% from highest to lowest); 6. Industry ( max of 15% from highest to lowest); 7. Other characteristics, with commissioner's prior approval
Enrollment information needed for setting up an employer account
1. Contact information; 2. Billing information, including bank routing numbers if appropriate; 3. Appropriate identifiers, such as employer tax ID numbers; 4. The employer group's industry code; 5. The specific benefit plan and any modifications; 6. An indicator of whether the plan is insured or self-funded; 6. An indicator of whether the plan is insured or self-funded: a) If insured, premium rates by employee tier, b) If self-funded, pricing and reinsurance information and specific services being administered; 7. Effective date of coverage
Qualification Standards for US Actuaries
1. All actuaries issuing SAOs in the US must meet the Qualification Standards; 2. The General Qualification Standard applies to most SAOs and requires the following: a) Basic education and experience requirement - must be a member of the Academy or similar organization, have 3 years of responsible actuarial experience, and be knowledgeable of applicable law (addl req's apply for issuing SAOs in a specialty track), b) Continuing education requirement - must complete 30 hours each calendar year of relevant continuing education, consisting of at least 3 hours on professionalism, at least 6 hours of organized activities, and no more than 3 hours of general business courses; 3. For actuaries issuing SAOs for annual statements, Specific Qualification Standards also apply. These include basic education on specific topics, such as statutory accounting and reserving, and 15 hours of continuing education that is directly relevant to the subject of the SAO
Reasons providers and payers use bundled payments
1. Allows providers to increase volume; 2. Allows providers to engage physicians (i.e. surgeons) - target physicians splitting admissions among several hospitals; 3. Allows providers to gain agreement among physicians (surgeons) to lower hospital cost; 4. Allows payers to lower payments for services; 5. Payers can encourage members to use lower-cost higher-quality providers; 6. Bundled payments align financial and quality of care incentives among various providers performing services during the care episode; 7. CMMI bundled payment initiative includes legal waivers that allow hospitals to share cost reductions/gains with physicians + waives other Medicare rules (3-day IP before SNF)
Essential health benefits that must be covered by ACA qualified plans
1. Ambulatory patient services; 2. Emergency services; 3. Hospitalization; 4. Maternity and newborn care; 5. Pediatric services; 6. Preventive and wellness services; 7. Prescription drugs; 8. Laboratory services; 9. Mental health and substance use disorder services; 10. Chronic disease management; 11. Rehabilitative services and devices
Tools needed for processing transactions
1. An advanced software application designed to record data and adjudicate claims according to predetermined rules; 2. Scanning solutions for paper claims; 3. Applications that enable electronic claims submissions; 4. Special databases to support the management of products, benefit plans, and provider contracts
Reasons members contact their health plans (the main functions performed by member services)
1. Any of the topics described in the new summary of coverage document, e.g., leads to questions related to coverage and cost sharing; 2. Claims processing and payment issues (most common) - could be prompted by denial of payment, incorrect payment, delay of payment, or other errors; 3. Enrollment issues, including ID card issues - common reasons include lost cards, incorrect information on the card, and adding a new dependent; 4. Provider access issues (primarily in HMOs) - e.g., needs help selecting a primary care physician; 5. Benefit issues, including appeals and denials of coverage
Components of quality care
1. Appropriateness - given the current state of the art in medicine; 2. Excellence - in the execution of care; 3. Patient satisfaction
Considerations in selecting data for an actuarial analysis
1. Appropriateness for the intended purpose; 2. Reasonableness, comprehensiveness, and consistency of the necessary data elements; 3. Any known material limitations of the data; 4. The cost and feasibility of obtaining alternative data in a reasonable time frame; 5. The cost and benefit associated with using an alternative data set or data source; 6. Sampling methods that were used to collect the data
Considerations in assessing physician quality
1. Assess the physician's training, experience, and professional certifications; 2. Review the physician's history of malpractice claims; 3. For physicians performing specialty procedures, consider advanced training received, experience with the procedure, complication and mortality rates, and success rates; 4. The NCQA has developed some programs to recognize high-quality physicians; 5. For physicians in managed care plans, review performance report cards, provided by the MCO; 6. Review ratings provided by patients, which are published on various websites; 7. Review Physician Quality Reporting Initiative data from CMS; 8. Schedule an office visit for evaluating the physician's communication skills
Special types of large groups
1. Association programs: a) Association of individuals - such as members of a medical society, who formed together to further a common interest, b) Multiple-employer trust - covers the employees of two or more employers in the same industry; 2. Taft-Hartley groups - state laws differ with respect to eligibility rules, types of coverage permitted, and minimum size requirements; 3. Purchasing alliances - formed when two or more non-affiliated large groups come together to solicit insurance (in order to enhance their purchasing power). A more recent version of a purchasing alliance is a coalition of very large employers who contract directly with providers
Considerations when developing a stochastic approach to reserve estimation
1. Availability of data - historical data is needed to validate the model and assumptions; 2. Appropriateness of data - consider whether the process reflected in the historical data are representative of the process being modeled going forward; 3. Access to statistical software - lack of access to or understanding of modeling software will limit the available choices for modeling techniques; 4. Appropriateness of the model - this can be validated through goodness-of-fit testing, residual analysis, and hold-out sample evaluation; 5. Covariances of modeled estimates - when reserve estimates are calculated through component estimates, the covariance between these components must be estimated.
Fraud risks faced by Medicare Advantage plans
1. Beneficiary fraud - includes identity theft to obtain care, reselling of prescription drugs, and doctor shopping for a physician who will provide desired drugs or services; 2. Provider fraud - includes altering records to make it appear as if patients are being seen, and accepting unlawful kickbacks to certain drugs or DME; 3. Vendor fraud - includes billing for services not rendered, sending items of lesser quality than what was purchased, and paying kickbacks to receive preferential contracts; 4. Pharmacy fraud and abuse - includes drug switching (receiving an illegal payment to switch a patient to a different drug), drug shorting or splitting (intentionally providing less than the prescribed quantity), and drug billing fraud (such as billing for brand drugs when generics are dispensed
Events that cause an ACA grandfathered plan to lose grandfathered status
1. Benefits for a particular condition are eliminated or substantially reduced; 2. Coinsurance charges are increased; 3. Deductibles or out-of-pocket limits are significantly increased; 4. Office copay amounts are significantly increased; 5. Fixed-dollar deductibles are significantly raised; 6. Significantly lower employe contributions toward premiums; 7. Addition or lowering or annual limit; 8. Change in insurer; 9. Transferring employees to a new plan without different terms and without a bona-fide employment reason
Examples of health care fraud by providers
1. Billing for services not performed; 2. Billing to a suspicious address; 3. Billing using the provider identification of an unknowing, innocent provider; 4. Falsifying a patient's diagnosis to justify medical procedures; 5. Misrepresenting procedures performed to obtain payment for noncovered services; 6. Unbundling - submitting bills for various procedures individually when they are required to be billed together; 7. Billing for more drugs than were dispensed; 8. Billing for brand name drugs when generics were dispensed; 9. Upcoding - billing for a more costly service than the one actually performed; 10. Duplicate billing; 11. Submitting durable medical equipment (DME) claims for equipment not provided; 12. Excessive lab tests and radiological exams; 13. Waiving patient copays or deductibles; 14. Falsifying medical records to justify payment; 15. Billing for care provided to dead people
Functions performed by health plan marketing organizations
1. Brand management - the plan must clarify its market position and differentiators; 2. External communications - including public relations and ensuring communications are consistent with the brand; 3. Advertising - marketing must set advertising strategy and provide oversight to the work of advertising firms; 4. Market research - includes providing competitive intelligence and surveying employers, distribution partners members and providers; 5. Lead generation - as research uncovers opportunities, provide leads to sales; 6. Sales campaign support - particularly around presentations and customer messaging
Distribution channels used in the individual market
1. Broker or agent - remains the most prevalent distribution channel, accounting for more than half of individual product sales; 2. Web sales - online brokers receive a commission for an online referral to the health plan's individual website; 3. Direct mail - prospective members are identified through health plan data, broker relationships, and consumer purchasing organizations; 4. Telesales - same as direct mail, except the contacts are made by phone; 5. Retail stores - a few health plans have set up stores that enable walk-in, in-person purchasing
Risk-based physician payment methodologies
1. Capitation - prepayment for services on a PMPM basis. The provider is paid the same amount every month for every member regardless of whether that person receives no services or very-extensive services: a) Primary care physicians (PCPs) (see sep list of considerations), b) Specialty car physicians (SCPs) - payments may be adjusted for age, sex, product type, and severity, but these adjustments aren't needed as much as for PCPs because SCPs see a larger panel of members, which results in greater credibility of their results; 2. Withholds - a % of the PCP capitation that is withheld every month and used to pay for cost overruns in referral or institutional services. The remainder after overruns are paid is returned to the PCPs; 3. Physician risk pools: a) Classes of risk pools include referral (or specialty care), hospital or facility care, and ancillary services, b) The plan sets aside money in these separate pools and payments for those services are made from the pools. At year end, any surplus in one pool is first used to offset excess expenses in the other pools and the remaining funds are paid to the physicians; 4. Risk-based FFS: a) FFS PCP withholds - these work same as PCP capitation withholds, b) Mandatory fee reductions - a unilateral reduction of fees in reaction to serious cost overruns, c) Budgeted FFS - the plan budgets a maximum amount of money that may be spent in each specialty category. As costs in a given category approach the budgeted amount, the withhold amount for just that specialty is increased and its fees may be reduced
Considerations when capitating PCPs
1. Capitation is typically used only by HMOs because only HMOs can use a PCP gatekeeper system, where members are locked in to their selected PCP; 2. To be able to determine an appropriate capitation, the plan must first define all the services that are expected to be covered by the capitation payment. Carve-outs should only be used for services that are not subject to discretionary utilization (e.g., diagnostic imaging should not be carved out); 3. The capitation rate for a given service equals the net cost per service (after copays) multiplied by the expected utilization PMPM; 4. Capitation payments sometimes vary by the following: a) Age and gender of the enrolled members, b) Acuity levels or case mix adjustment - this is not common because of the cost and system difficulty in making this adjustment, c) Other factors - such as geography and practice type; 5. Behavioral shift - members may alter their use of medical services in response to economic incentives or barriers, so capitation payments should account for this
Ways to modify the amount paid for a hospital case
1. Carve-outs: a) Hospitals want to carve out expensive surgical implants or drugs, in which case the hospital passes the cost through to the plan. But this removes any incentive for the hospital to negotiate the prices on these items, b) Payers want to limit the number of carve-outs; 2. Credits - manufacturers provide a refund (credit) to the facility if an implantable device fails or must be removed. Facilities should rebate Medicare for these credits, and payers should secure this same arrangement; 3. Outliers - these are extra payments if a patient's costs exceed certain thresholds. Payment is typically the original payment plus discounted charges once the outlier threshold is crossed.
Methods of estimation for claim reserves
1. Case reserves - direct enumeration on a claim-by-claim basis. Typically used only when there are very few claims. Can't use for IBNR: a) Examiner's method - estimate ultimate payment and deduct what's already been paid, b) Average size claim method - the number of reported claims times an average claim amount minus the amount already paid; 2. Projection method (aka formula or factor method) - develop a historical claim rate as a function of some measure of exposure. Then apply this rate to projected exposure. The most common approach is: projected PMPM claim costs * member months - claims already paid; 3. Loss ratio method (aka claim cost method) - use where volume is low or to validate other methods. (loss ratio * earned premium - claims already paid); 4. Tabular method - apply a factor to open claims to calculate reserve. Typically used for LTC or disability. Can't use for IBNR; 5. Development method (aka lag, completion, or triangulation method) - projects historical claim lag pattern into the future to estimate the reserve based on experience data; 6. Emerging development method techniques (see sep list); 7. Stochastic approaches - methods where a probabilistic statement can be made about the level and adequacy of the reserve amount. Any of the methods discussed previously can be given a stochastic treatment.
