Session 108 L, Medicare Advantage MLR: Year Two. Moderator/Presenter: Scott O Neil Jones, FSA, MAAA

Transcription

1 Session 108 L, Medicare Advantage MLR: Year Two Moderator/Presenter: Scott O Neil Jones, FSA, MAAA SOA Antitrust Disclaimer SOA Presentation Disclaimer

2 Medicare Advantage MLR: Year Two 2016 SOA Annual Meeting & Exhibit October 25, 2016 Scott Jones, FSA, MAAA -- Consulting Actuary Milliman Seattle Health Practice

3 Agenda Background Formula Filing process CMS data Quality Improvement (QI) expenses Guidance for bid development EGWPs Medicare-Medicaid plans Practical suggestions for preparing the MLR report 2

4 Scope and Perspective of the Presentation This presentation is primarily from the perspective of an actuary who is preparing MLR reports, preparing Medicare bids (BPTs), or advising Medicare Advantage plan sponsors on MLR considerations Caveats and Considerations: This presentation is not about pricing or negotiation strategy. Statements of fact and opinions expressed are those of the participants individually and, unless expressly stated to the contrary, are not the opinion or position of the Society of Actuaries, its cosponsors or its committees, nor of Milliman as an organization. This presentation should not be used as definitive guidance, as each actuary is responsible to ensure that filed MA/PD bids and MLR reports reflect compliance with his/her best understanding of CMS requirements and guidance. 3

5 Key Links May 31, Contract Year 2015 Release Memo: Payment/Downloads/Release-of-Medical-Loss-Ratio-MLR-Reporting-Tool-for- Contract-Year-2015.pdf Contract Year 2015 MLR Reporting Tool and Instructions: Payment/Downloads/CY2015-MLR-Report-Workbook-and-Instructions.zip Q&A (not updated since Oct 2015): Advantage/Plan-Payment/Downloads/MLR-QandA-Document.pdf CY 2015 guidance on Medicare/Medicaid Plans: forthcoming Prior CY 2014 guidance memo on plan terminated, withdrawn or cancelled within the contract year is now included in the CY 2015 instructions 4

6 Link to Regulations May 23, 2013 (Final Rule) Medicare Program; Medical Loss Ratio Requirements for the Medicare Advantage and the Medicare Prescription Drug Benefit Programs; Final Rule: Direct links to 42 CFR Parts 422 and 423: Part C - Title 42, Chapter IV, Subchapter B, Part 422, Subpart X ( ) Part D - Title 42, Chapter IV, Subchapter B, Part 423, Subpart X ( ) 5

7 Background Formula, granularity, scope

8 Scope and Granularity Each Medicare Advantage organization and Part D plan sponsor offering Part C or D coverage is required to submit an MLR report to CMS for each contract year, beginning with 2014 Who does not need to submit? PACE plans Cost plans with no Part D (part D only submission would be required) MMPs (though they may have be subject to a different MLR process) Granularity One report for each contract (e.g., H#) One report for each contract year 7

9 Formula General: MLR = (Claims + Quality Improvement) / (Revenue Taxes & fees) Details: many nuances customized for the MA program An additive credibility adjustment for contracts with lower membership MLR is required to be at least 85%; else a remittance is owed to CMS 8

10 Claims Numerator Items - Entry in report Claims 2.1 Claims incurred only during CY 2015, paid through 9/30/2016 $ 2.2 Liability and reserves for claims incurred only during CY 2015, as of 9/30/2016 $ 2.3 Incurred medical incentive pool and bonuses 2.3a Paid medical incentive pools and bonuses MLR Reporting year $ 2.3b Accrued medical incentive pools and bonuses MLR Reporting year $ 2.4 Contingent benefit and lawsuit reserves $ 2.5 MA Rebate for Part B Premium Reduction $ 2.6 MSA Enrollee Deposit $ 2.7 Allowable fraud reduction expense (the smaller of Lines 2.7a or 2.7b) $ 2.7a Total fraud reduction expense $ 2.7b Total fraud recoveries that reduced paid claims in Line 2.1 $ 2.8 Total $ 9

