The Health Insurance Market in Virginia. Maureen Dempsey, MD, MSc, ACC, FAAP Anthem Blue Cross and Blue Shield June 8, 2017

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1 The Health Insurance Market in Virginia Maureen Dempsey, MD, MSc, ACC, FAAP Anthem Blue Cross and Blue Shield June 8, 2017

2 Anthem Inc. at a Glance Broad geographic footprint and customer base ` BCBS plans in 14 states and Medicaid presence in 12 states BC or BCBS licensed plans (14) Medicaid presence - sell as Amerigroup (12) 22

3 Anthem Inc. at a Glance 40M medical members 53,000 associates $43.7B market capitalization (ANTM) $84.1B total operating revenue $2.47B net income (2016) 33

4 Anthem Inc. at a Glance 40 million Total medical members 39% Increasingly diverse customer base ( 000) Local group 15,400 National Accounts 7,700 Medicaid 6,400 19% 16% 14% BlueCard 5,500 Individual 1,600 FEP 1,500 Medicare 1,400 4% 4% 4% 4

5 Anthem in Virginia Largest health insurer in Virginia 7,100 employees in Virginia Approximately 3 million members in Virginia (all lines of business) Serve Employer, Individual (on and off Marketplace), Senior and Medicaid markets Current competitors: Aetna, United Health, Optima, Cigna, Kaiser 55

6 Value of Health Insurers Medical Management Financial protection Cost management Health care quality improvement Collect and manage data to improve health outcomes Empower and educate health care consumers and help them navigate the system Our role in health care puts us as the hub of the ecosystem with a responsibility to act as a convener and an integrator. Joe Swedish, CEO, Anthem Inc. 66

7 Functional Areas Customer Service Pay claims; answer inquiries Clinical Management Ensure appropriate utilization; improve quality; coach members Provider Networks Manage cost-effective networks; incentivize quality improvement and efficiency Financial Management Price products; ensure adequate reserves Information Technology Provide members and providers with tools to promote efficiency and care coordination Regulatory Ensure compliance federal & state 7

8 Key Challenges in U.S. Health Care System Unsustainable Cost Variation in Quality Lack of Coordination 20% OF GDP BY 2021 $700B WASTE ACROSS U.S. SYSTEM OUT OF $3T 2x COST PER CAPITA VERSUS OECD NATIONS 45% CARE INCONSISTENT WITH RECOMMENDED GUIDELINES $210B UNNECESSARY SERVICES 3x VARIATION IN HOSPITAL DAYS IN LAST 6 MONTHS OF LIFE 19.6% MEDICARE HOSPITAL READMISSIONS $45B ANNUAL COSTS FOR AVOIDABLE COMPLICATIONS $91B REDUNDANT ADMINISTRATIVE PRACTICES 88

9 National Health Care Spending Blue Cross Blue Shield Association: The evolving Affordable Care Act marketplaces: The 2015 to 2016 transition 99

10 Factors Affecting Health Insurance Premiums

11 Where Does Your Premium Dollar Go? Note: Values exceed 100% due to rounding Source: Data sources and methodology are referenced in more detail at 1 Prescription drug costs include outpatient, physician- and self-administered medications but not those administered in inpatient settings 2 Medical expenses as identified in this research differs from Medical Loss Ratio as defined by the Affordable Care Act. 3 Operating costs include consumer-centric activities such as communicating with members, running customer service operations, quality reviews, and data analysis, among other activities

12 Drug Spending Recent reports have projected drug spending in the United States to grow to $560 billion $590 billion by 2020, up from $337 billion in Much of this growth will be fueled by the growing number of high-priced, specialty drugs coming to the market an estimated 225 new specialty drugs over the next five years. While specialty drugs account for less than 2 percent of all prescriptions, they make up roughly 30 percent of spending on all prescription drugs. Almost half (47.8 percent) of the specialty drugs included in this analysis cost more than $100,000 per patient per year. A number of ongoing state and federal efforts are developing to address the significant challenges of high- priced drugs; and in support of these measures, this report attempts to quantify the annual per-patient expenditures for an initial sample of 150 specialty medications

13 Prescription Drug Prices: Then & Now 13 13

14 Key Drivers in Care Variation Reimbursement System Rewards volume over quality or outcomes Patient Preference Lack of information on effectiveness or alternatives Clinical Decision Making Poor integration and coordination across delivery system 14 14

15 Key Metrics Medical Utilization Inpatient Admissions/1000 Average Length of Stay Readmission Rates Outpatient Visits/1000 Physician Visits/1000 Pharmacy Scripts/1000 Unit Cost Cost per Admission Cost per Day Cost per Outpatient Visit Cost per RX Script Enrollment Growth Total Claims Trend Benefit Expense Rates Customer Satisfaction Care Management Disease Management Engagement Rates Member Risk Scores Compliance with Recommended Care Clinical Outcomes Operational Claims Aging Auto-Adjudication Rate Claims Payment Accuracy Average Seconds to Answer First Call Resolution 15 15