Methods used for asset adequacy analysis
1. Cash flow testing - is appropriate when cash flows of existing assets and liabilities may vary under different economic or interest-rate scenarios; 2. Gross premium reserve test - may be appropriate where the policy and other liability cash flows are sensitive to moderately adverse deviations in the actuarial assumptions; 3. Demonstration of extreme conservatism - when the degree of conservatism in the liabilities is so great that moderately adverse deviations are covered, then a demonstration of this conservatism is sufficient; 4. Demonstration that risks are not subject to material variation - for products that have risks that are not subject to material variation, it is sufficient to demonstrate this fact and show that moderately adverse deviations are covered; 5. Risk theory techniques - for products with short-term liabilities supported by short-term assets, it may be more appropriate to measure moderately adverse deviations using risk theory techniques; 6. Loss ratio methods - these may be appropriate when the cash flows are of short duration
Major small group rating requirements from the NAIC model law
1. Certain case characteristics are recognized as allowable rating factors (see sep list). This means they are not subject to the following premium limitation tests; 2. Index rate: a) The average of the base premium rate (the lowest rate that could be charged) and the corresponding highest premium rate, b) Calculated only after all rates have been adjusted for all allowable case characteristics and benefit design variations; 3. Rating restrictions between classes - the rating differential between classes is limited to 20% between the lowest and the highest class index rates; 4. Rating restrictions within a class of business - the premium rates charged to different groups within a given class of business cannot vary from that class' index rate by more than 25%; 5. Rate increase limit for a given group - the increase is limited to the sum of the following: a) The % change in the new business rate from the prior to the new rating period, b) 15% annually for experience, c) Adjustment due to the change in coverage or case characteristics
Items to include in an actuarial certification of compliance with small group rating methods
1. Certification that all practices required to be in the certification are in compliance with applicable regulatory requirements; 2. A list of practices that are covered in the certification; 3. Identification of the time period covered; 4. Changes in rating methods and other practices that have occurred during the time period covered that affect compliance; 5. A description of any subsequent events that could materially affect current or future certifications; 6. Where a qualified certification is given, any actions that are being taken to bring the carrier into compliance; 7. Where a limited certification is given, any sections of the regulatory requirements that are not addressed
Main function of ACA exchanges
1. Certifying qualified health plans; 2. Assigning ratings to each plan based on quality and price; 3. Providing customer information on qualified health plans in a standardized format; 4. Creating a calculator for consumers to assess the cost of coverage after applying tax credits and cost-sharing reductions; 5. Operating a website and toll-free telephone hotline offering comparative information and qualified health plans and allowing consumers to apply for and purchase coverage; 6. Determining eligibility for the exchange, tax credits, and cost-sharing reductions, and facilitating enrollment; 7. Determining and granting exemptions from requirements on individuals to carry health insurance; 8. Establishing a navigator program to assist consumers in making choices about their health care options and accessing premium tax credits; 9. Implementing outreach and education programs and complying with oversight and program integrity requirements
Types of payment for hospital services
1. Charges: a) Straight charges (full charges with no discount), b) Straight discount on charges - the hospital submits its claim in full and the plan discounts it by the agreed-to %, c) Sliding scale discount on charges - the % discount is based on the volume of admissions and outpatient procedures; 2. Per diems - a single charge for a day in the hospital, regardless of actual charges or costs: a) Flat per diems - a single per diem rate is applied to any type of inpatient day, b) Service-specific per diems - separate per diems are applied based on service type, such as med-surg, obstetrics, intensive care, and rehab, c) Per diem differential by day in hospital - because hospitalizations are more expensive on the first day (e.g. due to surgical and operating suite costs), a higher per diem is applied for the first day, d) Sliding scale per diems - the per diem is based on the volume of admissions; 3. Diagnosis-related groups (DRGs) and Medicare-severity DRGs (MS-DRGs): a) Straight DRGs - a flat per-discharge payment that varies based on diagnosis and procedures, b) MS-DRGs - like DRGs, except payments are adjusted to reflect severity of illness and complications during an admission; 4. % of Medicare - some commercial payers negotiate rates based on a % of what Medicare would pay. Cases where there are no Medicare rates (e.g. neonatal care) must be defined and terms agreed upon; 5. Facility-only case rates - a flat payment to a facility (inpatient or outpatient) for a defined service; 6. Capitation - paying the hospital on a PMPM basis to cover all institutional costs for a defined population of members. Payment may vary by age, sex, and severity; 7. % of revenue - the hospital is paid a % of the premium revenue, subjecting it to bearing the full insurance risk; 8. Ambulatory patient groups and ambulatory payment classifications - used for ambulatory facility services
Situations where employees may be offered multiple choices
1. Choice between medical coverage and no coverage - this creates antiselection because employees who waive employer coverage often have lower average health costs than those who don't; 2. Choice based on member cost sharing - options may differ by deductible, coinsurance, etc.; 3. Choice based on provider networks or medical management - the level of provider choice, the degree of medical management, and the presence of specific providers may drive employee selection decisions; 4. Choice among insurers - two or more insurers may offer health plan options to the same employee; 5. Optional riders added to core coverage - the insurer may allow employees to buy coverage riders such as vision, disability, and dental; 6. Choice by each family member - some insurers are now allowing employees to choose a different option for each covered family member; 7. Choice between consumer-directed plans and traditional plans
Exchange functions specific to the individual market
1. Citizenship validation - will be done by the Department of Homeland Security; 2. Subsidy determination - determined by the IRS based on income tax returns; 3. Shopping - state citizens visit their respective exchange to begin the insurance purchasing process; 4. Enrollment - when citizens have made their selection, the exchange may enable enrollment or direct individuals to the chosen health plan's website; 5. Navigators - to assist individuals in understanding their options and selecting the most appropriate choice
Ways health plans and MCOs detect potential fraud
1. Claims analysis; 2. Calls, emails, or letters to leaders from patients, vendors, or providers; 3. Coordination with other plans, task forces, or law enforcement agencies; 4. Data analysis tools and reports; 5. Ethics and compliance hotline calls from employees and patients
Services typically offered by PBMs
1. Claims processing and management reports; 2. Community retail pharmacy provider network; 3. Home delivery (mail service) prescriptions; 4. Specialty pharmacy distribution services; 5. Drug formulary development and management; 6. Pharmaceutical manufacturer contracting; 7. Customized pharmacy benefit design development and administration; 8. Clinical pharmacy programs, such as drug utilization review (DUR) and medication therapy management (MTM); 9. Other customized services requested by plan sponsors
Types of credibility procedures
1. Classical credibility procedures - use probability distributions; 2. Empirical credibility procedures - use actual experience, without reference to the underlying probability distribution; 3. Bayesian credibility procedures - produce posterior distributions that reflect both the related experience and the subject experience; 4. Approaches for determining partial credibility: N = volume of experience, F = full credibility standard, K = constant: a) (N/F), raised to some fractional power, b) N / (N+K)
Stepwise approach for changing behavior in individual providers
1. Collegial discussion of cases and utilization patterns in a nonthreatening way; 2. Persuading the provider to act in ways he or she may not initially choose; 3. Firm direction (only if the first 2 steps don't work) - reminding the physician of his or her commitment to cooperate with organizational policies and procedures; 4. Discipline and sanctions (only when all other approaches have failed) - formal sanctioning may occur for the following reasons: a) Poor-quality care - this is a serious charge and has a very negative impact on a physicians, so the plan must comply with due process requirements, b) Failing to cooperate with plan policies and procedures - in this case, the organization may terminate the contract "for cause", c) Utilization does not match the organization's managed care philosophy - the contract can be terminated without cause when adequate notice is given
Types of health care facilities
1. Community-based single acute care hospitals; 2. Multi-hospital systems (MHSs) - consolidation has led to most hospitals being part of an MHS, which gives them negotiating leverage; 3. For-profit national hospital companies - because these hospitals are owned by national companies, they have less local autonomy; 4. Specialized hospitals - these provide care to only a certain type of patient (e.g. children's hospitals and psychiatric hospitals); 5. Physician-owned single specialty hospitals - these restrict themselves to elective procedures within a single specialty, so they are not equipped to handle emergencies and sever conditions; 6. Accountable care organizations - these coordinate care for designated Medicare FFS beneficiaries and participate in a shared savings program; 7. Government hospitals - may be county-run, state-run, or federal; 8. Subacute care (skilled or intermediate nursing facilities) - these are well suited for prolonged convalescence or recovery cases. The cost for a bed day is much less than in an acute-care hospital; 9. Ambulatory surgical centers (ASCs) and procedure centers - are typically equipped to handle only routine cases; 10. Hospice - a broad term referring to health care services provided at the end of life, which may be at an inpatient facility, ambulatory facility, or no facility; 11. Retail health clinics - small clinics usually associated with a retail store (such as Target or Walgreens). Provide basic primary care services, such as immunizations and preventive screenings; 12. Urgent care centers - a hybrid of a low-level emergency department and a PCP practice; 13. Other types of ambulatory facilities - includes centers for birthing, community health, diagnostic imaging, occupational health, pain management, and women's health
Practical considerations in determining credibility levels
1. Competitive pressures; 2. Ability of administrative and management areas to cope with experience rating; 3. The trade off between the cost of experience rating and gains in the quantity and quality of new business; 4. The effect on existing business of a change in the credibility level; 5. Management philosophy regarding experience rating; 6. The need for consistency among classes of business
Contract groupings for premium deficiency reserve calculations
1. Contracts should be grouped in a manner consistent with how policies are marketed, serviced, and measured; 2. Deficiencies on a product can be offset by profits on other products within its group, but not by profits in other contract groups; 3. The recommended groups from the Health Reserves Guidance Manual are: a) Comprehensive major medical, b) LTC, c) Income protection (disability income), d) Limited benefit plans
Types of methodologies for estimating care management savings
1. Control group methods - these attempt to match the study subjects with other subjects that are not part of the study (see sep list); 2. Non-control group methods - population methods that do not use control groups (see sep list); 3. Statistical methods - these use pure statistical techniques, rather than constructing an explicit reference population (see sep list)
Advantages of self funding
1. Cost savings - premium taxes are avoided, insurer risk and retention charges are minimized, and administrative costs are sometimes lower than those of insured plans; 2. Plan design flexibility - design is not limited to the insurer's offerings and is not subject to state mandated benefits; 3. Claims management - plan sponsors can select their own claim administration vendors; 4. Cash flow - cash position may be improved since the sponsor holds its own IBNR reserves; 5. Investment income - the sponsor receives investment income on reserves held
Theoretical considerations in determining credibility levels
1. Coverages with low claim frequency are more volatile and will require a larger exposure base to be credible; 2. Coverages with widely varying claim sizes will tend to be more volatile; 3. The statistical confidence interval chosen by the insurer; 4. Historically, statistical fluctuation was considered to vary inversely with the square root of the number of claims or lives. So it will take 4 times the exposure to double the credibility; 5. For coverages with stochastically independent claims, longer experience periods can be used to increase exposure and therefore credibility
Components of the disease management value chain process
1. Data warehousing - integrate membership and claims data, and identify member conditions; 2. Predictive modeling - apply models to determine members to target for interventions; 3. Intervention development - develop campaigns to deliver interventions to target populations; 4. Outreach and enrollment - contact members and enroll them in the program. Includes follow-up; 5. Member coaching and assessment - including maintaining enrollment and graduating members from the program; 6. Outcomes assessment - including clinical, financial, and operational outcomes
Considerations in contracting for bundled payments
1. Defining the episode - what is the trigger date and when does the case end? Which services are included?; 2. Evaluating catastrophic risk - need to do an outlier risk analysis that includes a classical stop loss analysis; 3. Financial stability for low case loads - random fluctuation may be greater for provider groups with low case loads; 4. Determining provider allocation of funds - the allocation should consider financial incentives for physicians to encourage them to promote most cost-effective care; 5. Distinguishing case severity - could limit risk by removing higher-severity patients from the bundled payment approach; 6. Quality outcome requirements - minimum quality thresholds may be needed to ensure quality is not compromised as providers reduce services; 7. Administrative complexity of supporting the contract; 8. Risk-sharing alternatives - contracts that share financial risk between the provider and payer may be more viable than pure bundled payment; 9. Potential for increased utilization - contracts for individual providers should not give them incentives to increase utilization to get a larger share of the bundled rate
Definition and examples of statements of actuarial opinion (SAOs)
1. Definition - an opinion expressed by an actuary in the course of performing actuarial services and intended by that actuary to be relied upon by the person or organization to which the opinion is addressed; 2. Examples of SAOs - annual statement opinion, rate filing opinion, actuarial appraisal, and expert testimony; 3. May contain SAOs - speech, phone conversation, and congressional testimony; 4. Not SAOs when used alone - experience study and personal computer program; 5. Not SAOs - draft of an actuarial report not provided to the client, letters to the editor, and interview by the media
Enrollment information needed for setting up employee records
1. Demographic information, such as name, address, contact information, date of birth, and gender; 2. Which employment subgroup the employee belongs to; 3. The benefit plan applicable to the employee; 4. The provider network associated with the employee's benefit plan; 5. Effective date of coverage; 6. Dependent demographic information; 7. For HMO coverages, primary care physician selection; 8. Any other coverage the employee has (to support coordination of benefits)
Information included on the member's ID card
1. Demographic information; 2. Names of the subscriber and dependents; 3. The group and policy number; 4. Cost-sharing information; 5. Pharmacy information (such as separate cost sharing and the name of the pharmacy benefit manager); 6. Provider network, if applicable; 7. Name of the member's primary care physician, if applicable; 8. Plan contact information for customer service; 9. Additional phone numbers, such as for behavioral health services or nurse advice lines
Types of ancillary services
1. Diagnostic: a) Laboratory, b) Imaging (such as x-rays and MRIs), c) Electrocardiography, d) Cardiac testing; 2. Therapeutic: a) Cardiac rehabilitation, b) Noncardiac rehabilitation, c) Physical therapy, d) Occupational therapy, e) Speech therapy, f) Other long-term therapeutic services; 3. Pharmacy; 4. Ambulance and medical transportation services
Elements of a typical physician credentialing application
1. Demographics, licenses, and other identifiers (such as national provider identifier); 2. Education, training, and specialties; 3. Practice details - such as services provided and office hours; 4. Billing and remittance information; 5. Hospital admitting privileges; 6. Professional liability insurance; 7. Work history and references; 8. Disclosure questions - such as suspension from government programs or felony convictions; 9. Images of supporting documents - such as a state license certificate
Techniques used to apply the underwriter's decision
1. Denial - provides the greatest protection for the health plan, and is useful when other options do not provide sufficient protection; 2. Exclude conditions - coverage may be issued with a rider that excludes coverage for specific conditions. Exclusions may be temporary or permanent; 3. Rating class - charge an individual a rate that is different than the standard rate. Can be effective as long as the additional premium is not high enough to generate significant adverse selection; 4. Pre-existing condition limitations - eliminates coverage (for a certain amount of time) for conditions which existed prior to the coverage start date
Consumer approaches for improving quality (demand management)
1. Design cost sharing that encourages avoidance of unnecessary care; 2. Provide preventive services; 3. Use shared-decision-making programs to get the consumer involved; 4. Disseminate information about provider quality; 5. Offer telephonic nurse counseling services; 6. Offer telephonic disease management programs; 7. Encourage the use of reliable Internet sources (such as the US Department of Health and Human Services)
Business steps for processing claims
1. Determination of eligibility and liability - must verify the coverage dates to determine if the member was eligible on the dates of services. Also must determine cost sharing and provider contract terms; 2. Identification of other party liability - determine whether other insurance plans are liable or other individuals are responsible for illness or injury related to specific expenses; 3. Benefit administration - applying the appropriate schedule of benefits during the claims adjudication process. Requires configuring (coding) all benefits into the system used for auto adjudication; 4. Application of provider fee schedules and other contract or network terms - the correct provider information must be entered into the system to allow it to automatically determine the payable amount for covered service; 5. Handling resubmissions - be alert to a high number of these because they may signal a problem on either the provider side (such as payments not being properly posted) or the insurer side (such as a claim backlog); 6. Handling appeals and adjustment - the typical adjustment process is used to pay benefits that result due to an appeal; 7. Dealing with fraud and abuse - the management team must be vigilant to prevent fraud and abuse
Purposes of cash flow analysis
1. Determination of reserve adequacy; 2. Determination of capital adequacy; 3. Product development or ratemaking studies; 4. Evaluations of investment strategy; 5. Financial projections or forecasts; 6. Actuarial appraisals; 7. Testing of future benefits that may vary at the discretion of the insurer (such as dividend scale)
Steps for developing premium rates in a multiple-choice environment
1. Determine the actuarial value of each benefit option as if it were sold on an independent basis; 2. Estimate the enrollment mix by plan option; 3. Estimate the relative health status factor for each option based on the expected enrollment mix; 4. Calculate the preliminary selection adjusted rates for each option. This equals the actuarial rates from step 1 multiplied by the relative health status in step 3; 5. Calculate the average selection load as the ratio of the average of step 4 selection adjusted rates and the average of step 1 actuarial rates; 6. Calculate the blended selection adjusted rates by multiplying step 1 actuarial rates by the average selection loading from step 5
Steps in prospective experience rating
1. Develop past claim experience - should be incurred claims for an experience year (restated); 2. Use pooling methods to dampen random statistical fluctuation; 3. Calculate net premium (expected claim cost): a) Calculate a historical claim cost per unit of exposure, b) Trend the historical experience to account for changes in claim costs - may be due to changes in morbidity, mortality, demographics, benefits, or antiselection; 4. Calculate gross rates from net rates - apply loadings (retention) to the net premium; 5. A final adjustment may be required when dealing with a politically-sensitive policyholder. Be sure to know the financial impact of any change; 6. Plan choice considerations - when employees can choose between an HMO, PPO, and/or indemnity, there is often antiselection against the indemnity plan; 7. Small group considerations - need to recognize experience to some degree. May use one of the following: a) Formula-based methods (for groups with at least 10 lives) - a group is initially assigned to a rate class then reassigned at renewal if experience differs by a specified amount, b) Re-underwriting method - look at outlier cases to see causes of bad experience to determine prospective rates
Process for building in conservatism in claim reserves
1. Development method - can incorporate conservatism in the completion and projection factors. But usually use most likely factors and add an explicit margin to the reserve; 2. Tabular reserves - margins are typically included in the assumptions made to calculate the tabular factors; 3. Projection methods - add margins to the trend assumptions that are used to project costs per unit; 4. Loss ratio methods - margins can be explicit or implicit, depending on the choice of loss ratio
Factors complicating the comparison of financial savings for care management programs
1. Different research designs are used by different studies; 2. The basis of savings calculations varies (some report an ROI, which is difficult to compare across studies, and many do not provide information on the cost of the program); 3. The timing of the studies distorts numbers, since health care costs increase over time; 4. Different studies use different population sizes and durations; 5. Many of the published studies focus on clinical, rather than financial, outcomes
Approaches for paying capitation to SCPs
1. Direct capitation to individual physicians or specialty groups; 2. Capitation to a company that specializes in specific types of care, such as cancer or cardiac care. The payment will cover all services related to the condition, so it must account for costs from inpatient, outpatient, physician, pharmaceutical, etc.; 3. Contact capitation: a) A budgeted PMPM capitated pool of money is set up for each major specialty, b) The plan tracks member contacts made by each SCP during the tracking period, c) At the end of the period, the pool of money is paid out proportionally based on member contacts
Types of payment for ancillary services
1. Discounted FFS or a fee schedule - common for many routine diagnostic procedures; 2. Flat rates or case rates - the ancillary provider is paid a fixed single payment regardless of the number of visits or resources uses. For therapeutic providers, case rates can be tiered depending on the complexity of the case; 3. Capitation - common for plans with limits on out-of-network benefits and with acceptable access to ancillary service providers
Types of claim liabilities and reserves
1. Due and unpaid liabilities (reported, adjudicated, and processed, but not paid) - is usually small. Itemize or base on historical averages; 2. In course of settlement - system may record receipt and run report. Otherwise, use simple method such as average claim times number of claims; 3. IBNR - projected by using existing payment data to develop average expecting claims or claim payment patterns; 4. Loss adjustment expenses - usually a percentage of unpaid claims liability; 5. Present value of amounts not yet due (or "unaccrued") - an estimate of future amounts due on known open claims (commonly for disability or LTC claims); 6. Resisted claims - usually reserved seriatim assuming 100% of claim paid and possibly damages; 7. Outstanding accounting feed (may overlap with due and unpaid liability) - acknowledged but unpaid; 8. Deferred maternity or other extended benefits - the loss is triggered before the valuation date, but benefits are deferred by contractual provisions; 9. Other specific reserves - such as for waiver of premium due to disability
Key ingredients of fraud control
1. Effective instruments to spot fraud early and clearly see emerging fraud patterns; 2. Quick reactions to mitigate vulnerabilities before too much loss occurs; 3. Tools for spotting new fraud wherever and whenever it occurs
Channels for accessing the health insurance market
1. Employer sponsored - sales and marketing primarily tries to influence the employer and distribution channel partners, such as brokers and consultants. The relationship with the consumer is typically indirect; 2. Individual - closer relationships with the consumer. Sales and marketing focuses on the consumer and distribution channel partners.
