DMHC Approves Aetna’s acquisition of Humana

The California Department of Managed Health Care (DHMC) approved Aetna’s acquisition of Humana under these conditions:

  • Aetna will keep premium rate increases to a minimum for HMO small group.
  • The DMHC will have increased oversight on rates.
  • Aetna will keep key functions and operations in the state, such as medical decision making and
  • enrollee grievance and appeals systems.
  • Aetna will improve quality of care measured through rating and oversight programs under the National Committee for Quality Assurance and Office of the Patient Advocate.

Over the next three years, Aetna will make several community investments to educate at-risk populations on their health care rights, increase access to care for low-income and underserved communities, and improve California’s health care infrastructure:

  • $6 million to support consumer assistance programs to help seniors and people with disabilities understand their health care rights.
  • $3 million to provide dental services in low-income and/or underserved communities and scholarships for dentists to be trained to serve young children (ages 0-3).
  • $23 million to strengthen and support the health care industry in the economically distressed community of Fresno through the expansion of a service center.
  • $1 million to expand telehealth services to increase access to mental health care and reduce unnecessary emergency room visits.
  • $16.5 million in California’s health care infrastructure to support accountable care organizations and pay for performance programs.

Study Reveals Leading Healthcare Benefit Trends

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The Healthcare Treds Institute issued a massive survey of employee benefit trends. The good news is that employers are looking to insurance brokers and benefit consultants to help them evaluate health benefit designs and distribution models. Forty percent of employers say they will depend on insurance brokers to learn about new health benefit models, such as defined contribution plans and private exchanges, and 31% will depend on benefit consultants. Nearly 40% rely on insurance brokers to learn about health benefit designs and platforms.

“The ACA has created a dynamic marketplace in which brokers have a front row seat navigating in this new era,” according to the study. Human resource professionals have new responsibilities due to the ACA. Thirty percent are looking for help from benefit consultants. However, 30% are researching independently compared to 26% in the previous year. Employers gave the following answers to this question, “What partners would you depend on to help you learn about new health benefit designs and distribution models?”

  • Insurance broker 39.7%
  • Will research independently 30.8%
  • Benefit consultant 30.8%
  • Insurance carrier 24.4%
  • TPA 19.2%
  • None 15.4%
  • Trade Association 11.5%
  • Payroll company 10.3%
  • Other 5.1%

What Benefits Employers Are Offering

About 40% of employers offer three or more health plan options, which are usually a PPO, an HDHP, and an HMO. Employees are choosing HDHPs (39%) over HMOs (35%). The following is a breakdown of benefits that employers offer:

  • PPO 59.5%
  • Flexible spending account (FSA)59.5%
  • Health savings account (HSA) 52.1%
  • High deductible health plan (HDHP) 38.8%
  • HMO 34.7%
  • Self-insured plan 22.3%
  • Health-reimbursement arrangement (HRA) 15.7%
  • Catastrophic insurance 8.3%
  • Dental plan 73.6%
  • Vision plan 67.8%
  • Prescription drug coverage 67.8%
  • Mental health coverage 52.1%

How Healthcare Reform Has Affected Employee Benefit Packages

Forty-nine percent say that healthcare reform will increase employee cost-sharing; 39.6% say it will increase premium contributions, and 3.6% say it will shift their company towards a defined contribution plan. Employee cost-sharing has risen every year for 10 years. Employers and the medical industry have had to deal with other ACA implications, such as the employer mandate and new compliance, which has caused an increase in capital and human resources. Employers have done the following in response to health reform:

  • Increased employee cost sharing 49%
  • Has had no effect 30%
  • Enhanced wellness/preventive health programs 23%
  • Increased employee engagement in their health 19%
  • Increased employee engagement in reducing healthcare costs 18%
  • Adopted new wellness/preventive health programs 17%
  • Reduced covered benefits 15%
  • Added HDHPs/CDHPs 14%
  • Stopped offering healthcare benefits 9%
  • Shifted to a defined-contribution plan

The Cadillac Tax

The impending 2018 Cadillac Tax is a prevalent challenge for employers. The ACA 40% excise tax will be imposed on the portion of group health plan premiums that exceed specified thresholds. The concern may be more regional since it could be triggered in parts of the country where healthcare costs are high and less likely to be triggered in parts of the U.S. with below average healthcare costs. Thirty-five percent of employers are very concerned about the 2018 Cadillac Tax; 25% are somewhat concerned; and 30% are not concerned. Sixty-one percent are making no changes to their benefits in light of the impending Cadillac tax while 18% have changed plans to avoid the Cadillac Tax. Recent news reports along with lobbying efforts may be influencing the 61% of companies who have a wait and see approach about the Cadillac Tax.