16 Future of Healthcare Changing Demographics Aging population; Increase in chronic conditions Shift to Consumer Purchasing Technology Social networks; personal connectivity; data analytics Continued Increase in Consumerism Provider / Payer Consolidation Shift in Provider Payment Structure 16

17 Quality-In-Sights : Hospital Incentive Program (Q-HIP ) Aligns hospital reimbursement with safer and higher quality health care for consumers Measured by nationally vetted and recognized evidence-based indicators developed by organizations such as: Centers for Medicare and Medicaid Services / Joint Commission National Quality Forum The American College of Cardiology and the Society of Thoracic Surgeons Today almost 800 hospitals in Anthem s commercial markets participate in Q- HIP on an at-risk basis, representing >76% of Anthem s annual inpatient admissions. Input from National Advisory Panel on Value Solutions Representatives from health systems and academic medical centers from across the country Acts in an advisory capacity Feedback used to promote Q-HIP alignment with hospital priorities 17 17

18 Q-HIP Scorecard How it Works (Virginia specific) The scorecard is based off of a 100 point scale, with up to 5 additional bonus points available. If a measure on the scorecard is deemed invalid for any reason (service not offered or low volume), the associated points will re-weight across the remaining measures on the scorecard. Scorecard Section Patient Safety Health Outcomes Member Satisfaction Base Section Weight 27 pts 61 pts 12 pts Q-HIP Score Points Points 90+ Points % of Increase Earned No increase earned Partial increase earned 100% of increase earned Points are earned in a stepwise fashion, with between 30% to 100% of the at-risk increase earned based on progressively better score performance. The scale provided to the left reflects an example scale and is not the actual scale used in all markets

19 Payment Methodology 1-3% is the typical range of at-risk increase across Anthem >$500M Incentive Format Any increases earned based on Q- HIP performance are paid out of a goforward 12 month time period. The actual at-risk percentage is unique to each facility and negotiated with each contract renewal. Q-HIP increases may apply to both inpatient and outpatient rates. estimated dollars earned by facilities in 2016 based on their scorecard performance Note: Figures based on Allowed dollars, including Host 19 19

20 Quality-In-Sights : Hospital Incentive Program (Q-HIP ) Recent UVA Health System successes: - 35% improvement in influenza immunizations - Elimination of elective deliveries prior to 39 weeks - 44% reduction in low-risk C-sections - 13% reduction in angioplasty mortality rate 20 20

21 Enhanced Personal Health Care: Measuring Success Shared Savings Dollars paid to providers based on our estimate of savings Cost of Care Savings observed on total medical spend for members Clinical Quality Performance on scorecard quality measures Member Experience Patient satisfaction scores Unit Cost Savings due to adopting value-based payment contracts Revenue and Membership Employer account wins influenced by EPHC 21 21

22 Virginia EPHC Results 7.6% fewer acute inpatient admits per 1, % PaMPM decrease in outpatient surgery costs 5.4% fewer inpatient days per 1,000 $8.75 PaMPM (3%) savings over the first program year 3.9% decrease in acute admissions for high risk patients with chronic conditions 1.5% increase in PCP office visits for members with high risk chronic conditions 22 22

23 LiveHealth Online Online physician visit Provides access to physicians 24 hours a day, seven days a week Compliments physician-patient relationship Cuts down on costs for unwarranted emergency room and doctor visits 23

24 Anthem Mobile Health Changing behavior through highly personalized, integrated health information alerts, education, encouragement Right from their smartphone, members can Record activities to qualify for health incentives. Receive push notifications about care alerts. Read program suggestions relevant to their health. 24

25 ACA Challenges Deteriorating risk pool Purchase when you need it Healthy do not see the value Provider gaming High churn rate make pricing difficult Political and regulatory uncertainty Funding for cost share reduction subsidies Insurer losses and market exits 25 25

26 HHS Market Stabilization Regulations Open Enrollment Dates - Special Enrollment Period (SEP) Verification - Modified Interpretation of Guaranteed Availability (Grace Period) - Levels of Coverage (Actuarial Value) - Network Adequacy, Essential Community Providers, State Reviews 26 26

27 American Health Care Act Because reconciliation must deal with Federal spending, most of the insurance market requirements imposed by ACA remain. Eliminates the employer and individual mandates by zeroing out the penalties beginning in taxable year Creates funding for high risk pools Authorizes insurers to charge a 30% premium penalty for individuals who lacked insurance for longer than 63 days in the preceding 12-month period. Repeals the ACA s Premium Assistance Tax Credits and implements new age-adjusted, advanceable and refundable tax credits. Continues Medicaid expansion through 2019, but phases out enhanced Federal funding thereafter

28 Questions?