Types of outcome-based contractual reserves
1. Employer-based contractual liabilities - need to recognize liabilities for contracts where the employer shares the risk of emerging claims experience. The most common is the contractual Claims stabilization reserve (CSR) = Prior period CSR + premiums earned + interest credits - claims incurred - risk and retention charge; 2. Provider liabilities - for example, capitation payments owed, withholds, bonuses and incentives, stop loss settlements, and anticipated insolvency of capitated providers
Challenges to effective health plan sales
1. Employer-sponsored: a) Most coverage periods being on January 1, creating busy periods that strain health plan resources, b) Valuable and usable insight around employers, brokers, and members is limited, c) Health plan products and services becoming commoditized, d) Sales and renewals are complex because many different entities are influencing employers; 2. Direct markets: a) Customer insight is better, but not enough to enable advanced sales approaches, b) Web capabilities are immature (e.g., plans cannot do real-time underwriting), c) Health plans are burdened by regulatory concerns
Aggregate stop loss product variations
1. Monthly accommodation - insurer allows plan to settle losses monthly. Additional costs will need to be added to reflect cost of processing interim benefits, opportunity cost of money, and credit risk; 2. Aggregate only (rarely offered) - includes a maximum amount eligible for reimbursement per covered life (called a ghost deductible - has same effect as the specific stop loss deductible would have had); 3. Terminal liability - converts a 12/12 policy into a 12/15 policy, but only in the year the policyholder terminates. Useful for policyholders wanting to switch from self-funding to conventional funding
Enterprise objectives related to the claims capability
1. Enabling the payer to meet contractual obligations to employer groups, government agencies, members, and providers; 2. Ensuring timely and accurate benefits administration for enrolled members; 3. Improving the health care of its members through care management plans; 4. Administering medical management policies and medical necessity decisions; 5. Providing prompt and accurate customer service to members, brokers, employer groups, and providers; 6. Protecting financial liability by validating eligibility, avoiding inappropriate claims, ensuring accurate processing, pursuing cost-containment activities, and ensuring timely payment of claims to avoid processing penalties and interest payments; 7. Delivering on its mission in a manner that contributes to efficient use of health care dollar
Conditions that would exclude a member from a disease management program
1. End-stage renal disease (ESRD) - this condition is excluded because management of the condition may delay cost, but it cannot ultimately reduce or postpone those costs; 2. Transplants - claims are high up to a period shortly after the transplant, at which point the claims are reduced and stabilized; 3. HIV, AIDS, mental health - privacy issues make it difficult or impossible for a vendor to receive complete data feeds, or manage the member; 4. Members who are institutionalized - these members may not be reachable, or may not benefit from disease management interventions; 5. Members with catastrophic claims - these members are not manageable by the DM program, and are often subject to management by another program; 6. Members who are eligible for other management programs
Considerations in underwriting individuals for small group coverage prior to the ACA
1. Enforcement of eligibility - check to see if each applicant meets the group's eligibility guidelines; 2. Pre-existing condition limitations - HIPAA limits the use of these for individuals who had prior coverage; 3. Individual medical assessment - the key was to convert information on individuals into a numerical measure for establishing the employer group's premium rate (often done by applying debit points based on medical conditions); 4. Post-issue underwriting - may result in coverage being rescinded if fraud or material misrepresentation is later discovered; 5. Underwriting optional benefits - carriers generally offer the optional benefit only at issuance
Eligibility requirements for Medicare Advantage (MA) plans
1. Entitled to Part A and enrolled in Part B; 2. Does not have ESRD; 3. Permanently resides in the service area of the MA plan; 4. Agrees to abide by the rules of the MA plan; 5. Makes a valid enrollment request during an enrollment period; 6. If requesting in a Special Needs Plan (SNP), must meet the additional requirements for the SNP
Components of renewal underwriting for large groups
1. Evaluating the case - renewal evaluations focus on the same type of information used in initial underwriting, but now there is access to better claim and premium data; 2. Developing renewal recommendations - the first step is to present the new premium rates for the existing program. Recommendations may involve proposed plan design changes and alternate rating and funding methods; 3. Revision underwriting - includes developing cost estimates for any changes in plan design or group composition; 4. Renewal monitoring - experience must be tracked throughout the year, with more formal analysis two to four times per year
Loadings on the net premium (retention)
1. Expense loadings - usually the largest part of retention; 2. Deficit recovery charge (may make rates uncompetitive) - charged to a specific policyholder to recover that policyholder's past losses; 3. Termination risk charge - charged to everyone to finance (in advance) the risk of group's leaving while in a deficit position; 4. Pooling charges - usually covered in net premium; 5. Profit charge or contribution to free reserves - may be built into other assumptions; 6. Investment income - may be credited (net of investment management costs and taxes); 7. Explicit margin - reduces insurer's risk; 8. Charge to cover risk of rate guarantees. This risk arises due to misestimation risk and trend risk.
Categories of drugs that are typically excluded on prescription drug plans
1. Experimental or investigational drugs (not approved by the FDA); 2. FDA-approved drugs when prescribed for unapproved indication ("off-label" use); 3. Drugs used for cosmetic purposes or specific purposes such as smoking cessation or infertility; 4. Over-the-counter drugs other than insulin
Requirements for a care management methodology to be valid
1. Familiarity - the purchaser must be familiar with the methodology, or at least be able to grasp it readily; 2. Ease of replication and auditability - the methodology must be documented in sufficient detail for another practitioner to replicate the analysis; 3. The results upon applying the methodology must be consistent with the client's savings expectations, and must plausible; 4. Results should be stable over time and between clients; 5. The methodology must be practical (possible to implement it cost-effectively); 6. Inherent validity - lack of obvious bias; 7. Scientific rigor; 8. Market acceptance - how the method is perceived in the market; 9. Application - how the methodology is applied in practice
Programmatic approaches to changing physician behavior
1. Financial incentives; 2. Formal continuing medical education through seminars, conferences, and home-study. But studies have found little evidence that traditional continuing education changed physician behavior; 3. Data and feedback - the following factors are likely to play a role in whether feedback will be effective: a) Goal alignment - physicians must have a reason to change, b) Clean data - feedback must be credible, c) Knowledge - feedback must be consistent and usable, d) Timeliness - feedback needs to be closely related to what a physician is doing at that time, e) Reinforced - feedback must be regular in order to sustain changed behavior, f) Extrinsic motivation - feedback linked to economic performance is more likely to produce changes; 4. Practice guidelines and clinical protocols - using evidence-based guidelines is most effective when: a) Efforts are focused on one or two new guidelines at a time, b) Guidelines are focused on conditions that occur frequently and for which there is a lot of practice variation, c) Implementation of guidelines is accompanied by regular feedback, d) Financial rewards are used; 5. Small group programs - there is strong evidence of positive change resulting from educating physicians in interactive small groups
Categories of risk accepted by capitated physicians
1. Financial risk - refers to actual income placed at risk. Common forms are withholds and capitated pools for non-primary care services; 2. Service risk - refers to the physician receiving a fixed payment and then having to provide a higher volume of service than expected. The physician could potentially become too busy and lose the ability to sell services to someone else for additional income
Group characteristics used in underwriting small groups prior to the ACA
1. Financial viability - carriers need to retain groups long enough to recoup high acquisition expenses, so the group needs to be financially strong enough to stay in business; 2. Industry/occupation - carriers must consider the type of work done and the lifestyles of the employees. Under HIPAA, there are no ineligible industries, but surcharges are applied in states where they are allowed; 3. Group size - larger groups result in a better spread of morbidity risk and lower administrative expenses; 4. Worker's compensation - some carriers require that all eligible employees be covered by workers' compensation; 5. Participation requirements - these help ensure a better spread of risk by not allowing too many healthy employees to opt out of coverage; 6. Employer contributions - the higher the employer contribution, the higher employee participation tends to be; 7. Prior coverage and experience - for groups seeking coverage for the first time, find out why the group is now seeking coverage; 8. Eligibility rules and classes - groups need to define who is eligible for coverage (for example, full-time employees who have been with the company for at least three months)
Stochastic modeling techniques for reserving
1. Fitting a parametric distribution to the data - this technique works best when the process being modeled is stationary over time; 2. Ordinary least squares regression - this allows for investigation of the effects of specific explanatory variables, such as trend or seasonality; 3. Generalized linear models - these models improve upon ordinary regression models because they allow for cases where the dependent variable being modeled is either bounded (e.g. must be > 0) or not normally distributed; 4. Stochastic time series models - these are useful for handling situations where values are correlated across time (e.g. seasonal or cyclical patterns); 5. Monte Carlo simulation - this approach is of significant practical value when combining results from any of the other techniques
Considerations when using claims data for evaluating disease management programs
1. Fixed time periods - a one-year time period to be too short for outcomes evaluations; 2. Enrollment issues/eligibility - the timeliness of enrollment and disenrollment should be factored into the study; 3. Claims run-out - due to claim lag, program results may not be known for up to two years after the program begins; 4. Outlier claims - these may distort the study's results; 5. Special problems with claims data - when using claims data to identify chronic members, some members are miscategorized (false positives or false negatives)
Steps for health care entities to mitigate exposure and liability to government fraud audits
1. Follow as closely as possible all government regulations and laws, and seek interpretive guidance when needed; 2. Dedicate appropriate resources to ensure that payment processing and billing systems are not overbilling; 3. Implement an effective compliance program, self assess the program, and self disclose any improprieties; 4. Be aware of the many entities working as government auditors, and what the authority is for each; 5. When a fraud-related audit is taking place, designate an accountable person to receive requests, track requests, and be aware of due dates, and communicate regularly with key leaders; 6. Have the following elements in place: a) Clearly documented policies and procedures for preventing fraud and abuse, b) Adequately staffed fraud team, c) Effective fraud control training, d) Internal monitoring and oversight activities, e) Screening of staff against the OIG exclusion list and applicable state equivalents
Steps for using the authorization method to project claims
1. Gather data on the number of authorized services as of the valuation date; 2. Adjust authorized services - adjust for differences between initial authorizations and actual services rendered. Differences arise due to appeals, poor data, and issues with coordination of benefits and enforceability of rules; 3. Calculate an average cost per service rendered - this average cost is frequently a blend of provider contractual amounts and actual payments made; 4. Estimate incurred claims - multiply the number of services by the cost per service; 5. Calculate the estimate IBNR - equals the estimated incurred claims minus the amount of paid claims to date
Payment approaches that make a combined payment to hospitals and physicians
1. Global capitations - payment is made to a single entity for all medical services. This entity accepts the single capitation and manages all care; 2. Bundled payment, package pricing, and global payment - these terms refer to a single fee covering all facility and professional services related to a particular episode of care; 3. Shared savings - a non-capitation methodology in which cost savings compared to a targeted cost are shared between the payer and a provider organization
Considerations in deciding whether to use retrospective experience rating
1. Group size - the group must be large enough to have credible data and to warrant the cost and time of experience rating; 2. Contract provisions regarding the funding arrangement - some funding arrangements (like retrospective premium arrangements) will replace the experience rating formula; 3. Company policies and practices - is an overriding factor; 4. Company financial situation - crucial for insurers with small surplus (e.g. the Blue plans)
Reasons for experience rating
1. Groups want it - at least those with good experience want the premium to reflect it; 2. The insurer wants to quote and charge premiums that are as competitive as possible; 3. The insurer wants to avoid antiselection (good groups going to competitors and bad groups staying)
Capabilities of a well-functioning contract management system
1. Identify network gaps or where provider recruiting is most needed; 2. Track recruiting efforts, provide reminders, and generate recruiting reports; 3. Generate new contract blanks and new contracts with information filled in; 4. Store copies of different versions of any provider's contract; 5. Track and report contract changes for each provider; 6. Track and manage permissions and sign-offs on contracts; 7. Store images of signed documents and convert imaged documents into machine readable formats; 8. Support an entirely paperless contracting process; 9. Provide early notification or reminders for upcoming actions such as recredentialing or renegotiations; 10. Direct electronic feed of required demographic information to other internal functions; 11. Direct electronic feed of market-facing systems such as internet physician searches; 12. Be searchable on multiple attributes; 13. Analyze the potential impact of changes in contract terms
Risk areas related to claims processing production and quality
1. Growing claims backlog - need quick action when production falls behind; 2. Inadequate front-end control - need procedures to ensure only clean claims are accepted into the system; 3. Inadequate management of suspended claims - these claims must be strictly monitored and quickly resolved; 4. Inadequate focus on a continuous quality improvement process effort; 5. Inadequate or ineffective workflow - close supervision is required to keep this from creating bottlenecks; 6. Poorly-maintained claims engine or other operational applications - do not simply work around problems and allow poor system maintenance to go unchallenged; 7. Inadequate or ineffective data management - implement an early warning mechanism to catch data management issues early; 8. Incorrect benefit setup and group installation - this could result in thousands of claims being processed incorrectly; 9. Incorrect provider contract set-up and maintenance - also could result in claims being processed incorrectly; 10. Inadequate quality and financial controls - establish a quality control function and be sure adjudicators agree to the quality assessment process; 11. Poor employee recruiting - organize the claims area with positions of increasing responsibility to create a career path to retain talented staff; 12. Inadequate policy and procedure documentation - could lead to inconsistent claims adjudication and low employee morale; 13. Inadequate training - training should include the proper context and background related to the claim adjudicator's work; 14. Inadequate data analysis and claims management reports - employ analysts to develop meaningful and insightful reports on demand; 15. Failure to use the claims capability to identify customer and operational problems early - talk to claim adjudicators to get their insight on improvements that can be made
Considerations when evaluating results of disease management studies
1. Has the measurement been performed according to a valid methodology?; 2. How has that methodology been applied in practice?; 3. Are the results arithmetically correct?
