2014 Medicaid Managed Care Conference

Transcription

1 2014 Medicaid Managed Care Conference Achieving Actuarial Soundness in an Increasing Regulatory Environment Presented by Jeremy D. Palmer, FSA, MAAA Principal and Consulting Actuary October 20, 2014

2 Session Objectives Demystify the term actuarial soundness Explore evolution of regulations Discuss potential changes in practice A look ahead at the evolving requirements 2

3 How is Actuarially Sound Defined? Section 42 CFR 438.6(c) definition of Actuarially Sound Capitation Rates : Have been developed in accordance with generally accepted actuarial principles and practices; Are appropriate for the populations to be covered and the services to be furnished under the contract; and, Have been certified as meeting the requirements of the regulation by actuaries who meet the qualification standards established by the American Academy of Actuaries and follow the practice standards established by the Actuarial Standards Board. 3

4 How is Actuarially Sound Defined? AAA Practice Note definition of Actuarially Sound Capitation Rates : Medicaid benefit plan premium rates are actuarially sound if, for business in the state for which the certification is being prepared and for the period covered by the certification, Projected premiums, including expected reinsurance and governmental stoploss cash flows, governmental risk adjustment cash flows, and investment income, provide for all reasonable, appropriate and attainable costs, including health benefits, health benefit settlement expenses, marketing and administrative expenses, any state-mandated assessments and taxes, and the cost of capital. AAA Practice Notes are not binding on the actuary. This means that they represent guidance as opposed to required practice and are less restrictive than an Actuarial Standard of Practice (ASOP). 4

5 How is Actuarially Sound Not Defined? Rates that yield expected profit margin in aggregate? Rate needed such that all health plans make appropriate profit? Rate needed such that 50% of health plans make minimum profit? Rate needed such that at least one of the health plans make minimum profit? Rate increases must be greater than 0%. Rate increases must be at or above trend. 5

6 Key Players Roles in Development of Rates CMS / HHS States Health Plans Actuary Primary Financial Responsibility ( Buyer ) Secondary Financial Responsibility ( Buyer ) Contract Performance ( Seller ) Certification of Compliance Regulation Compliance Program Design/Operation Implementation / Dayto-day Operations Independent Opinion It is acknowledged that beneficiaries and providers are also key players in the Medicaid program, but are not generally at the table in the development of actuarially sound capitation rates. Their interests should be considered by all parties listed above. 6

7 Current Regulation Under Attack Increased Federal Match ACA Expansion GAO Report American Academy of Actuaries Practice Note Non Binding (2005) Public Concern Health Insurer Tax Sovaldi 42 CFR 438.6(c) Actuarial Soundness (2002) CMS Checklist DRAFT Non Binding (2003) Dual Integration Upper Payment Limit (Prior to 2002) Lack of Binding Actuarial Standards 7

8 Increased Regulation 1. CMS has increased its review of capitation rates Financial alignment for duals - ACA New adult populations 2014 All populations Actuarial Standards Board implementing Medicaid ratesetting Standard of Practice Will be binding on actuaries (both state and MCO) Expected within next few months 8

9 CMS Capitation Rate Review Started in dual demonstration programs with use of actuarial vendors representing CMS Enlisted OACT in 2013 for review of New Adult populations where feds paying 100% FMAP Expanded to all risk-based programs for 2015 CMS always had review/approval responsibility they are now exercising this responsibility on the actuarial side of the capitation rates. 9

10 Actuarial Standard of Practice Codifies general actuarial practice for Medicaid managed care rate-setting Previous practice note (2005) was only guidance and was nonbinding ASOPs are binding to actuaries all actuaries states, health plans, and government employees (OACT) Provides framework for actuary s work and assumptions Defines actuarial soundness 10

11 Sources of Information CMS Checklist (note this is not an official CMS website) AAA Practice Note GAO Report CMS 2015 Managed Care Rate Setting Consultation Guide Care/Downloads/2015-Medicaid-Manged-Care-Rate-Guidance.pdf ASOP Exposure Draft 11

12 LIMITATIONS The information contained in this presentation is intended for informational purposes only. Milliman makes no representations or warranties regarding the contents of this presentation to third parties. Likewise, third parties are instructed that they are to place no reliance upon this report that would result in the creation of any duty or liability under any theory of law by Milliman or its employees to third parties. The views expressed are that of the author and do not represent the collective opinions of Milliman, Inc. QUALIFICATIONS Guidelines issued by the American Academy of Actuaries require actuaries to include their professional qualifications in all actuarial communications. Jeremy D. Palmer is a member of the American Academy of Actuaries and meets the qualification standards for performing the analyses contained herein. 12