Developing a Sustainable

Transcription

1 Developing a Sustainable Retiree Health Plan Strategy By Amy H. Burgoyne and Kim Denbow

2 Medicare Advantage retirees rely on their former employer for medical benefit security. Retiree health plans can be complex to administer, though, and costly in terms of annual expense and long-term liability. Medicare Advantage plan to offer additional health-care benefits to improve retiree health and reduce costs. The Medicare Advantage plan manages all aspect of plan administration and the CMS relationship. Many organizations question their ability to continue offering these benefits. They face the combined impact of cost concerns, administrative complexity, shifting healthcare trends, and market forces, as well as large, unfunded, Governmental Accounting Standards Board Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits other than Pensions, liabilities. Some organizations react by altering eligibility, requiring higher retiree contributions, or completely cutting the benefit. In a recent Tower Watson survey, 92 percent of employers cited the burden of long-term liability as the chief reason for seeking change. 1 But most leaders have no appetite for changing retiree healthcare plans. They fear retiree backlash and prefer to honor benefit promises. MEDICARE ADVANTAGE PROVIDES AN OPTION Drastic benefit cuts are not necessary. A customized group Medicare Advantage approach can provide savings on short-term expenses and longterm GASB Statement No. 45 liabilities without compromising plan structure and benefit promises. Traditional retiree health benefits follow a multi-step process and can be confusing. Medicare Advantage plans deliver a more streamlined experience for retirees and employees. The traditional approach to retiree health benefits pairs original Medicare (the primary payer) with a group-sponsored self-insured plan (the secondary payer). Neither payer has a full view of claims bills, and the paperwork can be overwhelming for retirees. Medicare Advantage allows a private insurer to offer a single-source solution: a fully-insured Medicare Advantage plan. The insurer contracts with the federal government s Centers for Medicare and Medicaid Services (CMS) to provide the retiree with Medicare Part A and Part B benefits in return for a monthly stipend. The CMS contract allows the Many organizations question their ability to continue offering retiree medical benefits. They face the combined impact of cost concerns, administrative complexity, shifting health-care trends, and market forces, as well as large, unfunded, GASB Statement No. 45 liabilities. SIMPLICITY IS KEY Retirees and plan sponsors appreciate simplicity. The traditional approach to retiree health benefits is a multi-step process for retirees and providers: 1. Retiree visits provider, who files two claims one with Medicare and the other with a secondary plan. 2. Medicare pays first, the supplemental plan pays second, and the retiree pays the balance. 3. Retirees cobble together multiple bills and statements (often long after the health-care visit) to understand who paid and how much was paid. 4. No single entity has a full view of claims data. Supplemental plans typically lack care management services (because any savings would accrue primarily to Medicare). The Medicare Advantage plan streamlines the experience for retirees and employers. Retirees use one ID card, and all claims go to a single source: the Medicare Advantage plan. Retirees enrolled solely in an Medicare Advantage plan don t need to sort through bills and paperwork from multiple sources. REVENUE AND EXPENSE STRATEGIES FOR PREMIUMS AND PRICING The Medicare Advantage plan s structure simplifies the process. The insurer funds the plan with a stipend from CMS and a premium from the employer. The insurer receives the monthly stipend in return for providing Part A and Part B benefits, and additional benefits. The employer s supplemental premium covers the difference between the CMS reimbursement and the total value of the benefits package, plus adminstrative expenses. December 2017 Government Finance Review 23

3 A closer look reveals how the Medicare Advantage plan can yield savings by balancing total revenue (stipend + premium) against expenses (claims + administrative expense). (See Exhibit 1.) Prudent management ensure that these components interact efficiently and cost-effectively. STAR RATINGS EMPOWER RETIREES A defining feature of Medicare Advantage plans is the CMS five-star quality rating program, which help retirees understand plan value. Traditional plans lack these quality ratings. Medicare Advantage plans receive an annual star rating based on plan quality and performance. Ratings show how well a plan performs (i.e., how satisfied clients are with plan services) and how well it helps retirees to manage their health. Star rating measurements include data for customer service satisfaction, complaint resolution, retiree experience metrics, and screening/testing/vaccine metrics focused on health maintenance or improvement. A customized group Medicare Advantage approach can provide savings on short-term expenses and long-term GASB Statement No. 45 liabilities without compromising plan structure and benefit promises. Medicare Advantage plans provide high value because they include additional benefits to improve retiree health and manage cost (as compared to original Medicare). As retirees navigate their personal health journey, they are supported by resources including care management programs and wellness benefits. Employers often appreciate how these features align with today s typical plan sponsor mantra: improved population health for active workers and pre-65 retirees. CUSTOMIZING A MEDICARE ADVANTAGE PLAN A group Medicare Advantage plan delivers flexibility and unique features. (See Exhibit 2.) Most employers minimize distruption to retirees by customizing their plan to closely match or exceed current benefits. An Medicare Advantage plan may actually lower premiums, even for comparable or slightly richer plans, due to the CMS reimbursement structure and cost/expense levers discussed above. Exhibit 1: How the Plan Blances Total Revenue against Expenses Medicare Advantage Plan Goals Effect Financial Result Include Effective Senior-Specific Assist both retirees and their Disease Management Programs treating physicians. Include Care Advocacy through Help retirees navigate the confusing Personal interactions with specially trained Case/Care Management Programs health care arena. nurse care managers supports holistic health management and mitigates wasteful utilization. Collaborate Efficiently with Providers Align resources and incentives. Quality, efficiency, and utilization are improved, resulting in effective management of health care costs. Achieve High Star Ratings and Bonuses Opitimize plan revenue to help CMS provides bonuses to Medicare stabilize premiums and benefits. Advantage plans that receive at least 4 stars on the program s 5-star quality rating system. Obtain Accurate CMS Revenue Appropriately cover expected costs Reimbursement from CMS to Medicare (Reimbursement) for retirees. Advantage plans is adjusted based on a retiree s health status and demographic characteristics. Accurate clinical data to document diagnosis helps ensure appropriate CMS reimbursement. 24 Government Finance Review December 2017