Definitions of health care fraud and abuse
1. Health care fraud occurs when someone misrepresents a fact related to health care services in order to receive or increase payment from a health plan or the government. It involves intentional deception or misrepresentation; 2. Health care abuse typically occurs if an activity abuses the health care system but does not meet the legal definition of fraud or is not medically necessary; The difference between most fraud and abuse is the often the ability to prove intent
Users of provider profiles
1. Health plans - for example, provider relations and medical directors; 2. Consumers - effective dissemination of profiles to members is still under development; 3. Employers - most are more interested in cost control than quality, so approaches should integrate cost control with quality; 4. Providers - most are interested in change if methods to measure performance are well grounded in scientific evidence or professional consensus
Purposes of health plan auditors
1. Help ensure plans are properly spending their money; . Look for the following types of errors and fraud: a) Errors in coding claims - these account for about 3% of claim payments, b) Misinterpretations - for example, the plan may be paying 100% on some services where the member also paid a copay, c) Outright fraud - such as providers billing for services that weren't rendered and members getting prescriptions they don't need and reselling the drugs on the street for large profits
Delivery mechanisms for telemental health services
1. Hub-and-spoke networks - these link large tertiary centers with outlying clinics; 2. Health provider-home connections - these link providers with single-line phone-video systems for interactive consults; 3. Web-based e-health patient service sites - these provide direct consumer outreach and services over the internet
Standard wording for the actuarial opinion in the heath insurance annual statement
1. Identification paragraph - identifies the actuary and his or her relation to the company; 2. Scope paragraph - identifies the liabilities on which an opinion is to be expressed; 3. Opinion paragraph - states that it is the actuary's opinion that the liabilities on the balance sheet: a) Are in accordance with accepted actuarial standards and sound actuarial principles, b) Are based on relevant and appropriate actuarial assumptions, c) Meet the requirements of the state laws, d) Make good and sufficient provision for all actuarial liabilities of the organization, e) Are computed based on assumptions that are consistent with the prior year's assumptions, f) Include appropriate provision for all actuarial items that ought to be established; 4. Statement in the opinion paragraph that: a) The Underwriting and Investment Exhibit - Part 2B was prepared in accordance with ASOP #5, b) The methods, considerations, and analyses used in forming the opinion conform to the relevant ASOPs
Principles for designing provider profiling reports
1. Identify high-volume and costly clinical areas to profile; 2. Involve appropriate internal and external customers (including providers) in developing and implementing the profile; 3. Compare results with published performance (external vs internal norms); 4. Report performance using a uniform clinical data set; 5. When possible, employ an external data source for independent validation of the provider's data; 6. Consider onsite verification of data from the provider's information system; 7. Present comparative performance using clinically-relevant risk stratification; 8. Require statistical significance for comparisons and establish thresholds for minimum sample size; 9. Adjust performance measurements for severity
Key success factors of a patient-centered medical home (PCMH)
1. Improved quality of care; 2. Improved status of comorbid conditions; 3. Increased satisfaction of patients; 4. Reduction of avoidable comorbid hospitalizations; 5. Reductions of acute occurrences; 6. Reduction of inpatient admissions; 7. Reduction of LTC admissions
considerations regarding thr Medicare Shared Savings program
1. Improving quality may not generate necessary savings a. ACOs already operating with high efficiency (i.e. well managed) may be unable to satisfy the target reductions 2. ACOs that target certain procedures may not achieve sufficient savings 3. Few organizations willing to make the changes necessary (i.e. system changes) to change from loosely managed to well managed 4. Risk analysis by potential ACOs of utilization of services is required to meet target levels 5. Provider organizations may not have the proper talent to successfully manage as an ACO under Medicare 6. ACO spending targets are based on prior experience - Easier for inefficient systems to satisfy their targets 7. ACOs operating efficiently with low inpatient utilization and costs need to focus on non- inpatient services and non-Medicare populations (i.e. commercial) to achieve significant savings
New innovations in the measurement of healthcare quality and efficiency
1. Increased collaboration and coordination of key players in the industry; 2. Enhancement of hospital quality measures; 3. New physician quality metrics (i.e. evidence-based medicine metrics); 4. Improved efficiency metrics that link micro clinic measures (i.e. used by physicians) to macro population measures (i.e. financial measures used by purchasers); 5. Alternative networks based on quality and/or efficiency; 6. Pilot programs to improve quality and efficiency (i.e. P4P)
Contracting considerations for different types of physician groups
1. Individual physicians - advantage is the direct relationship with the physician. Disadvantage is the effort to maintain the relationship is large for just one physician; 2. Medical groups - advantage is the same contracting effort yields a higher number of physicians. Disadvantage is that if the relationship is terminated then there is a greater disruption in patient care; 3. Independent practice associations (IPAs): a) Advantages: a large number of providers come along with the contract, the IPA may accept more financial risk, and some IPAs perform network management, credentialing, and medical managements, b) Disadvantages: the IPA can hold a considerable portion of the delivery system hostage to negotiations, and the plan's ability to select and deselect individual physicians is limited; 4. Faculty practice plans (medical groups that are organized around teaching programs): a) Advantages: these programs provide highly-specialized care and they add prestige to the plan by virtue of their reputation for quality care, b) Challenges include: tend to be less cost effective in their practice styles, and they are not set up for case management, so care is not well coordinated; 5. Physicians in integrated delivery systems (IDSs) - there are two types: a) Hospital systems that affiliate with private physicians, b) Hospital systems that employ physicians - these often have substantial negotiating leverage; 6. Patient-centered medical homes - these coordinate all care for a group of patients; 7. Specialty management companies - these focus on managing very specialized services using physicians (e.g. single-specialty case management of neo-natal care)
Insurer group life underwriting factors
1. Industry - either decline coverage or use an SIC factor to adjust rates; 2. Contribution level - a 100% employer-paid plan has the least antiselection and best spread of risk; 3. Eligibility - usually require full time and actively at work. Must decide what to do with dependents and retirees (antiselection is greater); 4. Participation level - most states require 75% (needed anyway by the insurer to ensure an adequate spread of risk); 5. Benefit schedule - want minimum spread of amounts to reduce risk (less employee antiselection); 6. Prior experience - expected mortality can be developed from past experience for very large groups. But experience is rarely fully credible, so it is usually combined with expected manual claims. 7. Past rate history - rate history is usually needed to fully understand the prior experience; 8. Individual underwriting - group life is generally offered with little or no individual underwriting. But underwriting is sometimes required for large amounts of insurance, late entrants, small groups, and some voluntary plans
Group disability underwriting characteristics
1. Industry - some industries may be too hazardous to underwrite; 2. Occupations; 3. Age distribution; 4. Gender distribution; 5. Income distributions; 6. Group size; 7. Location; 8. Employment status - seasonal employees may not have enough job security
Factors that influence an employee's choice of health plan in a multiple-choice environment
1. Inertia - employees often prefer to stay with a prior plan option; 2. Plan provisions and costs - such as covered benefits and employee cost sharing amounts; 3. Employee and dependent demographics - such as age, gender, health status, and family size; 4. Employer actions and attitudes - such as employee contributions and the attitude towards managed care; 5. Eligibility for other health insurance coverage - such as through a spouse's plan; 6. Information available about options - such as employee communications and selection tools; 7. Provider and provider network attributes - such as provider availability, reputation, quality, and medical management restrictions; 8. Insurer and administration issues - such as claim administration and customer service
Ways for members to appeal benefit denials or coverage rescissions
1. Informal internal review - the process includes a review by the case manager and the medical director, and the member is notified about whether the coverage is approved or the denial of coverage is upheld (in which case the member is notified about formal appeal rights); 2. Formal internal appeal - the process is similar to the informal review, but may also include discussion with the attending physician, member, a formal appeals committee, and internal legal counsel; 3. External appeal - in states where the appeals process includes all NAIC minimum protections, plan must comply with the state's external review requirements. In other states, plans must either comply with the NAIC minimum protections or participate in a federal external review process; 4. Appeal to government agencies - applies only some cases (e.g., Medicare Advantage members have the right to appeal to CMS); 5. Arbitration - in some states, arbitration is allowed for cases involving insured plans; 6. Lawsuits - if a plan carefully follows its grievance procedure, the chances of a successful lawsuit against it are small
Examples of billing abuse
1. Overutilization of services, such as refilling a prescription when not needed; 2. Ordering more tests than medically necessary; 3. Treating patients differently based on their insurance coverage; 4. Changing certain procedure codes and unbundling of services usually delivered together; 5. Charging outrageous fees to third-party payers when there is no contract in place
Common drivers of product ideas
1. Innovator or follower - some companies are successful at innovating, while others are successful at following and learning from competitors; 2. Changing laws and regulations - new rules can lead to new products developed specifically to operate within the new set of rules; 3. Consumer demand - companies must constantly seek consumer feedback and market intelligence; 4. Marketing and sales - these teams can spot holes in the product spectrum where consumer demand is not being fully met; 5. Leveraging insurer capabilities - product development teams must know what the insurer does well and find way to grow in those areas; 6. Social need - for example, Medicare Part D served the social need of helping seniors who were being overwhelmed by the cost of expensive medications; 7. Changing demographics - leads to a shift in the types of products that will be marketable and saleable; 8. Changing economy and financial markets - leads to changes in purchasers' views of their need for insurance; 9. Competitive advantage - product development ideas should utilize the company's competitive advantages
Types of services delivered by behavioral health care networks
1. Inpatient services - the highest level of skilled services. Involves 24-hour medical and nursing care in a psychiatric facility, a general hospital, or a detoxification unit in a hospital; 2. Residential treatment - services rendered in a 24-hour facility offering therapeutic services for patients with severe mental or substance-related disorders; 3. Partial hospitalization - provides structured mental health or substance abuse therapeutic services for at least 4 hours per day and 3 days per week; 4. Intensive outpatient program - provides structured therapeutic services for at least 2 hours per day and at least 3 days per week; 5. Outpatient treatment - includes individual, family, or group treatment rendered by a licensed professional; 6. Employment assistance programs (EAPs) - EAP professionals deliver short-term, problem-focuses outpatient services for employees and their families
Potential indicators of health care fraud in a managed care setting
1. Insufficient time spent by providers with patients; 2. High levels of referrals to specialists (may indicate a kickback arrangement); 3. Consistently poor care outcomes (may indicate lack of treatment); 4. Unusual patient encounter ratio (may indicate patients are not being seen); 5. High numbers of patient claims for care outside the HMO service area
Considerations when selecting a risk adjustment model
1. Intended use - consider the degree to which the model was designed to estimate what the actuary is trying to measure; 2. Impact on program - consider whether the risk adjustment system may cause changes in behavior because of underlying incentives; 3. Model version - if a new version of a previously-utilized model is used, consider the materiality of changes to the model; 4. Population and program - consider if the population and program to which the model is being applied are consistent with those used to develop the model; 5. Timing of data collection, measurement and estimation - consider the impact of timing differences between the model is developed and when it is applied; 6. Transparency - consider whether the model provides an appropriate level of transparency for its intended use; 7. Predictive ability - consider the predictive ability of the model and the characteristics of the various common predictive performance measures; 8. Reliance on experts - consider whether the individuals incorporating their specialized knowledge into the model are experts in risk adjustment; 9. Practical considerations - consider practical limitations, such as the cost of the model, the actuary's familiarity with the model, and its availability
Considerations when establishing risk classes
1. Intended use - select a risk classification system that is appropriate for the intended use; 2. Actuarial considerations: a) Adverse selection - may occur if the variation in expected outcomes within a risk class is too great, b) Credibility - risk classes should be large enough for expected outcomes to be credible, c) Practicality - must balance the conflicting objectives of accuracy and efficiency; 3. Other considerations - should comply with applicable law, consider industry practices, and consider limitations created by business practices; 4. The reasonableness of results from using the risk classes
Ways in which members contact the customer interaction center
1. Interactive voice response (IVR) - may provide members a self-service option for some services, such as requesting a new identification card, checking the status of a claim, and enrolling in a plan; 2. Inbound telephonic calls (most common) - calls are routed to the right area via menus or IVR; 3. Mail and paper-based communications - commonly used for formal complaints or grievances. All inbound correspondence must be logged and tracked, usually after being scanned; 4. E-mail - can be less efficient than live phone interaction because the response may not exactly meet the member's needs and can therefore lead to extra work. Automated email responses are generally effective for basic member requests; 5. Web chat or text messaging - usually initiated through a "click-to-chat" function on the plan's website. It basically acts as a written version of an inbound call; 6. Internet self-service - is effective for enrollment, issuing ID cards, tracking the status of a claim, and looking up providers, benefits, and eligibility; 7. Mobile devices such as smartphones or tablets - to perform the same internet self-service functions
Considerations for determining contract reserves
1. Interest rates - rates should be reasonable and consistent with the purpose of the reserve; 2. Morbidity - this assumption should reflect the underlying risk, including factors such as age, gender, durational effects, and adverse selection; 3. Persistency - this assumption should include both involuntary and voluntary terminations; 4. Expenses - consider whether maintenance, acquisition, or claim expenses should be included; 5. Trend - inflation, utilization, morbidity, and expense rates should reflect the appropriate trend; 6. Premium rate changes - assumptions for future rate changes should reflect market conditions, regulatory restrictions, and rate guarantees; 7. Valuation method - when the valuation method is not prescribed, the actuary should choose an appropriate method
Types of reports used by the claim area
1. Internal executive-level dashboards; 2. Internal financial reports: a) Claims payout, b) IBNR, c) Utilization reports, d) Overpayment reports, e) Voluntary refund reports; 3. Internal productivity and quality reports: a) Mailroom and EDI receipts, b) Claims on hand, c) Claims processed through auto adjudication, d) Suspended claims, e) Claims selected for random quality assessment or focused audit, f) Ad hoc reports for continuous process improvements; 4. External reports: a) Quality and timeliness reports, b) Group experience report, c) Product experience report, d) Medication therapy management (MTM) scores for Blue Cross Blue Shield plans, e) COB and OPL reports by customer, f) Provider-specific reports related to performance and risk-sharing, g) Workforce modeling and planning
Approaches for signing the Statement of Actuarial Opinion when reserves are too high or too low
1. Issue a qualified opinion - be straightforward in laying out the concerns, and then state the actuarial opinion with those exceptions noted; 2. Convince management to change the reserves to an appropriate level; 3. If other options fail, notify management that you must sign an opinion stating that the reserves are inadequate - this decision cannot be taken lightly, since you will probably lose your job as a result
Sources of data for provider profiling
1. Lab test results; 2. Biometric information; 3. Feeds from electronic health records; 4. Patient satisfaction measures; 5. Operational information on vendor programs; 6. Claims system data is the major source. Before it can be used, it must be standardized and stored in a data warehouse
Steps in the employer-sponsored sales process
1. Lead generation - from brokers and consultants, marketing, and RFPs from employers; 2. Prospecting - initial conversations with prospective customer to get information for rating and underwriting; 3. Rating and underwriting - to determine initial pricing; 4. Quoting - initial pricing communicated to prospective customer (may have several iterations of underwriting and price quoting as parameters are negotiated); 5. First sale (to the employer) - contract is finalized after employer agrees to pricing, benefit design, products, and network; 6. Case installation - customer information and details of the services purchase are entered into information systems; 7. Second sale (to the employee) - employees select a health plan during open enrollment. Health plan salesperson may be involved in promoting the health plan to employees; 8. Enrollment - employees and dependents are enrolled in the systems
Challenges to effective health plan marketing
1. Marketing is severely limited by a lack of customer insight; 2. Health plans have historically limited investment in marketing, which has led to gaps in human capital and technology assets; 3. ACA MLR requirements may constrain investments in marketing; 4. An employee's purchasing decision may be complex and has many potential influences
Impact of life events on health plan eligibility
1. Marriage - HIPAA offers right for employees and spouses to enroll in a group health plan, and it provided protections for individuals who have preexisting conditions; 2. Birth or adoption of a child - HIPAA offers rights for employees, spouses, and new dependents, allowing them to enroll in a group health plan upon birth or adoption. It also prohibits preexisting condition exclusions from applying to newborns and adopted children who enroll within 30 days; 3. Job change or loss - COBRA requires that most employer health plans offer employees and their dependents the opportunity to continue their health plan coverages (typically for 18 months); 4. Coverage for family and loved ones - ERISA permits a parent to obtain a court order to provide coverage for children under the noncustodial parent's health plan; 5. Coverage loss due to divorce or death of a spouse - COBRA generally requires group health plans to continue coverage of dependents for up to 36 months. HIPAA also offers special enrollment rights; 6. Coverage in later years - the HIPAA and COBRA requirements listed above also apply when the employee loses coverage due to retirement
Documentation needed to support the actuarial certification of compliance with small group rating methods
1. Materials that have been reviewed to certify compliance with requirements for rating methods and underwriting practices, including: a) A description of the carrier's rating methods and underwriting practices, b) The rating manual and formulas for calculating rates from the manual, c) Some test calculations to verify that the rates charged are in accordance with the rating manual; 2. A written demonstration that the rates are in compliance with applicable regulatory requirements. Should explain how classes of business, average rates, rating bands, and rate increases comply with rating constraints; 3. A written demonstration supporting the determination of compliance with actuarial soundness
Examples of high-performance health plan marketing
1. Measuring brand value - surveys to validate brand strategy and measure effectiveness of campaigns; 2. Marketing portfolio optimization - applying a more scientific approach to the mix of marketing activities; 3. Consumer segmentation - including use of life stage information and behavioral segmentation; 4. Targeted marketing campaigns - to support specific objectives (e.g., developing intelligence on favorable consumer segments for consumer-directed products)
Medicaid business process