11 Revenue Denominator Items - Entry in report Revenue 1.0a MA Sequestration Adjustment (enter as negative amount) $ 1.0b Part D Sequestration Adjustment (enter as negative amount) $ 1.1a MA Beneficiary Premium (Basic + Mandatory Supplemental + Optional Supplemental) $ 1.1b Part D Beneficiary Premium (Basic + Supplemental) $ 1.2 MA plan payments (based on A/B bid), using final risk scores, including: MA Rebate for Cost Sharing Reduction MA Rebate for Other Mandatory Supplemental Benefits MA Rebate for Part D Supplemental Benefits $ 1.3 MA Rebate for Part B Premium Reduction (note: included as $ revenue) 1.4 MA Rebate for Part D Basic Premium Reduction $ 1.5 MSA Enrollee Deposit (note: included as revenue) $ 1.6 Part D direct subsidy, using final risk scores $ 1.7 Part D federal reinsurance subsidy (prospective and reconciliation adjustments) $ 1.8 Part D Low Income Premium Subsidy Amount (LIPSA) $ 1.9 Part D risk corridor payments $ 1.10 Total $ 10

12 Taxes/Fees Denominator Items - Entry in report Federal and State Taxes and Licensing or Regulatory Fees 3.1 Federal taxes and assessments, incurred in CY 2015, deductible from revenue in MLR calculation 3.1a Federal income taxes $ 3.1b Other Federal Taxes (other than income tax) and assessments $ 3.2 State insurance, premium and other taxes, incurred in CY 2015, deductible from revenue in MLR calculation 3.2a State income, excise, business, and other taxes $ 3.2b State premium taxes N/A 3.2c Community benefit expenditures $ 3.3 Regulatory authority licenses and fees $ 3.4 Total $ - 3.4a Affordable Care Act section 9010 Fee (informational only; already included in Line 3.1) $ 11

13 Other Non-Claims Costs - Entry in report (no impact on MLR) Non-Claims Costs 5.1 Cost containment expenses not included in QI expenses in Section 4 $ 5.2 All other claims adjustment expenses $ 5.3 Direct sales salaries and benefits $ 5.4 Agents and brokers fees and commissions $ 5.5 Other taxes 5.5a Taxes and assessments not excl. from revenue (not reported in Section 3) $ 5.5b Fines and penalties of regulatory authorities (not reported in Line 3.3) $ 5.6 Other general and administrative expenses $ 5.7 Total $ - 12

14 Credibility Ranges from 8.4% to 1% for partially credible contracts cliff at 1%, unlike commercial MLR Varies between contracts with MA plans and those with PD-only Credibility Adjustment MA Stand-alone PD Full Credibility (+0% adjustment) >15K life years >30K life years Partial Credibility (+1% to +8.4%) ,000 life years ,000 life years No Credibility (no min. MLR) <200 life years <400 life years 13

15 Summary of Key Part D Items Numerator Denominator Reinsurance claims Yes, as paid by the sponsor Reinsurance pre-payments and settlement amount yes Part D risk corridor yes LICS pre-payments and settlement amount Coverage gap discount program (CGDP) revenue ignore ignore Low income cost sharing (LICS) reduction and CGDP by plan sponsor ignore 14

16 Key run-through dates MLR report is due in December in order to permit full Part D settlement and extensive claims & revenue run-out Membership and Revenue thru September MMR Claims run-out thru September, plus IBNR Final Part D Settlement ~ Sep/Oct

17 Filing Process Timing, attestation, remittances, sanctions

18 Filing Dates HPMS upload functionality starts November 4, 2016 MLR filing due by 11:59 Pacific, Friday, December 2, 2016 Attestation functionality opens December 5 th, and is due by 11:59 Pacific, Friday, December 9 th No actuarial certification is required CMS performs desk review of the MLR reports and some are audited 17