Defined Contribution Plans

Employers continue to learn more about defined contribution plans and private exchanges with about 35% saying they are familiar with them. This is an increase of about 5% over last year. Twenty-eight percent say that exchanges help employees understand the value of their benefits. Twenty-five percent say that a defined-contribution plan would help employees understand the value of their benefits and make more cost-conscious benefit decisions.

Five percent of employers offer defined-contribution plans (not on a private exchange) while same offer defined-contribution plans on a private exchange. Also, 7% are considering offering a defined contribution plans on a private exchange while 53% have not explored defined contribution plans.

Fifty-five percent of employers who are considering a defined-contribution plan, say they would explore the option for 2017 or 2018. This suggests that near-term adoption will be gradual. But the adoption curve may steepen as the benefits of defined-contribution plans become better known.

Private Exchanges

Employers want private exchanges to provide many solutions including health spending accounts (62%), carrier integration (58%), COBRA compliance (56%), automation of premium payments (51%), and payroll integration (50%). Employers choose private exchanges to control costs and increase employee choices, which is why employers say, most often, that they are looking for health spending accounts. Incorporating consumer directed healthcare coverage, such as HDHPs, HSAs and HRAs, helps private exchanges create a competitive marketplace that promotes cost-savings for employees and employers.

To succeed a private exchange needs to provide broad choices and help participants in the selection process. Sixty-two percent of employers say that it is somewhat important to very important to have health-spending accounts in an insurance exchange. Also considered somewhat important to very important are carrier integration (59%), COBRA compliance (56.4%), and premium payment automation (53%). Employers say they would choose the following offerings in an exchange:

  • Plan and cost comparison tools 80%
  • Online capabilities 69%
  • Combined benefit enrollment 47%
  • A help line 47%
  • Transparency solutions for treatment cost comparisons 45%
  • Mobile applications 45%
  • Progressive cost tracking tools 35%
  • Consolidated employer billing 35%
  • Integrated consumer healthcare accounts 30%
  • Financial account options 28%

Employers rank several exchange features as important, such as being a private exchange instead of a public exchange (83%), having a large selection of plan choices at targeted benefit levels (58%), and being provided by their broker or benefit consultant (55%). These findings indicate that broad choice is more important than who runs the exchange (broker versus carrier).

Wellness

Wellness programs continue to gain interest as 35% of employers have initiatives in place compared to 30% last year. Another 22% are considering implementing a program. Sixty-five percent are considering adopting a wellness program in 2017, and 16% are considering adopting one by the end of 2016.

Fifty-five percent of those offering wellness programs, offer an employee-assistance program (EAP); 53% offer flu shots or vaccinations; and 37% offer a smoking cessation program. The disease management tools that most employers offer are for diabetes (30%) and depression or other mental health (30%). Fifty-four percent of employees are not offering disease management tools. But 30% are providing services for diabetes and mental health conditions. To promote positive health outcomes, 44% of employers offer at least one wellness program; 31% offer biometric screening; and 20% offer a disease management program.

Forty-four percent have at least one wellness initiative in their workplace. Employers that are interested in offering wellness plans should consider how it would affect productivity, absenteeism, turnover, retention, and recruitment, according to the survey authors. Including these factors in the ROI discussion can help demonstrate additional savings a company could achieve.

When it comes to wellness incentives, HSA and HRA contributions (18%) and premium reductions (16%) are most popular. Companies are split on whether to offer wellness incentives with 58% not providing rewards to employees and 42% offering some type of incentive in varying monetary amounts to participate. The value of the incentives remains relatively modest. Companies interested in wellness incentives can use the ACA as a guide. Eighteen percent offer $250 or more of incentives to employees for health-related tasks. Common values of incentives are $101 to 250 and $1 to $50. For more information, visit www.HealthcareTrendsInstitute.

Consumer Choices in the Affordable Care Act Marketplace

Under the ACA marketplaces, consumers in most regions of the country have multiple options from which to select a health plan, according to a study by the Blue Cross Blue Shield Assn. (BCBSA). However, the types of health plans are changing to meet the needs of customers and to manage risk for health insurers. For example, the share of HMO and exclusive provider organization (EPO) products increased from 41% in 2015 to 52% in 2016. HMO products were the lowest cost Silver Plans in 57% of counties in 2016 compared to 46% in 2015.

Price differentials are narrowing. In 2014, more than 29% of counties had the lowest cost Silver Plans. These plans cost more than 10% less than the next lowest competitor’s option. In 2015, that number dropped to less than 5%. In 2016, only 1% of counties had this large of a price differential between the two most affordable Silver Plans.