1. Member management - includes eligibility determination, enrollment, member information management, and prospective and current member support; 2. Provider management - includes provider enrollment, provider information management, and provider support; 3. Contractor management - includes health services contracting, administrative contracting, contractor information management, and contractor support; 4. Operations management - includes payment management, cost recoveries, and service authorization; 5. Program management; 6. Care management; 7. Program integrity management; 8. Relationship management
Examples of health care fraud by patients
1. Misrepresentation on health insurance coverage applications; 2. Falsification of eligibility as an employee; 3. Filing false claims with payers; 4. Identity theft to obtain care; 5. Forging prescriptions; 6. Obtaining prescriptions for illegal resale; 7. Doctor shopping for narcotics
Ways to identify and prevent fraud and abuse
1. Monitoring claims for compliance with billing and coding guidelines; 2. Adhering to appropriate clinical documentation standards; 3. Providers adhering to the standard of care for treatment; 4. Educating all staff members responsible for medical records; 5. Referring cases of suspected fraud and abuse to law enforcement and appropriate regulators
Emerging development method techniques
1. Multiple triangles - this technique looks at claim triangles in both the traditional way (claims paid by service date) and in a new way (claims reported by service date); 2. Time series and other statistical projections (aka "regression methods") - these techniques use advanced statistical and computer tools to help in projecting claims. Uses include: a) Project payment patterns for partially complete incurral months (using statistical or time series techniques - instead of development factors - to complete the claims), b) Project PMPM costs that can be applied in projection method techniques
Eligibility requirements for ACOs to participate in the Medicare Shared Savings Program
1. Must be an eligible type of provider (see sep list); 2. Must be capable of receiving and distributing shared savings, repaying shared losses, and ensuring all providers comply with program requirements, and performing other required functions; 3. The governing body must be composed primarily (at least 75%) of participating providers and must also include Medicare beneficiaries served by the ACO; 4. Leadership and management criteria include: a) Clinical oversight must be done by a senior-level medical director who is a board-certified physician, b) Providers must make a meaningful financial or human investment to the clinical integration program; 5. Must exhibit a strong patient-centeredness element (see sep list); 6. Must have a sufficient number of beneficiaries (at least 5,000) and primary care providers; 7. Must have a compliance plan, a lead compliance official, and mechanisms for identifying compliance problems
Methods for mitigating concentration risk on life insurance
1. Obtain catastrophic reinsurance; 2. Obtain per-life reinsurance; 3. Participate in an industry risk pool; 4. Limit the volume of business written in certain locations
Reasons why a health plan wants to contract with providers (also known as contracting goals)
1. Obtain favorable pricing (less than full billed amounts); 2. Obtain payment terms that result in an underwriting gain; 3. Get the provider to agree to provide services to the plan's members; 4. Meet service area access standards required by the states and Medicare; 5. Obtain contractual agreement for several clauses, many of which are required by the states and Medicare. The provider agrees to: a) Submit claims directly to the plan, not the member, b) Not balance-bill the member for any amount above the agreed-upon payment terms, c) Hold harmless the member (not bill for any amounts owed by the plan), d) Cooperate with the plan's utilization management program, e) Cooperate with the plan's quality management program, f) Give the plan the right to audit clinical and billing data for care provided to plan members, g) Not discriminate (and other similar requirements)
Reasons why a provider wants to contract with the plan
1. Obtain favorable pricing when in a strong negotiating position; 2. Ensure that it will not be excluded from the network of a large payer; 3. Receive direct payment from the plan, thereby avoiding the need to collect from the patient; 4. Receive timely payment (usually 30 days or less); 5. Have plan members directed or steered to it; 6. Not lose business (or medical staff) as a payer steers members to others who are contract providers; 7. Receive defined rights around disputing claims and payments
Steps for setting aggregate stop loss attachment factors
1. Obtain running 12-month paid losses for the past 1-3 years. Use running 12-month due to seasonality; 2. Adjust paid losses for specific stop loss reimbursements; 3. Divide by number of certificates in each period to calculate losses paid per employee per month (PEPM). Many will use incurred PEPM instead of paid PEPM; 4. Adjust for plan design changes from experience periods to rating period; 5. Trend losses PEPM from midpoint of experience periods to midpoint of rating period; 6. Calculate weighted average of trended losses PEPM. May give more weight to recent periods; 7. For plans without full credibility, use a credibility formula to blend weighted average trended losses PEPM with manual losses; 8. Adjust for contract type (such as 12/12 or 12/15); 9. Multiply by the aggregate margin factor (for example, 125%)
Characteristics of chronic conditions that make them suitable for disease management programs
1. Once contracts, the disease remains with the patient for the rest of the patient's life; 2. The disease is often manageable with a combination of pharmaceutical therapy and lifestyle change; 3. Patients can take responsibility for their own conditions; 4. The average annual cost is sufficiently high to warrant spending resources to manage the condition
Tools for changing physician behavior
1. Ongoing communications: a) Electronic or paper communications - these have the worst penetration rates, b) Group meetings - these give everyone a chance to understand one another better, to voice concerns, and to get questions answered, c) Social networking - helps physicians get to know the organization and its personality by increasing the number of brief contacts; 2. Data - the challenge is not getting information, but knowing which information can be translated into useful knowledge. Data provided to physicians must be checked and rechecked for accuracy; 3. Mission clarify - a widespread understanding of what the organization is trying to accomplish is extremely valuable in changing behavior
Types of long-term claims and reserve methods
1. Open claims - claims currently being paid (uses tabular reserves): Reserves = V_n = Sum_t=n->BP (Benefit_t)*(Continuance_t)*(InterestDiscount_t); Benefit = the monthly benefit (may vary over time due to product provisions); Continuance = the probability of a claim continuing to receive payments in the future; Interest discount = factor to reflect time value of money; The summation runs from the current time period (n) to the end of the benefit period (BP); 2. Pending claims - claims that have been reported but payments have not yet begun; Reserve for claims that are still in the elimination period = pending factor * tabular reserve; Reserve for claims that have completed elimination period = pending factor * (tabular reserve + AV of past payments not yet made); 3. IBNR claims - claims that have been incurred but have not been reported to the company. The reserve can be estimated using either the lag method or the loss ratio method
Categories to consider for coordination of benefits and other party liability
1. Other group health insurance - benefits are coordinated based on industry standard COB rules published by the NAIC; 2. Automobile insurance - liability is shifted from the payer to another insurer based on state laws; 3. Workers' compensation insurance - again, liability is shifted from the payer to another insurer based on state laws; 4. Subrogation - benefits are recovered from member who have been compensated for costs via legal action
Problems that result from errors in the enrollment process
1. Paying claims on someone who is no longer covered or not yet eligible for coverage; 2. Not paying claims for someone who is covered; 3. Incorrect premium payments to the payer, requiring later reconciliations; 4. Improper calculation of capitation payments; 5. The need to make after-the-fact adjustments with providers
Services provided by medication therapy management (MTM) programs
1. Performing or obtaining necessary assessments of the patient's health status; 2. Formulating a medication treatment plan; 3. Selecting, initiating, modifying, or administering medication therapy; 4. Monitoring and evaluating the patient's response to therapy; 5. Performing a comprehensive medication review to identify, resolve, and prevent medication-related problems; 6. Documenting the care delivered and communicating essential information to the patient's other primary care providers; 7. Providing verbal education and training, designed to enhance patient understanding; 8. Providing information, support services, and resources to enhance patient adherence; 9. Coordinating and integrating MTM services with other health care services
Features of LTD and LTC contracts to consider when setting reserves
1. Periodic benefits - benefits typically equal some specific monthly or daily amount; 2. Long-term benefit periods; 3. Elimination periods; 4. Optional benefits - these may affect the timing or amount of monthly payments (e.g., partial disability benefits and COLA); 5. Integration of benefits - these plans often coordinate benefits with Social Security and Medicare; 6. Limitations and exclusions - some claims are excluded (such as intentionally self-inflicted injuries) or subject to limited periods (such as mental and nervous claims)
Principles for establishing a patient-centered medical home
1. Personal physician - each patient has a personal physician trained to provide comprehensive care; 2. Physician-directed medical practice - consists of a team of individuals taking responsibility for the patient's ongoing care; 3. Whole person orientation - appropriately arranging care with other qualified professionals; 4. Care coordinated and integrated across all elements of the health care system and the patient's community; 5. Quality and safety - includes patient-centered outcomes, evidence-based medicine, and continuous quality improvement; 6. Enhanced access through open scheduling, expanded hours, and E-visits; 7. Reimbursement structure to support and encourage this model of care
ASOP considerations for estimating incurred claims
1. Plan provisions and business practices - reflect practices that materially affect the cost, frequency, or severity of claims; 2. Economic influences - such as unemployment levels, cost shifting, and catastrophic events; 3. Organizational claims administration - lag factors may vary due to staffing levels, computer system changes, or seasonal backlogs; 4. Risk characteristics and organizational practices by block of business - consider the effects of marketing and underwriting on the types of risk accepted; 5. Legislative requirements - consider how regulations mandating benefits, risk characteristics, rating, reserving, and underwriting practices can affect incurred claims; 6. Carve outs - consider the effect of carved-out benefits on incurred claim levels; 7. Special considerations for long-term products - such as COLA adjustments and inflation effects
Types of care management methods
1. Pre-authorization - requires a provider to obtain approval before performing a service; 2. Concurrent review - monitoring a member's care while the member is still receiving care in a hospital or nursing home; 3. Case management - typically involves a health care professional who coordinates the care of a patient with a serious disease or illness (such as stroke, AIDS, or cancer); 4. Demand management - refers to certain passive forms of informational intervention, often provided over the telephone. Includes nurse advice lines and shared decision making; 5. Disease management - focuses on chronic conditions with certain characteristics that make them suitable for clinical intervention (see sep list); 6. Specialty case management - a care manager who has expertise in a particular area coordinates care for patients in that area; 7. Population health management - the entire membership of a health plan is evaluated, using statistical tools to identify potential high-cost patients who can benefit from some type of voluntary intervention program; 8. Medical Home - this model returns to the physician the responsibility for coordinating all of the patient's care
Types of physicians and other professional providers
1. Primary care physicians (PCPs) and specialty care physicians (SCPs) - for traditional HMOS, the distinction between PCP and SCP is very important because the PCP acts as a gatekeeper and must authorize any visits to a specialist; 2. Hospital-based physicians - specialties include radiology, anesthesiology, pathology, emergency medicine, and hospitalist. These physicians often have exclusive rights at the hospital, so they are reluctant to contract for anything else than full charges; 3. Nonphysicians or mid-level practitioners that provide primary care - the most common are physicians assistants and nurse practitioners. These are a great asset in managed care because they deliver excellent primary care, tend to spend more time with patients and are well accepted by most members; 4. Mental health providers (see sep list); 5. Other types of professionals - podiatrists, dentists, orthodontists, optometrists, chiropractors, physical therapists, occupational therapists, nutritionists, acupuncturists, audiologists, respiratory therapists, and home health care providers
Reasons claims are suspended by the claims transaction system
1. Problems with the system configuration, which need to be addressed; 2. Inappropriate services for the patient's age or gender; 3. Services that requires specific medical management review; 4. Procedure codes that must be manually priced; 5. Missing or inappropriate modifier codes affecting the pricing of surgical claims; 6. Suspected other party liability; 7. Suspicious diagnosis codes related to accidents; 8. Suspected fraud or billing abuse
Desired characteristics for credibility methods
1. Produce results that are reasonable in the professional judgment of the actuary; 2. Do not bias the results in any material way; 3. Be practical to implement; 4. Balance responsiveness and stability
Key players in the product development cycle
1. Product development team - is responsible for generating new product ideas and studying the market; 2. Senior management - sets the company's goals and is responsible for making the decision to pursue a proposed idea; 3. Marketing - is focused on advertising, name recognitions, and branding; 4. Sales - often has insight into price sensitivity and the types of products customers want; 5. Underwriters - can help quantify the risk associated with certain plan features; 6. Information technology (IT) - can help in understanding the feasibility of the infrastructure needed to administer the product; 7. Operations - work with IT teams to administer the product; 8. Compliance - ensures the product is compliant with laws and regulations; 9. Actuarial - prices the product and works on the projections and feasibility studies; 10. Finance - reviews the projected enrollment and pricing to determine whether projections meet corporate profit targets
Uses of quality and efficiency measurements
1. Professional standards; 2. Government oversight; 3. Professional accreditation; 4. Quality improvement; 5. Network development; 6. Pay-for-performance programs; 7. Public reporting; 8. Consumer health education; 9. Financial management; 10. Purchaser decision making
Providers eligible to participate in an ACO
1. Professionals in group practice arrangements; 2. Networks of individual practices; 3. Joint venture arrangements between hospitals and professionals; 4. Hospitals employing professionals; 5. Critical access hospitals that are paid by Medicare in a way that supports the collection of data needed to assign patients to providers; 6. Rural health clinics; 7. Federally qualified health clinics
Aggregate stop loss underwriting considerations
1. Profitability is largely driven by setting appropriate attachment points; 2. Aggregate margin factor - insurers generally have a higher factor for smaller plans due to the volatility caused by low numbers of employees; 3. Specific stop loss deductible - should fall within a range from 5-15% of the plan's expected aggregate losses
ACA initiatives that promote health care access and consumer choice
1. Prohibitions on pre-existing condition exclusions; 2. Restricting the use of lifetime maximums; 3. Prohibiting annual benefit maximums on essential benefits; 4. Requiring most groups to offer coverage to dependents up until age 26; 5. Issuing grants to states to create high-risk pools for the uninsurable; 6. Creating a health insurance exchange that is both guaranteed issue and without pre-existing condition exclusions
Steps for building a new product
1. Project enrollment - this is critical to helping senior management decide whether the product is worth pursuing; 2. Price the product - includes an assessment of the market price sensitivity. After initial pricing, the projected enrollment should be reviewed again; 3. Perform financial assessments - to determine whether the new product can meet the company's required return on investment or return on equity; 4. Implement the infrastructure needed to administer the product (process claims, bill and collect premiums, and service member inquiries); 5. Get senior management approval
Provider approaches for improving quality
1. Promote continuous quality improvement plans; 2. Large employers can use quality care data to selectively contract with providers; 3. Use bundled payments to encourage providers to be more efficient and reduce errors; 4. Provide feedback on hospital and medical staff performance; 5. Contract with ACOs; 6. Use performance incentives ("pay for performance" programs)
Types of drug utilization review programs
1. Prospective - can identify and resolve problems before the medication is dispensed. It serves as an excellent member teaching opportunity for pharmacists; 2. Concurrent - performed at the point-of-prescribing. Pharmacists are provided clinical and benefit design edits that provide an alert for potential clinical conflicts to evaluate before the product is dispensed; 3. Retrospective - performed after the prescription is dispensed. It could include a review of high-cost outliers
Types of mental health providers
1. Psychiatrist - a physician who specializes in mental health and is able to prescribe drugs; 2. Psychologist - has a doctoral degree in psychology and two years of supervised professional experience; 3. Clinical social worker - a counselor with a masters degree in social work; 4. Licensed professional counselor - has a masters degree in psychology, counseling, or a related field; 5. Certified alcohol and drug abuse counselor - has specific clinical training in alcohol and drug abuse and provides individual and group counseling; 6. Psychiatric nurse practitioner or nurse psychotherapist - a registered nurse practitioner with special training in psychiatric and mental health nursing; 7. Martial and family therapist - a counselor with a master's degree and special training in marital and family therapy
Control group methods for estimating care management savings
1. Randomized - compares equivalent samples drawn randomly from the same population (the preferred method); 2. Geographic - compares equivalent populations in two different locations; 3. Temporal - comparing equivalent samples drawn from the same population before and after the intervention program; 4. The product control methodology - compares samples drawn from the same population at the same point in time, but differentiates between members who have different products; 5. "Patient as their own control" - patients are used as their own control group; 6. Participant vs. nonparticipant studies - the experience of those who voluntarily participate is compared to the experience of those who choose not to participate (has selection bias)
Information included on the explanation of benefits
1. The provider's name; 2. The date(s) of service; 3. The type(s) of service; 4. Fees charged; 5. The amount paid; 6. Any remaining liability payable by the member; 7. Reasons a claim was adjudicated the way it was (e.g., subject to deductible); 8. Appeal rights and procedures for requesting an appeal; 9. Health plan contact information
Principles for measuring results of care management programs
1. Reference population - any outcome's measurement requires a reference population against which to evaluate the statistics of interest; 2. Equivalence - the reference population should be equivalent to the intervention population; 3. Consistent statistics - the same statistic should be measured in the same way in the reference and intervention populations; 4. Appropriate measurement - avoid (if possible) extraneous, irrelevant, or confounding variables; 5. Exposure - the exposure group must be clearly defined and all members who meet the definition should be included in the appropriate group; 6. Reconcile the results - reconcile the outcomes of a small population with those of the entire health plan ("plausibility analysis")
Issues that affect disease management evaluations for chronic populations
1. Regression to the mean - a high % of high-cost patients in one period will not be high cost in the next period, simply because the high-cost event was a one-time event that is not likely to be repeated; 2. Identifying patients - due to regression to the mean, it may not be appropriate to use patients' past data as the comparison group. A common alternative is to use the population approach (uses the entire population); 3. Establishing uniform risk measure for comparability - objective, consistent definitions should be used to identify candidates for the care management program (this will ensure equivalence); 4. Patient selection bias - this results when a study is based on those volunteering for a program; 5. Patient drop outs - drop outs may also create a bias (e.g., those feeling better may drop out); 6. General versus specific populations - some interventions are performed on an extremely small population, making some methodologies inappropriate for measuring results
Types of reserve reporting
1. Regulatory reporting - concerned with solvency and policyholder protection, so conservative; 2. GAAP reporting - "realistic with provision for adverse deviation"; 3. Experience reporting for employers and providers - typically less sophisticated except for financial settlement and pricing reviews. For settlements, allow a 3 month run-out period to minimize the size of the estimated reserve; 4. Valuations for acquisitions - reserves are material to profitability, so they are often a focal point of negotiations. There is often a final settlement after several months to revisit the purchase price and assess the impact of claim reserves.