19 Attestation The attesting officer must be designated as a CEO, CFO, or COO in the HPMS Basic Contract Management Module. 18

20 Remittances and Sanctions If an MLR remittance is owed, it will be deducted from the monthly plan payments, beginning with the July 2017 payments. After 3 years of non-compliance, prohibition on enrolling new members If non-compliant for , no new enrollment would be allowed in 2018 ( second succeeding year ) After 2 years of non-compliance, MA sponsor will be required to report 3 rd year MLR earlier in the year, since otherwise members would have enrolled by the December filing date After 5 years of non-compliance, contract will be terminated by CMS If non-compliant for , contract for 2020 would be terminated Contract year 2019 would have begun by the time 2018 MLR was reported 19

21 CMS Data

22 CMS data We had hoped that CMS would have released some information on the contract year 2014 MLR reports, but they have not at this time. GAO anticipates some remittances will occur: while MA organizations spent an average of 86.3 percent of revenue on medical expenses, 39 percent of beneficiaries were covered under contracts where less than 85 percent of revenue was spent on medical expenses. Actual volume of contracts paying remittances should be much less than 39% since MLR is higher than a traditional loss ratio and aggregation occurs at the contract level. 21

23 CMS Expectations CMS expected about 605 contracts would be subject to MLR and have at least partial credibility, covering 33.6M lives & $188B revenue Average MLR of 89% for MA contracts and 88% for stand-alone Part D ~5-6% will be saved by credibility adjustments 13% of MA and 18% of PDP contracts to pay remittances Total remittances of $858M Expressed in 2013 dollars/membership, with no expectation of behavioral/pricing change since then. Does not account for anticipated better tracking of QI by

24 Precedent from Commercial MLR 80% minimum MLR for individual health plans 37% of policyholders in individual plans were paid rebates in the first year (2011) 25% were paid rebates in the second year (2012) Figures were 16% and 11%, resp., when averaged across individual, small group, and large group markets. 23

25 Quality Improvement (QI) Definitions, special cases

26 Quality Improvement (QI) expenses QI expenses can be included in the numerator of the MLR along with claims. CMS aligned the definition of QI with the Commercial MLR regulations; Medicaid has followed suit. Activities must: Be designed to improve health quality Be directed toward individual enrollees or segments of enrollees Be grounded in evidence-based medicine, widely accepted best clinical practice, or criteria issued by recognized bodies Activities must not: Be designed primarily to control costs 25

27 QI Numerator Items - Entry in report Health Care Quality Improvement (QI) Expenses Incurred 4.1 Improve health outcomes $ 4.2 Activities to prevent hospital readmission $ 4.3 Improve patient safety and reduce medical errors $ 4.4 Wellness and health promotion activities $ 4.5 Health information technology expenses related to improving healthcare quality $ 4.6 Allowable ICD-10 expenses $ 4.7 Total $ 26

28 Quality Improvement (QI) expenses Specific exclusions Activities specifically designed to contain or control costs Portions of expenses attributed to other lines of business, including self-funded plans Activities that would meet the definition of QI but which are funded by grant money or funding separate from premium revenue Claims adjudication expenses Health care telephone hotline expenses not otherwise meeting the definition of QI All retrospective and concurrent utilization review Fraud prevention activities (note that these are already included in the MLR numerator with certain limitations) Provider contracting, network development, or provider credentialing Marketing Administering enrollee incentive programs 27

29 Quality Improvement (QI) expenses, further clarification MA or PD sponsor may count a third party s expenses for QI, to the extent they can be quantified and attributed to the segment of enrollees Capitation payments are counted as claims in the numerator; to the extent QI is an activity covered in the payment, the sponsor must ensure they are not double-counted in the numerator 28