Maureen Sullivan of BCBSA said, “Insurance carriers are applying more data including the actual health care costs of newly enrolled members to design offerings that more accurately meet the needs of consumers in this new market.”

Sutter Health Expands

Sutter Health Plus, an HMO health plan that serves the greater Sacramento, Central Valley, and Sonoma County areas, now offers its competitively priced products to five new counties in the Bay Area. The announcement comes after receiving final approval from the Department of Managed Health Care. In January 2014, Sutter Health Plus initially launched in the Greater Sacramento and Central Valley. The HMO took its first step into the Bay Area when it added Sonoma County in March 2015. The latest expansion adds Alameda, Contra Costa, San Francisco, San Mateo, and Santa Clara counties to its service area. The Sutter Health Plus network in the Bay Area includes 16 hospitals and campuses, dozens of conveniently located care centers, and nearly 3,600 physicians. Physician organizations include the following:

  • Brown & Toland Physicians
  • Mills-Peninsula Medical Group
  • Palo Alto Medical Foundation
  • Sutter East Bay Medical Foundation
  • Sutter Pacific Medical Foundation

The Problem of Inaccurate Provider Directories

Health plans have been creating contracted network offerings at an unprecedented rate since the implementation of the Affordable Care Act (ACA). But some consumers are complaining that the provider network information from their health plan is misleading and inaccurate, according to a report by Berkeley Research Group. As a result, new federal and state regulations require health insurers to maintain and provide consumers with an accurate listing of providers, facilities and physicians participating in their networks. The repercussions of inaccurate provider directories can be significant, posing risks to consumers and health plans.

Inaccurate directory information may limit a consumer’s ability to verify if a preferred doctor is in-network or to know how many and what types of providers would have to be accessed under a particular product offering. Additionally, the consumer may be at risk of being charged higher out-of-network rates when providers are erroneously listed as being in-network. These inaccuracies also put health plans at greater risk of litigation, government penalties, and investigations, and significant administrative costs associated with rectifying inaccurate directories.

Consumers typically use provider directory information to make decisions in real time. However, the frequency with which health plans update their provider directories varies significantly. Many states only require an annual update. Additionally, states must decide whether penalties should be imposed on health plans when directories have errors, particularly when patients incur out-of-network costs because of it. Regulators may also require health plans to allow consumers to re-enroll in a new health plan if their provider has been misrepresented in a provider directory.

However, variation also exists across health plan types, with HMOs being the most regulated with respect to network adequacy, followed by PPOs and EPOs.  In a study published by JAMA Dermatology, researchers at the University of California, San Francisco, tried contacting 4,754 dermatologists listed in the three largest Medicare Advantage plans in 12 metro areas. Nearly half of the names were duplicates, and only about half the remaining—26% of the total—were at the listed address, accepted the plan and were offering appointments. The California Department of Managed Health Care (DMHC) performed a survey of Blue Shield of California showing that a significant percentage (18.2%) of the physicians listed in the directory were not at the location listed in the provider directory and that a significant percentage (8.8%) were not willing to accept patients enrolled in the plan’s Covered California products, despite being listed on the website as doing so.

Anthem customers filed 176 complaints on network issues FROM January 1 to August 31, 2014, and Blue Shield saw 130 complaints. A study into the availability of providers in the Medicaid Managed Care program performed by the Department of Health and Human Services’ Office of Inspector General offers perhaps the most glaring results. Forty-three percent of providers were not participating in the Medicaid managed care plan at the listed location and could not offer appointments. Thirty-five percent of providers could not be found at the location listed and were therefore not participating at the location listed by the plan. Another 8% of providers were at the location listed but said that they were not participating in the plan. In some cases, these providers had participated in the plan in the past; in other cases, the providers had never participated in the Medicaid managed care plan.

Health plans find it increasingly difficult to maintain accurate participating provider information in their provider directories for reasons including the following:

  • Increasing complexity in the insurance products being offered to customers.
  • The dynamic nature of participating provider information.
  • Limited resources to maintain provider directories.

One reason is that health plans are attempting to lower costs by constructing provider networks that include only certain providers within a health system. A 2014 McKinsey study of products being sold on the ACA health insurance exchanges describes partial health system participation. The study found that Forty-four percent of ultra-narrow, silver-tier products exclude at least one hospital from every single participating health system. Another 31% of the products exclude at least one hospital from at least one health system. The costs for such ultra-narrow networks are 13% lower. But these arrangements add complexity to the process of capturing the relevant information in a health plan’s provider system and ensuring that these data are propagated correctly to its provider directories. Third, a provider practicing multiple specialties or at multiple locations may be participating with a health plan for only one specialty or at one location.