Risk pooling programs for small group business
1. Reinsurance programs - many states have these programs to help distribute the added risks of guaranteed issue requirements. Carriers can place individuals or entire groups into the reinsurance program by paying the reinsurance premium; 2. Risk-adjustment formula programs - a couple of states have developed risk-adjustment formulas to help normalize the risk of guaranteed issue
Principles to follow for changing physician practice behavior
1. Relationships matter - physicians acting as medical managers should get to know their practicing peers, and should approach conversations as a respectful colleague (not as a punishing authority); 2. Let the data speak for itself - performance data should be analyzed to see if variation from expected are the result of a sicker population or different demographics. If variations cannot be explained, then a conversation can be set up with the physicians; 3. Peers are a powerful influencer of physician practice patterns - physicians are more likely to change their behavior if they can discuss potential changes with a peer; 4. Peer leaders must understand and communicate the big picture - the medical manager must be able to speak to the organization's intent, answering questions as to why physicians are being managed
Ways in which health plans will implement ICD-10
1. Remediation - modify all applications to accommodate ICD-10; 2. Replacement of all applications; 3. Neutralization - create crosswalks from ICD-10 to ICD-9, even though some codes don't crosswalk well (CMS will be using this approach initially)
Special funding arrangement for group insurance
1. Reserveless plans (aka deferred premium or premium drag plans) - the insurer foregoes premiums equal to part or all of the claims reserves. In return, the insurer receives a terminal premium when the group terminates (risk of not receiving terminal payment). The policyholder chooses how to invest money; 2. Fully-insured plans - the standard arrangement. Policyholder pays insurer, who pays claims; 3. Self-insured plans - a trust receives employer money and pays the claims (so there is latitude in the choice of investments). Stop loss is usually purchased from an insurer. Governed by ERISA (no premium taxes or state mandates); 4. Minimum premium contracts - fully insured plan that includes a minimum premium rider (provides for the employer to fund a trust which the insurer uses to pay claims). Avoids premium tax on the portion of premium used to pay claims. 5. Stop loss contracts (specific and/or aggregate) - trends are leveraged, so give them special attention; 6. Retrospective premium arrangements - the policyholder is liable for an additional premium up to some amount (there is a risk of nonpayment)
Responsibilities of actuaries related to audits or examinations of financial statements
1. Responsibilities of the responding actuary - reply to reasonable requests, which may include: a) Discussion of the data used, the source of prescribed assumptions (if any), the methods used, and the basis for assumptions that are not prescribed, b) Discussion of environmental considerations that affected the preparation of the financial statement (such as changes in operations or in the entity's methods, policies, or procedures), c) Requests for data and sample calculations; 2. Responsibilities of the reviewing actuary: a) Planning - discuss the project's scope with the auditor, inform the responding actuary about the expected timing, and request the information needed, b) Documentation of the procedures planned and followed, the items subject to review, and the results of the review, c) Preserve the confidentiality of any information received; 3. Both actuaries should disclose any relationships with the entity whose financial statement is being audited; 4. Both actuaries should comply with ASOP #41 in communicating findings and documenting work
Measures for evaluating the member services area
1. Responsiveness: a) Average speed to answer calls (goal of 30 seconds), b) Service level percentages (goal of 75-80% of calls handled within 30 seconds), c) Abandon rates (goal of less than 3% of all calls); 2. Contact resolution; a) Calls resolved with no follow-up required (goal of 90%), b) Outstanding inquiries resolved within 14 days (goal of 90%) and 28 days (goal of 98%); 3. Customer service representatives are also measured individually: a) Adherence to schedules, b) Average time to handle a contact, c) Percentage of contacts resolved on the first call, d) Quality (measured via silent monitoring of calls)
Financial measures for disease management programs
1. Return on investment - this is the most common metric. DM programs typically use gross ROI: a) Net ROI = (gross savings - cost) / cost, b) Gross ROI = gross savings / cost; 2. Total savings - this metric may be more useful, since it represents the dollar savings for the plan: a) Average savings equals total savings net of program cost, divided by the total population, b) Marginal savings per chronic member equals the increase in savings (net of costs) due to intervention on the marginal population, divided by the number of members in the marginal population
Components of new business underwriting for large groups
1. Review the characteristics of the group in order to screen, approve, and classify the group (see sep list); 2. Evaluate the group's prior experience - prior data needs to be checked for accuracy and will need to be adjusted to fit the coverage being offered; 3. Develop the proposal - explain the plan design, underwriting caveats, expense charges, and any performance guarantees or funding alternatives that will be used
Methods for calculating provider liabilities
1. Risk-based payments - liabilities are based on projected contractual pay out, which is commonly defined as the difference between experienced and targeted costs. Settlements are often done several months after the period ends, so reserves play a minimal role; 2. Bonus or incentive contracts - estimates are normally based on utilization studies
Considerations for determining provider-related liabilities
1. Risk-sharing and capitation arrangements - the nature of the arrangement should be considered when determining whether to establish a liability; 2. Provider financial condition - consider whether the provider will be able to meet its obligations; 3. Provider incentive payments - if an agreement with a provider calls for incentive payments, consider whether a liability should be held for those payments
Methods for evaluating claim reserve adequacy
1. Runoff studies (commonly done by incurral year) - previous reserve balances are compared to subsequent claim payments and reserve balances, with adjustments for interest; 2. Actual to expected claim termination rate studies (commonly done by claim duration) - compares the actual claim terminations to the expected claim terminations based on the table used for reserving; 3. Experience studies - typically involves a gross premium valuation. The reserve is adequate if PV of future gross premiums + reserve > PV of future claim cost
Actuarial standards for the use of data
1. Selection of data (see sep list); 2. Reliance on data and other information supplied by others; 3. Review of data - the actuary should review the data for reasonableness and consistency, unless such a review is not practical; 4. Limitation of the actuary's responsibility - the actuary is not required to audit the data or determine whether data supplied by others is intentionally misleading; 5. Use of data - the actuary must decide whether the data is of sufficient quality, if adjustments need to be made, or if data defects prevent the analysis from being done; 6. Documentation regarding data quality (see sep list)
When using past experience to project future results, adjust for material changes in:
1. Selection of risks; 2. Demographic and risk characteristics of the insured population; 3. Policy provisions; 4. Business operations; 5. Premium rates, claim payments, expenses, and taxes; 6. Trends in mortality, morbidity, and lapse; 7. Administrative procedures
Non-control group methods for estimating care management savings
1. Services avoided methods - savings are calculated as the estimated cost of a service requested through pre-authorization minus the actual cost after the intervention; 2. Clinical improvement methods - the change in a clinical measure is observed and the resulting improved health and reduced utilization is estimated from outside studies
Models used for outsourcing claims services
1. Shared service - consolidating back-office functions into a centralized office. Outsourced services often include mail intake, scanning, data entry, and certain types of claims processing; 2. Onshore - vendors for these shared services have emerged, enabling the payer to migrate shared functions to lower-cost third party partners. Over time, vendors moved to near-shore and off-shore locations to remain competitive; 3. Near-shore - setting up operations in English-speaking locations such as Canada. But increasing local labor costs contributed to the migration to other parts of the world; 4. Off-shore - setting up locations in areas such as India and the Philippines. Must address occasional technology issues, must clearly delineate responsibilities and communication protocols, and must address legal, public relations, and human resource issues
Fraud control improvements related to health care reform
1. Significant additional financial resources for fighting fraud; 2. High-level cabinet member support for the fight against health care fraud; 3. Higher screening standards for billing Medicare and Medicaid; 4. More coordinate exclusion between Medicare and Medicaid once a provider is kicked out of a program; 5. Requirements that providers implement compliance programs; 6. Allowing the government to suspend payments to certain providers suspected of fraud based on "credible allegations" of fraud; 7. Numerous statutory amendments that make it easier to prosecute health care fraud
Recommended practices for actuaries providing expert testimony
1. Take reasonable steps to ensure the testimony is not used to mislead other parties; 2. May act as an advocate for a principal, but still must comply with Code of Professional Conduct and use appropriate assumptions and methods; 3. Should identify the principal on whose behalf the expert testimony is given; 4. If calculations are performed using prescribed or alternative assumptions, state whether the results are consistent with your expert opinion; 5. Subject to the constraints of the forum (e.g., if the court allows it), may refuse to answer hypothetical questions that are based on assumptions you believe to be unreasonable; 6. Not required to volunteer information that may be adverse to the interest of the principal; 7. Be mindful of past statements you have made. If different methods or assumptions are now being used, be prepared to explain why
Smoothing methods to apply to development factors
1. Simple averaging - average development factors for each lag month (3 month average is very current, 12 month average is smoothest but may bury trends); 2. Removing bumps - throw out the high and low factors and use 6 of the last 8 or 10 data points. Or remove large "shock" claims from the claims triangle and analyze them separately; 3. Weighted averaging - give more credibility to most recent results (sum of digits, squared sum of digits, constant declining %); 4. Other types of means- harmonic (use the reciprocal of the "mean of the reciprocals") or geometric (the nth root of the "product of n observations"); 5. Dollar weighted methods (prior methods have been ratio weighted) - compute smoothed age-to-age factors directly by average the payment amounts for a given lag month and then dividing by the average for the prior lag months; 6. Per member age-to-age ratios - before calculating age-to-age ratios, divide payments in each lag by the exposure for that lag. Then use one of the above methods
When to do cash flow testing
1. Situations where cash flow testing is needed: a) Where there are material asset risks, b) Where there are liabilities that have cash flows far out into the future, c) Where a company has a new or rapidly growing line of business, d) Where policyholder options are likely to result in antiselection; 2. Situations where cash flow testing is not needed: a) Products with short-term liabilities supported by short-term assets, b) Business that is not sensitive to changes in economic conditions or interest rates, c) If the risk being evaluated is unanticipated sources of significant claims (past examples include AIDS or asbestos)
HIPAA requirements that increased antiselection in the small group market
1. Small group carriers and HMOs must offer all of their major medical and comprehensive health insurance products on a guaranteed acceptance and renewal basis (with very limited exceptions); 2. Individuals cannot be rejected or singled out for special rating treatment due to their health; 3. Pre-existing condition limitations or exclusions cannot be imposed on individuals who have had continuous coverage for more than 12 months
Sources of requirements and guidance for setting reserves
1. State laws and regulations - these often prescribe certain requirements for calculating reserves or particular language to include in the actuarial opinion; 2. NAIC Accounting Practices and Procedures Manual (APPM) - is intended to be used in situations where state regulations are silent; 3. NAIC annual statement instructions - these specify what should be included in various annual statement line items. The health instructions also include standard wording for the actuarial opinion; 4. ASOPs; 5. Health Reserves Guidance Manual - is intended to assist actuaries that estimate reserves and examiners who review the financial statements; 6. Actuarial practice notes - developed to provide information on current practices in new and developing areas. They are not binding on any actuary
Recommended practices for preparing health filings
1. State the purpose of the filing - including the regulatory requirements that the filing intends to comply with; 2. Understand the business plan, and use assumptions consistent with that plan; 3. For projecting future results, use past experience that is properly adjusted (see sep list); 4. Recognized pertinent plan provisions, such as: a) Plan documents, b) Administrative procedures, c) Plan interpretations that are not written in the plan documents; 5. Projections of capital and surplus should account for future actions that are likely to have a material effect; 6. Projections done to compare results with a regulatory benchmark should be based on appropriate available information; 7. Assumptions should be reasonable in the aggregate, and for each assumption individually.
Reserve standards for the different types of financial statements
1. Statutory statement - the focus is on ensuring solvency, so reserves tend to be conservative; 2. GAAP statement - the focus is on matching profit streams with revenue streams, with a lesser degree of conservatism (through provisions for adverse deviation); 3. Tax statement - the IRS standards make sure profits beyond a set level are recognized, and therefore taxed, immediately; 4. Embedded value based statement - may be needed for international companies. Standards are set by the International Accounting Standards Board.