30 QI Example of prescription drug management PBM fees associated with counseling on the proper use of specialty medication Outreach programs to ensure compliance with taking prescription drugs that a patient was prescribed Carve outs: If part of effort involves generic substitution (a cost saving measure), then that portion would not be QI 29

31 QI Example of reviewing diagnosis codes An effort to review coding quality may be geared primarily towards revenue enhancement, so not QI However, to the extent that subsequent effort is used to identify patients for care management intervention (e.g., a missing diagnosis could mean that a diabetic had not been contacted for a preventive visit), then that would be seen as QI 30

32 Guidance for bid development

33 Things to remember during bids BPTs may include related party expenses at cost or re-priced to FFS MLR is on a contract basis BPTs cannot be used to project MLR directly (QI, tax allocation, contract aggregation, sequestration) Bids need not meet MLR requirements prospectively Where provider risk settlement formulas are used, actual settlement may not be at the contract level. Anticipate the need to re-allocate for subsequent MLR report. Takeaway Project the MLR in parallel and communicate to client Check if your client passed the MLR in the prior year For appointed actuaries, remember that year-end liabilities include two MLR reporting years 32

34 Special Plans EGWPs and Medicare-Medicaid plans

35 Employer Group Waiver Plans (EGWPs) Self-funded plans are still subject to MLR to the extent that they have a Medicare funded portion Required to use a reasonable method to allocate costs and revenues to the Medicare funded portion One of two methods must be used to determine the Medicare-funded portion of the contract s experience either use actual cost information to separate employer-funded from Medicare-funded portions, or else simply look at the split of revenue and assume the split of costs is the same proportion. Risk corridor is not applied to PD EGWPs so that item is a zero in the form by definition Any non-calendar year EGWPs still have their MLR calc done on a CY basis. 34

36 EGWP methodology disclosure in the report You can choose one of two primary options 6. Methodology for determining the Medicare-funded portion of the contract for EGWP plans 6.1 Option 1 "Actual EGWP costs", or Option 2 "Allocated based on revenue" 6.2 Enter percentage used to allocate EGWP costs (i.e., Medicare % of total revenue) 35

37 Medicare-Medicaid Plans While MMPs do not complete this particular MLR Report, they may be required to complete a separate MLR report (that is specific to MMPs) based on the requirements defined during the demonstration development process. Note that Dual-SNPs must file the MLR report, but any Medicaid revenue and benefits costs must be removed 36

38 Preparing MLR reports Additional practical suggestions

39 Few changes to the forms Only technical changes to report displays Sequestration adjustments are now explicitly entered as negatives instead of netted with their respective revenue items Default sequestration adjustment calculation is 2% of Lines 1.2, 1.3, 1.4, and 1.6. Insurer fee must be shown separately for information only 38

40 Direct lookup of key revenue items * Sequestration reported on paid basis in contract-level Plan Payment Reports (PPR) 39

41 Other calculation notes Member premium should be calculated directly from sponsor reporting or calculated using BPT premiums and member months Some items, such as taxes, fees, and QI, may need to be allocated across multiple contracts Some provider settlement amounts, treated as claims, may be calculated internally by service area, rather than contract, so a reallocation is needed A sensible, stable methodology should be developed for allocating across contracts, which can stand up to scrutiny and does not get gamed each year. Worksheet 3 requires a disclosure of allocation methods. QI expenses, in particular, need careful review. 40

42 Plans terminated, canceled, withdrawn in contract year Plans that terminate in 2015, will need a special report on key revenue items Items in July 2016 MMR for adjustment code reasons (ARC) 25 (Part C Risk Adjustment Factor Change/Recon) and 37 (Part D Risk Adjustment Factor Change) are gross of sequestration and can be used to get final Part C and D revenue and final risk adjustment reconciliation amounts. CMS will post these on HPMS. 41

43 Thank you Scott Jones, FSA, MAAA Consulting Actuary Milliman Seattle Health Practice