4 Shelby County s Experience with Medicare Advantage Both employers and retirees gain from Medicare Advantage plans. Shelby County (Tennessee) Government realized savings after taking advantage of the Medicare Advantage approach. Kim Denbow, deputy chief administrative officer of Shelby County Government, shared her thoughts about this transition. What were your concerns for the retiree benefits? Affordability and maintaining quality benefits for our retirees is always the concern. Unlike pensions, health benefits are not guaranteed, but many retirees bank on having this benefit as part of their retirement planning. We consider ourselves to be fairly progressive with regard to making periodic adjustments to benefits to control costs, but we didn t want to sacrifice quality of care in delivering benefits to retirees. Over the years, providing retiree benefits at an affordable cost for both retirees and taxpayers has proven to be a balancing act. How did you decide on Medicare Advantage as a solution? At first, we issued a request for proposal for Medicare supplement plans and didn t get the results we d hoped for. Our consultant recommended that we consider group Medicare Advantage, and we were more than pleased with the responses. Did you consider a private exchange of individual plans during your search? We didn t consider this approach at the time, but we re continuing to watch the market and see what others are doing. Were you able to keep your same/similar plan design in your new Medicare Advantage plan? We worked with our carrier to design benefits so that the plan designs changed very little. For example, the premiums were significantly reduced [as compared to the former plan], but the cost share for retirees who utilize benefits did change such as a new copayments. Improvements were to add in wellness programs and obtain utilization reports on claims experience, both of which were lacking with the Medicare supplement plans. What were your before and after costs, and how did your change impact your GASB Statement No. 45 liabilities? Prior to implementing the Medicare Advantage plan, we offered a Medicare supplement plan and two Medicare prescription drug plans. The baseline including employer and retiree cost share was $6.5 million annually. With Medicare Advantage, we reduced this to $3.2 million. In 2013, the government had $307 million in accrued OPEB liabilities attributable to retiree health care. We re proud of the fact that we ve been fully funding our OPEB annual required contributions because many other jurisdictions have not been able to do so. Being disciplined in good fiscal management is what is required to do this, and it is, after all, what is owed to the taxpayers, our employees, and our retirees. We knew we were making a significant impact to annual spend but the game changer and best news was the impact on the actuarial accrued liability that resulted in a reduction of $103 million (47 percent). Were there challenges you faced with changing your retiree plan? The biggest issue we faced was that physicians seemed unfamiliar with Medicare Advantage plans in Shelby County. Providers needed to be educated that they could accept the Medicare Advantage insurance card. It was a true partnership with our carrier. They did most of the heavy lifting with outreach to the physicians while SCG staff supported the effort by communicating with retirees that they could keep their provider of choice. As a result, very few doctors refused the Medicare Advantage insurance card. How did the plan change go over with retirees? As with any change, communicating early and often is critical. Open enrollment for retirees is not as easy as enrollment for active employees. Retirees are harder to reach so the more time you have to prepare and educate them, the better. Also, any time a savings on benefits is rolled out, most people think something has been cut from the offerings. That was not the case and for the most part, retirees appeared extremely satisfied with premiums and services. Improvements to the plan design after year 1 (especially pharmacy) were necessary to drive a better customer experience. Being sensitive to the fact that retirees are often living on a fixed or limited income and monitoring the retiree s experience with plan designs also proved to be beneficial. Working with our carrier to improve member satisfaction has been the key to our success. December 2017 Government Finance Review 25