Steps of the development method
1. Summarize data by incurral vs. paid month to get a claims triangle; 2. Sum cells of the claims triangle to get cumulative incurred and paid claims; 3. Develop age-to-age development factors (ratio of month to month cumulative claims); 4. Can use various methods to smooth the age-to-age development factors (see sep list); 5. Calculate age-to-ultimate development factors (called completion factors) from the smoothed age-to-age factors; 6. Divide each month's paid claims by its completion factor to get ultimate incurred claims; 7. Subtract paid claims from the ultimate incurred claims to get unpaid claims liability
Types of behavioral health care services delivered by public sector networks
1. Supervised living - includes community-based residential detoxification programs and rehabilitation in halfway or quarter-way houses; 2. Programs for assertive community treatment - multidisciplinary teams delivery services directly in the community to people who demonstrate chronic symptoms and a pattern of relapsing; 3. Peer support - consumers who have recovered work under the supervision of a behavioral health provider that assists patients in building confidence and in improving life skills; 4. Continuous treatment teams - multidisciplinary teams provide a range of services in an effort to prevent a child from needing to be removed from the home and placed in a more restrictive level of care; 5. Community case management - workers coordinate care and social services delivered within the community
Sources of data on member satisfaction
1. Surveys of current members - to evaluate service levels and determine what issues are important to members. May be focused on a few issues the plan wants to study, or may be broad and comprehensive; 2. Disenrollment surveys; 3. Telephone response time and waiting time studies; 4. Surveys of clients and accounts
People needed for processing claims transactions
1. Technically-proficient personnel who support EDI transmissions; 2. Clerical personnel who initially prep paper claims; 3. Claims processors who adjudicate claims and make adjustments; 4. Supervisors and managers who interpret policies and run daily operations; 5. Specialized staff who support analytics, reporting, and continuous process improvements; 6. Directors and vice presidents who strategically manage investments in claims capability and hire key talent
Challenges related to delivering telehealth care
1. Technology infrastructure - the technologies available are constantly expanding; 2. Cost - the capital investment required for telehealth infrastructure can be prohibitive for some organizations and communities; 3. State licensing and regulation - professionals who use telemedicine technology across state lines must apply for a separate license in each state; 4. Payment - a number of payers have recently started covering telehealth and "web visits" for their members
Disclosure requirements for assumptions and methods used in an actuarial report
1. The communication should identify the party responsible for each material assumption and method; 2. If the assumption or method is prescribed by law, disclose the applicable law, the assumptions or methods affected, and that the report was prepared in accordance with the law; 3. If a material assumption or method is selected by another party, the actuary has three choices: a) If it does not conflict with the actuary's professional judgment, no disclosure is needed, b) If it significantly conflicts with the actuary's professional judgment, then disclose this fact, c) If the actuary is unable or not qualified to judge its reasonableness, then disclose this fact; In the case of either b or c, also disclose the affected assumption or method, the party who set it, and the reason it was set by this party, rather than by the actuary
Areas where actuaries can be involved with care management programs
1. The economics of care management programs - help with understanding the relationship between care management program inputs and outputs; 2. Risk adjustment and predictive modeling: a) Predictive modeling is used to identify candidates for intervention programs, b) Risk adjustment is used to assess outcomes; 3. Financial outcomes evaluation - help in achieving comparability between the reference and the intervention population
Considerations in assessing hospital quality
1. The hospital should have the appropriate accreditation (from the state, CMS, and the Joint Commission); 2. Consider the results of the Joint Commission on-site surveys; 3. American Hospital Association information (on hospital facilities, personnel, and services); 4. Consider whether the hospital is a major teaching hospital (these have lower mortality rates for certain conditions); 5. Review hospital quality ratings provided by The Leapfrog Group and HealthGrades; 6. Review government data sources on hospital performance; 7. For specific procedures or conditions of interest, consider questioning the hospital directly, regarding volume of admissions, complication and mortality rates, and success rates
Principles for designing care management programs
1. The intervention population should be chosen carefully; 2. The economics of the program should be analyzed carefully (since interventions can be costly); 3. The objectives of a program should be clearly defined, and the program should be designed to achieve those goals; 4. Interventions require the active participation of both providers and patients; 5. Financial savings may take a long time to emerge
Formula for deferred acquisition cost (DAC) reserves
1. The notation: z_i_E_x = deferrable expenses at age x, duration I, and issue year z, i_P_x^E = net expense premium at age x, duration I, and issue year z; 2. The formula on a per surviving policy basis: z_t_DAC_x^s = sum (i=0 to t-1) { [1 / tpx] * (1+i)^t * [E - P] (AV formula)
Key metrics in the design of disease management programs
1. The number and risk-intensity of members to be targeted - the number must be large enough to produce savings that offset implementation costs, but not so large that marginal costs exceed marginal savings; 2. Types of interventions to be used in the program - such as mail or automated outbound dialing; 3. The number of nurses and other staff needed for the program, and program costs; 4. The methodology for contacting and enrolling members; 5. The rules for integrating the program with the rest of the care management system; 6. The timing and number of contacts, enrollments, and interventions; 7. The predicted behavior of the target population if there were no intervention, and the predicted effectiveness of the intervention at modifying that behavior
Future trends that will affect pharmacy program management
1. The patent loss of approximately $90 billion of brand name drugs, resulting in low-cost trends; 2. A simultaneous increase in the number of specialty drugs approved by the FDA; 3. Due to the high cost of specialty drugs, health plans will integrate some portion of their medical and pharmacy management; 4. By 2019, the number of beneficiaries in Medicare and Medicaid will grow by 30%; 5. Due to the ACA and CMS policy, there will be several initiatives to measure and promote practice patterns and risk-sharing contracts that improve outcomes and the quality of care; 6. New technologies will support accountable care organizations and patient-centered medical homes; 7. Health plans and pharmacy benefit managers (PBMs) will likely implement greater restrictions on their formularies
Required documentation related to data quality
1. The process the actuary followed to evaluate the data, and any limitations due to data that was not reviewed; 2. A description of any material defects the actuary believes are in the data; 3. A description of any adjustments or modifications made to the data; 4. The source of the data; 5. Any limitations on the use of the actuarial work product due to data quality issues; 6. Any unresolved material concerns the actuary may have about the data; 7. Any results that may be biased due to data quality issues, including the magnitude of the bias; 8. Disclosures in accordance with ASOP #41 in the following situations: a) If any material assumptions or method was prescribed by law, b) If the actuary relies on other sources and thereby disclaims responsibility for any material assumption or method, c) If the actuary has otherwise deviated materially from ASOP guidance
Considerations when selecting risk characteristics to use in a risk classification system
1. The relationship between the risk characteristics and expected outcomes. Rates are considered equitable for a given risk characteristic if differences in rates reflect material differences in expected cost; 2. Causality - the risk characteristics should be related to expected outcomes, but it is not necessary to establish a cause and effect relationship; 3. Objectivity - select risk characteristics that are capable of being objectively determined; 4. Practicality - reflect the tradeoffs between practical and other relevant considerations; 5. Applicable law - consider whether the law limits the choice of risk characteristics; 6. Industry practices - consider usual and customary risk classification practices for the given situation; 7. Business practices - consider limitations created by business practices for the given situation
Items included in an actuarial appraisal report
1. The scope of the assignment and any limitations as to the availability of the data; 2. The actuary's principal (client or employer); 3. The duty, if any, that the actuary is assuming with respect to any user of the report other than the actuary's principal; 4. A description of the intended use of the report; 5. A description of the business being valued; 6. The appraisal date; 7. An appraisal value or range of appraisal values; 8. The methodology used to develop the appraisal and reasons for the choice of methodology; 9. The projection model, the accounting basis used, and other key items included in the analysis; 10. The results of the model validation; 11. A discussion of the level of capital reflected in the appraisal and how this level was determined; 12. The assumptions, described in sufficient detail that another actuary qualified in the same practice area could evaluate their reasonableness; 13. The sources of any assumption selected by someone other than the actuary; 14. The extent to which taxes have been considered and on what basis; 15. Any sensitivity testing results deemed material by the actuary; 16. The source and extent of reliance on information supplied by others; 17. Disclosures in accordance with ASOP #41 if applicable
Information needed for reviewing and certifying small group rates
1. The small group rate manuals used during the rating period being reviewed; 2. The small group rate manuals used during the prior period; 3. The policy and certificate forms used for the business; 4. Listing of groups in force during the testing period, and the following for each group: a) Rates charged in the current and prior period, b) Group size, c) The value of allowable case characteristics, d) The value of any change in benefit from the previous year; 5. Depending on the type of certification required, may also need: a) Loss ratio and claim experience reports, b) Sales brochures and other solicitation materials, c) Description of the underwriting procedures, d) Underwriting results for each new group, e) Marketing materials, f) Underwriting manual
Characteristics of successful multiple-employer health plans
1. The sponsoring association is a strong entity with a high percentage of eligible firms participating; 2. There is a large pool of eligible members; 3. There is a relatively small average employer size
Information to include in a statement of actuarial opinion
1. The words "statement of actuarial opinion" (or alternative required wording) in the title; 2. The intended users; 3. The intended purpose; 4. The liabilities being opined upon; 5. The stated basis of the amounts presented; 6. The scope of the analysis underlying the opinion and the review date if different from the date the opinion is signed; 7. The type of opinion (see sep list)
Formulary guidelines for Part D plans
1. There are 146 therapeutic categories that must be included; 2. If a generic is available, it must be included; 3. If the pharmacy dispenses a brand name drug, it must inform the patient of any differential between the price of the brand and the lowest-price generic of that drug; 4. Preferred drug rebates must go to the payer to decrease the cost of the program; 5. At least 2 drugs must be included in each "key drug type" category; 6. The formulary must include prior authorizations, step therapy, generic drug requirements, and preferred brand name drugs; 7. Substantially all drugs in the following classes must be included: antidepressants, antipsychotics, anticonvulsants, anticancer, immunosuppressants, and HIV/AIDS medications
Reasons why employers should focus on the quality of health care
1. There are numerous errors in the delivery of health care services; 2. There is substantial evidence of extensive overuse and underuse of various health care services; 3. Lack of attention to quality of care can have negative consequences in relationships with employees, providers, and others in the community; 4. Poor quality of care erodes the value of health care purchases
Disadvantages of self funding
1. There is no risk transfer - the plan sponsor is liable for losses that exceed expectations; 2. Budgeting - fluctuations in benefit plan costs from month to month must be managed; 3. Administration - the sponsor must arrange for all services needed by the plan; 4. Legal liability - the sponsor may be liable for actions taken by the plan that adversely affect employees
Statistical methods for estimating care management savings
1. Time-series method - a curve is fit to the data over time and a divergence from this best-fit line can be observed once the intervention is applied; 2. Regression discontinuity - a line is fitted to data that relates pre- and post-intervention experience. A dummy variable is used to test whether the intervention produced a change. For example: Y_i = B_0 + B_1*X_i + B_2*Z_i + E, where: a) X = independent variable (year 1 cost), b) Y = dependent variable (year 2 cost), c) Z = dummy variable for the intervention in question, d) B = regression coefficients and E = random errors; 3. Benchmark methods - the values of certain key statistics are compared between the population being managed and some benchmark populations
Purposes of actuarial standards of practice
1. To offer guidance and provide a framework for performing work - ASOPs do not dictate a single approach or mandate a particular outcome; 2. To be used by qualified actuaries - others should obtain the advice of a qualified actuary before relying on ASOPs; 3. To be principles-based and leave room for the actuary to use professional judgment - ASOPs do not attempt to dictate every step and decision in an actuarial assignment; 4. Not to shift the burden of proof in litigation - failure to satisfy an ASOP provision should not, in and of itself, be presumed to be malpractice
Core competencies of the claims functions
1. Transactional processing (the primary competency) - the handling and adjudication of health care claims. Requires business process that govern policies and procedures for: a) Initially handling submitted claims, b) Adjudicating claims for payment or denial, c) Resolving suspended claims, d) Administering other party liability (OPL) programs, e) Reopening claims due to errors or appeals; 2. Quality control - focuses on the functions and processes of the claims function, including customer service and appeals. Includes testing upstream files to find errors before claims are processed. Also includes audits and retraining after claims are processed; 3. Service delivery to both internal and external customers - must decide whether to place customer call centers in the claims area (which allows adjudicators to more quickly adjust errors and resolve suspended claims) or outside the claims area (staffed by people who can answer non-claims questions as well); 4. Information management and analysis - collection and management of data fundamental to the payer and its customers. Claims data analysis (often done by an informatics function) provides customer insights that are critical to managing the business
Claim types commonly excluded from disease management program evaluations
1. Trauma and accident; 2. Behavioral and substance abuse; 3. Malignant neoplasm; 4. Maternity and childbirth claims; 5. Pharmaceutical drugs
Considerations in rating specific stop loss
1. Trend leveraging - effect increases as the deductible increases; 2. Area leveraging - works in the same way as trend leveraging (if an area is 10% higher cost, it has same leveraging effect as a 10% trend rate); 3. Network leveraging - network discounts also leverage; 4. Variations by age and sex - for excess medical costs, males are more expensive than females at all ages, partly due to prevalence of accidents among young males; 5. Underlying plan design - such as maximums, managed care features, and extension of benefit provisions; 6. Industry - may adjust rates based on industry of plan sponsor; 7. Contract type - a 12/12 contract is less costly than a 12/15. Watch for antiselection by contract type
Types of premium reserves
1. Unearned premium - reserve for the premium that has been received to cover the portion of the coverage period which hasn't yet occurred (usually a pro-rata portion of the last premium received); 2. Premium paid in advance - reserve for premiums paid in advance for future coverage periods; 3. Premium due and unpaid - an asset is created on the statement for the amount of premium that is expected to be received; 4. Policy reserves - money set aside to account for current funding of costs over the future lifetime of the policy
Limitations and measurement challenges (quality and efficiency)
1. Uninsured populations not included; 2. Size and complexity of US health care system: various stakeholders (Medicare, Medicaid, employer-based, individual), decentralized (hosp/phys have different measurement approaches and standards of care), FFS is based on volume of services and not results; 3. Definition of quality - various exist (access, disparities in care, member satisfaction, service quality, timeliness); 4. Different approaches to measure quality and efficiency in the healthcare industry - formal studies vs macros measures; 5. Diverse stakeholders and goals and therefore perspectives - business interest & financial incentives of buyers/sellers misaligned; 6. Fast pace of change of measurement practices (financial challenges, new legis, tech changes)
Types of statements of actuarial opinion
1. Unqualified opinion: a) For NAIC Health Annual Statements, says the reserve amount makes good and sufficient provision for all unpaid claims and other actuarial liabilities, and that obligations are covered even under moderately adverse conditions, b) In other circumstances, says the liability and asset amounts are reasonable for the intended purpose; 2. Adverse opinion: a) For the NAIC Health Annual Statement, says the aggregate amount established is not sufficient for the actuary to provide an unqualified opinion, b) In other circumstances, says the liabilities fall outside a reasonable range for the specified purpose; 3. Qualified opinion - issued when there are certain liabilities or assets that the actuary believes cannot be reasonably estimated or for which the actuary is unable to render an opinion; 4. Inconclusive opinion - issued when the actuary cannot reach a conclusion due to deficiencies or limitations in the data, analyses, assumptions, or related information
Metrics for measuring financial performance of pharmacy programs
1. Various cost parameters (e.g., program expenses, billed and paid claims, and copayments); 2. Prescription utilization and trends; 3. Administrative and claims processing fees; 4. Prescription discount or rebates; 5. Generic dispensing and conversion rates and missed generic substitution opportunities; 6. Drug formulary conformance rate; 7. Patient satisfaction and member complaints related to the pharmacy program; 8. Number of drug formulary prior authorization exception requests and approvals; 9. HEDIS measures related to pharmacy; 10. Drug utilization review exception reports
Questions answered by a market assessment
1. What exists in the market today?; 2. What is the product objective for the consumer?; 3. What is the regulatory environment for this product?; 4. What are the financial value and other benefits for the consumer?; 5. What are the price targets? (the assessment may indicate a range of acceptable prices); 6. What is the likely reaction from competitors?; 7. How will the sales team react?