5 Exhibit 2: Medicare Advantage Flexibility A Group Medicare Advantage Approach Allows a Plan Sponsor to: Design an Medicare Advantage Plan that Mirrors n Actuarially equivalent plan design can provide retirees Current Benefits with a plan as their previous plan that feels the same. n Care management advocacy and wellness benefits are included with Medicare Advantage plans. Create a Design that Minimizes Provider Disruption n Plans are built on a foundation of a network of contracted providers. CMS establishes network adequacy parameters and insurers networks are evaluated. n Even retirees living in an area considered not-adequate by CMS may still enjoy the benefits of a group Medicare Advantage plan through a CMS waiver. n The CMS group waiver can be used if 51% (or more) of a group s retirees reside in a network service area. For those that do not reside in a network service area, the benefit design can have (a) no difference in in-or-out-of network cost share and (b) allow retirees to see any provider who accepts the plan and is willing to see the patient. Include Simple Cost Sharing, Simplified Enrollment, n Plan can be designed with simple copayments for predictable and Important Financial Protections cost-sharing. n Out-of-pocket maximums protect retirees financially from high cost of serious or chronic illnesses. n Enrollment in a group Medicare Advantage plan is guaranteed to all in the group provided retirees meet CMS eligibility requirements and they meet the employer s eligibility criteria. There is no underwriting for previous medical conditions. n Plans can be offered with a single national rate for administrative ease. RELATED STRATEGIES Private Exchanges. Organizations exploring retiree benefit strategies often come across the different concepts of public exchange and private exchange. The public exchange (i.e., Healthcare.gov) caters to people who aren t eligible for Medicare who may be active, unemployed, or retired. A private exchange is run by a company specifically for Medicareeligible retirees. It helps retirees select an individual market plan from the geographically available choices. Most health benefits consulting firms offer a proprietary private exchange. Private Exchange with Individual Plans. Employers may set up a private exchange featuring multiple individual plans. Retirees receive a stipend to A defining feature of Medicare Advantage plans is the CMS five-star quality rating program, which helps retirees understand plan value. fix employer cost-sharing. After terminating its group plan, the employer introduces retirees to specially trained consultants who assist with plan shopping and selection. Private exchanges are drastically different from group plans, and this contrast can be useful or burdensome. Some retirees welcome the freedom to use their stipend for greater plan choice, but others feel overwhelmed or confused by choices. Employers may appreciate the fixed cost and the exit strategy from group plan sponsorship, but not all retirees will find costeffective and comprehensive health care to match their prior coverage. Employers with a strong promise to maintain retiree benefits sometimes hesitate to adopt this option. 26 Government Finance Review December 2017

6 A Private Exchange with Group Plans. Employers may also set up a private exchange with a limited number (3 to 5) of group sponsored plans from a single insurer. This approach allows the employer to enjoy fixed costs and empower retiree choice while directing plan design, consistency, and quality. Group Medicare Advantage plans (with high, medium, and low menu choices) are a way to marry retiree choice and employer control, resulting in satisfaction and savings for both parties. CONCLUSIONS Retiree health insurance can be a difficult puzzle to solve, but there is a range of cost-effective choices for plan sponsors and retirees. Group Medicare Advantage plans can replace Medicare Advantage Plan Growth Medicare Advantage plans are experiencing uninterrupted growth, likely because of simpler plan structure and enhanced benefits. This progress was not slowed by the introduction of the Affordable Care Act. One in three Medicare beneficiaries are now enrolled in a Medicare Advantage plan. ( 2018 Medicare Advantage and Part D Prescription Drug Program Landscape, Centers for Medicare and Medicaid Services, September 2017, and Medicare Congressional Budget Office s January 2017 Baseline, Congressional Budget Office, January 24, 2017.) CMS estimates that Medicare Advantage enrollment will surpass 20.4 million by Sign-ups for group Medicare Advantage plans outpace overall Medicare Advantage growth, increasing by 60 percent since Currently, 3.8 million people are in Medicare Advantage group plans. Retirees and plan sponsors appreciate simplicity. The traditional approach to retiree health benefits is a multi-step process for retirees and providers. standard benefit packages, or be offered as a choice on a private exchange menu. Medicare Advantage plans enable employers to honor their benefit obligations, save money, and keep retirees satisfied with their benefits. y Notes 1. Emerging Opportunities for Retiree Health Care Programs Insights From the 2015 Survey on Retiree Health Care Survey on Retiree Health Care Strategies, February 2015, Towers Watson. AMY H. BURGOYNE is the director of retiree solutions for Aetna Medicare. KIM DENBOW is the deputy chief administrative officer of Shelby County Government in Memphis, Tennessee. National Medicare Advantage 10-Year Growth Millions % ACA 25% Fiscal Year December 2017 Government Finance Review 27