Underwriting considerations in setting a specific stop loss rate
1. Whether any of the current known large losses will have an effect on the upcoming policy year. The underwriter may rate the policy up for the known loss, set a separate specific deductible for it (lasering), or exclude it from the coverage (rarely done); 2. How often the plan sponsor switches stop loss insurers; 3. Whether or not the specific stop loss deductible is appropriate for the plan; 4. Whether the producer has an established track record of success with the insurer; 5. Specific stop loss rate history; 6. Historical specific stop loss experience
Cash flow analysis documentation required by actuarial standards
1. Whether any prior analyses were relied upon; 2. The purpose of the analysis and the risks analyzed; 3. The type of analysis performed (such as cash flow testing); 4. The results of the analysis; 5. The actuary's conclusions or recommendations; 6. Any conclusions or recommendations related to sensitivity testing; 7. The data, assumptions, and methods used
Required attributes of claims policies and procedures
1. Written - should identify who does what, when, and how it is measured or verified. Should also show a history of changes; 2. Thorough - should account for every step of the process; 3. Cross-functional - procedures that cross departmental lines should be developed with other department so that each department's procedures are clearly defined; 4. Current - claims personnel must feel confident that the policies and procedures are up to date, or else they will not refer to them; 5. Accessible - most payers use intranets or knowledge management tool to make searching for applicable polices and procedures more efficient; 6. Consistent with external information - should correspond with information in marketing materials, member handbooks, provider guides, and on the payer's website; 7. Shared with partners - to ensure consistent and accurate claims processing outcomes
Principles for determining premium deficiency reserves
According to the American Academy of Actuaries PDR work group: 1. Situations that result in a PDR being established include: a) A block of business expected to have near-term losses, b) A block of business expected to be profitable in the near term, but long-term guarantees will cause it to be unprofitable over the projection period; 2. Should minimize false positives - no PDR should be required unless there is a meaningful potential for loss; 3. Should minimize false negatives - a PDR should be required whenever there is an expectation for loss
Pros and cons of capitation
Advantages for the HMO: 1. Gives the provider an incentive to reduce medical expenses and utilization; 2. Eliminates incentive to overutilize and aligns the provider's incentives with those of the HMO; 3. Costs are more easily predicted by the health plan; 4. Is easier and less costly to administer than FFS; Advantages for the provider: 1. Provides good cash flow: money comes in at a predictable rate and as prepayment; 2. For physicians who are effective at managing costs, profit margins can exceed those found in FFS; Disadvantages: 1. There is no immediate reward when the provider performs a service (as there is with FFS), since payment has already been received; 2. A physician's success is subject to a significant amount of luck, especially if the physician has relatively few capitated patients; 3. Capitation incentivizes a physician to withhold necessary care
Advantages and disadvantages of stochastic approaches for reserving
Advantages: 1. Provides explicit guidance for establishing provision for adverse deviation in the reserves; 2. Provides guidance on potential variability in reported earnings and reserve levels; 3. Allows for quantifications of variability in items such as seasonality and claim trend; 4. Allows for improved evaluation of reserve estimates (by knowing the variability of the estimate); Disadvantages: 1. Some audiences that are unfamiliar with this approach may have a false sense of confidence in the approach because of its sophistication; 2. May be too complex to be used by all individuals who must perform related functions (such as forecasting and pricing); 3. Not every process can be modeled rigorously
Recommended practices for performing actuarial appraisals
An actuarial appraisal is an appraisal of an insurance business presenting a set of actuarial appraisal values base on a range of discount rates and assumptions: 1. When setting assumptions: a) Consider historical experience, adjusted for trend and known environmental changes, b) Ensure that each set of assumptions used is internally consistent, c) Consider the circumstances, needs, and strategies of the intended audience; 2. Consider displaying appraisal values using several discount rates; 3. Perform validation tests to determine whether the model reasonably reproduces results; 4. Address the sensitivities of the appraisal value to changes in key assumptions; 5. Provide documentation in sufficient detail that another actuary qualified in the same practice area can evaluate the reasonableness of the work
The seven elements of an effective compliance program for health care plans to prevent fraud
As identified by the Office of the Inspector General (OIG): 1. Develop written policies and procedures; 2. Designate a compliance officer and other appropriate bodies; 3. Conduct effective training and education programs; 4. Develop effective lines of communication; 5. Enforce standards through well-publicized disciplinary guidelines; 6. Conduct internal monitoring and auditing; 7. Respond promptly to offenses and develop corrective action
Formulas for calculating disease management program savings
Based on the actuarially-adjusted historical control design ( a temporal control group method): 1. Savings = [ChrUtil_prior year * (1+trend) - ChrUtil_actual] * Chronic members * Cost per service; ChrUtil is the utilization rate per chronic member; The trend rate comes from the non-chronic population of the health plan; 2. Savings PMPM = Savings/ Member months
Institute of Medicine definition of quality care
Definition - the degree to which health services increase the likelihood of desired health outcomes and are consistent with current professional knowledge; Aims for high-quality care: 1. Safe - avoiding injuries to patients; 2. Effective - providing services based on scientific knowledge to all who could benefit, and refraining from providing services to those not likely to benefit; 3. Patient-centered - providing care that is respectful of and responsive to individual patient preferences, needs, and values; 4. Timely - reducing waits and sometimes harmful delays; 5. Efficient - reducing waste, including waste of equipment, supplies, ideas, and energy; 6. Equitable - providing care that does not vary in quality because of personal characteristics
Definition and types of drug formularies
Definition of drug formulary - a continuously updated list of covered drugs and access rules (such as a tier structure and dispensing limitations). It should be supported by current evidence-based medicine and the judgment of physicians, pharmacists, and other experts: 1. Open formulary - generally covers most drugs (exceptions may include cosmetic or over-the-counter drugs); 2. Closed formulary - does not cover as many drugs. Drugs not included in the formulary are not eligible for payment except by an approved medical exception
Non-risk-based physician payment methodologies
Fee-for-service: 1. Straight charges - physician are paid full billed charges; 2. Usual, customary, or reasonable (UCR) - physicians are paid up to the prevailing fee, which comes from percentiles of physician charges and varies by geography and specialty; 3. Percentage discount on charges; 4. Fee schedule - a list of the maximum amount the health plan will pay for each type of procedure. The plan pays the lesser of this amount and the physician's charges; 5. Relative value scale (RVS) - each CPT code has a relative value associated with it called a relative value unit RVS. The physician payments equals the RVU times a multiplier; 6. Resource- based relative value scale (RBRVS) - each CPT code has three RVUs and the multiplier is applied to the sum of the three. The RVUs reflect the difficulty of providing the procedure, the practice cost, and the cost of medical malpractice insurance; 7. Percent of Medicare RBRVS; 8. Special fee schedule or RVS multiplier - large medical groups and health systems have been able to demand larger fees, which are commonly determined through a larger RVS multiplier; 9. Facility fee add-on - when a hospital runs the clinics or office used by the physicians, it commonly adds on a separate fee that is paid to the facility; 10. Electronic (or online visits) - some payers are now paying physicians for providing care via secure email or similar applications; Case rates and global fees - a single payment that encompasses all professional services delivered in an episode (such as all costs related to a normal pregnancy). May be subject to additional outlier fees (based on a discount off charges) if significant complications occur
Significant financial risk (SFR) legislation
Incentive arrangements that are at SFR (Stop loss for provider is required if SFR is present: Agg covering 90% of referral service cost > 25% of potential payments or Per Patient SL covering 90% of referral costs exceeding stated limit): 1. Withholds > 25% of potential payments; 2. Bonuses > 33% of potential payments - Bonus; 3. Withholds + Bonus > 25% of potential payments, 4. Max potential referral payments - Min potential referral payments > 25% of max potential payments (for capitation arrangements);
Assumptions needed to estimate premium deficiency reserves
PDR = PV of future claim costs and expenses less PV of future premiums and current reserves (all types of reserves: contract, claim, and premium); Use assumptions that are realistic rather than conservative; 1. Rate increases - must be reasonable and likely to be implemented and approved; 2. Enrollment - cannot project that new entrants will improve morbidity unless there is historical experience to justify this assumption; 3. Lapses - should reflect any potential antiselection, particularly if induced by rating actions; 4. Expenses - if other policies can be expected to cover overhead, then zero overhead costs may be assumed (reflect only operating costs); 5. Claims trend - reflect reasonable increases in claim costs; 6. Interest rates - reasonable interest rate assumptions should be used to discount deficiencies; 7. Taxes - these reserves are calculated on an after-tax basis; 8. Provider arrangements: a) Provider settlements under risk sharing arrangements should not be used to offset claims unless they have been specifically determined and billed to the providers, b) Include capitations as claim costs at the level negotiated. Recognize that if the provider goes insolvent, the discounts are lost and costs will rise; 9. Reinsurance - the calculation of the reserve is usually net of reinsurance
Typical retrospective refund formula
Policyholder account balance = prior year's balance + premium + investment earnings - charged claims - expenses - risk charge - increase in stabilization reserve - profit: 1. Prior year's balance - ending balance is carried forward if not eliminated at prior year's end; 2. Premiums - amount may be adjusted for interest based on the timing of the payment; 3. Investment earnings - very important for coverages with significant reserves; 4. Charged claims = claims paid + increase in claim reserves - pooled claims + pooling charges + conversion charges + claim margins (may adjust claims for credibility); 5. Expense charges typically vary by duration to allow for the recovery of acquisition costs; 6. Risk charge covers the risk that the policyholder will terminate coverage while in a loss position; 7. Addition to premium stabilization reserve - to reduce the risk of a deficit on termination. The insurer may require certain level of reserve before surplus can be paid as an experience refund; 8. Profit - usually built into other assumptions since the insurer is reluctant to show explicit profit in the formula
Steps of the product development cycle
Product development is the process by which new products are created and existing products evolve: 1. Innovate - consists of: a) Understanding the company's strategic perspective, b) Development of new ideas (see sep list), c) Idea screening - check for consistency with corporate goals and feasibility with the corporation's abilities, d) Market assessment - to determine if a market exists for the product (see sep list); 2. Design the product - this phase consists of determining the product structure, plan design options, contribution requirements, and regulatory compliance; 3. Build the product (see sep list); 4. Sell the product - the product is often test marketed, after which revisions are done before it is mass marketed; 5. Assess the product - monitor financial results and consumer and market feedback; 6. Revise the product - changes may be indicated by the product assessment, regulatory requirements or consumer demand
Formulas for policy reserves on a per original issued policy basis
Prospective formula: PV of Future Claims - PV of Future NET Premiums; Retrospective formula: AV of Past Net Premiums - AV of Past Claims; Two-year full preliminary term prospective formula: Reserve = 0 for years 0 and 1, policy is treated as if it was issued 2 years later than it was and the policyholder is 2 years older
Data to include in a data warehouse for provider profiling purposes
Provider profiling is the identification, collection, collation, and analysis of data to develop a characterization of the provider's performance: 1. Unique patient identifier; 2. Diagnostic information (e.g. ICD-10 codes); 3. Procedural information (e.g. CPT and HCPCS codes); 4. Level of service information; 5. Paid and allowed dollar amounts from services ordered by the physician or health care facility; 6. Unique provider identifier
Methods for adjusting development method reserve estimates for recent months
Replace completion factors that are less than 40-70% with estimates based on: 1. Projection method; 2. Loss ratio method; 3. Credibility-weighted average of development results with the projection or LR method results
ERISA requirements for internal appeals
State requirements typically conform to these standards: 1. An individual must have at least 180 days to file an appeal; 2. The plan must provide claimants with information relevant to their claims; 3. The appeal must be reviewed by someone new who is not a subordinate of the person who made the initial decision. The reviewer must give no consideration to the initial decision; 4. Urgent appeals must be reviewed as soon as possible, but not later than 72 hours after the plan receives the review request; 5. Preauthorization and postservice appeals must be reviewed within a reasonable period of time (but not later than 30 days for preauthorization appeals and 60 days for postservice appeals); 6. An individual may obtain an independent external review of a denied claim
Optional "categorically needy" groups for Medicaid eligibility
States can choose whether to provide Medicaid coverage to these groups: 1. Infants up to age 1 and pregnant women not covered under the mandatory rules whose family income is below 185% of FPL; 2. Optional targeted low-income children; 3. Certain aged, blind, or disabled adults who have incomes above those requiring mandatory coverage, but below the FPL; 4. Children under age 21 who meet income and resources requirements for the Temporary Assistance for Needy Families (TANF) program, but who otherwise are not eligible for TANF assistance; 5. Institutionalized individuals with limited income and resources; 6. Persons who would be eligible if institutionalized, but are receiving care under home and community-based services waivers; 7. Recipients of state supplementary payments; 8. Tuberculosis-infected persons who would be financially eligible for Medicaid at the SSI level; 9. Low-income uninsured women who are in need of treatment for breast or cervical cancer
Situations that result in disenrollment from MA plans
The MA plan must disenroll a member in the following situations: 1. A change in residence that makes the member no longer eligible to be served by the plan; 2. Loss of entitlement to Parts A and B; 3. In the case of a SNP, the member no longer meets the requirements for participation; 4. Death of the member; 5. The MA plan no longer serving the area where the member resides; The plan, but is not required to, disenroll members for the following reasons: 1. Failure to pay premiums on a timely basis; 2. Disruptive behavior, 3. Fraud committed in the enrollment request or allowing improper use of the identification card
Operational functions performed by the modern claims capability
The claims capability (or claims function) is the set of operational functions that process claims from receipt to issuance of payment and/or explanation of benefits (EOB): 1. Receipt of electronically submitted claims through electronic data interchange (EDI); 2. Receipt of paper claims; 3. Initial auto adjudication; 4. Second attempt at auto adjudication following resolution of certain suspension edits; 5. Manual processing for claims that cannot be auto adjudicated; 6. Check-writing process; 7. Issuance of EOB and/or remittance advice; 8. Completing appropriate prepayment and postpayment analytics; 9. Archiving claims record and data
Disclosures required in an actuarial report
The report states the actuarial findings and identifies the methods, procedures, assumptions, and data used: 1. the intended users of the report; 2. The scope and intended purpose of the report; 3. The acknowledgement of qualifications as specified in the Qualification standards; 4. Any cautions about risk and uncertainty; 5. Any limitations or constraints on the use or applicability of the findings; 6. Any conflict of interest; 7. Any information on which the actuary relied that has a material impact on the findings and for which the actuary does not assume responsibility; 8. The information date (date through which data and other information has been considered); 9. Subsequent events (may have a material effect on the actuarial findings); 10. If appropriate, the documents comprising the actuarial report
Mandatory "categorically needy" groups for Medicaid eligibility
These groups must be given Medicaid coverage: 1. Limited-income families with children who meet requirements in the state's Aid to Families with Dependent Children plan; 2. Supplemental Security Income (SSI) recipients; 3. Infants up to age 1 born to Medicaid-eligible pregnant women; 4. Children under age 6 and pregnant women whose family income is at or below 133% of the FPL; 5. Children under age 19 in families with income at or below the FPL; 6. Recipients of adoption or foster care assistance; 7. Certain people with Medicare; 8. Special protected groups who may keep Medicaid for a period of time, such as those who lose SSI payments due to earnings from work or increased Social Security benefits
Elements of the Fraud Triangle
These must be present for fraud to occur: 1. Pressure - can come in various ways, such as from a need to pay medical bills or to fuel a drug or gambling addiction; 2. Opportunity (or ability) to commit fraud - in health care, committing fraud has historically been fairly easy; 3. Rationalization (excusing behavior) - for some, cheating the government or a health insurer is acceptable. For others, conditions of the economy or unemployment provide rationalization
Methodology for assigning beneficiaries to an ACO
Two step process: 1. Beneficiary is assigned to ACO if physicians in that ACO account for the largest amount of total Medicare allowable charges for that beneficiary's primary and preventive services for the most recent 12 months; 2. CMS will review claims for remaining unassigned who has at least one primary or preventive service by a provider in an ACO