Any time one piece of information for a provider listed in a health plan directory changes, the entire directory is technically inaccurate until it is updated with the accurate information. The process required by a health plan to maintain accurate participating provider information in its provider directories is complex and requires substantial resources. All of this must be performed by health plan resources that are often limited and subject to medical loss ratio (MLR) requirements.

Proposed Obamacare Rates 12% higher for 2016

HealthPocket analyzed rate filings for 3,771 plans in 45 states and found proposed Affordable Care Act premiums average a 12% rate increase for 2016. Premiums were compared for 40-year-old non-smokers in the largest city in each state. The Silver plan was the most popular exchange plan during the 2015 open enrollment period, accounting for 67% of marketplace plan selections. The 2016 rate proposals for silver plans averaged 14% higher than premiums in 2015. At a 16% increase, gold plans had the highest rate increases proposed for 2016. Entry-level bronze plans had 2016 rate proposals that averaged 9% higher than 2015 while platinum plans, the top-tier of the Affordable Care Act plans, averaged only a 6% increase in rates for 2016.

HealthPocket also found that rate increases varied significantly depending on the type of health plan. For example, among bronze plans examined, rate proposals for HMO and EPO plans were 20% higher than 2015 while PPOs were only 4% higher.

The 2016 rates represent the first time Affordable Care Act insurers have had a full year of medical claims data (including the post-deductible period) to determine rates for the new enrollee pools enabled by the law. Before the enactment, in most states applicants with expensive pre-existing conditions risked being rejected for privately purchased health insurance. Given the exclusion of this population in the pre-reform market, historical data on enrollee pools had limited value for setting Affordable Care Act rates.

Consumers will not necessarily pay the health insurance premiums proposed within the rate filings. The proposed rates must be reviewed and approved by the insurance regulators to each state in which the rates were filed. That process may result in lowering of some of the proposed rates . Moreover, some consumers will experience lower premium increases due to subsidies. Those who are unsubsidized and pay full price for health insurance, will endure the full cost of whatever rate increases are approved.

Proposed Obamacare Rates 12% higher for 2016

Affordable Care Act (ACA) premiums will go up an average of 12% for 2016 over 2015, according to a report by HealthPocket. The company analyzed rate filings for 3,771 plans in 45 states. Silver plans, the most popular exchange plan, account for 67% of exchange plan selections. The proposed 2016 rates for  averaged 14% higher for Silver plans, 16% higher for Gold plans , 9% higher for entry-level Bronze plans, and 6% higher for Platinum plans.

Proposed rate increases vary depending on the type of plan. For example, rate proposals for HMO and EPO Bronze plans were 20% higher than 2015 while PPOs were only 4% higher. The 2016 rates represent the first time Affordable Care Act insurers have had a full year of medical claims data with enrolles who cannot be turned away due to a  pre-existing condition. Proposed rates must be reviewed and approved by state insurance regulators, which may result in lowering some proposed rates. Some consumers will see lower premium increases due to subsidies, but unsubsidized consumers will endure the full cost of any approved rate increase.

Obamacare Premiums Higher in Counties Without a Preferred Provider

A study by HeathPocket reveals that consumers benefit when PPO plans are available to them, even if they choose not to buy PPO plans since the other available plans will have lower premiums. The average Obamacare premium for a 40-year-old was $327.28 in counties with no PPOs and $325.43 in counties with PPOs. Obamacare health plans must meet the standards mandated in the Affordable Care Act, but plans choose whether to cover out-of-network providers and require referrals for specialist visits, according to the study.

HMO, EPO, and POS plans were 5% higher in counties with no PPO plans than in counties with PPO plans. Premiums for POS plans were 6% higher in counties with no PPO plans than in counties with PPO plans while HMO premiums were only 2% higher. EPO plans had the greatest premium cost difference, with average premiums of $335.55 in counties where PPO plans were available and $387.21 in counties where PPO plans were unavailable, an increase of more than 15%.

HealthPocket also found premium differences among counties with only one available plan type and counties with multiple available plan types. Plans in counties with only one available plan type had an average premium of $350.61, 8% higher than the average premium of $324.06 for plans in counties with multiple available plan types. Among the four plan types, PPO and POS plans may appeal most to consumers who want to continue seeing their doctors if other plans don’t cover their doctor’s in-network. However, cheaper HMO plans could be preferable for consumers that don’t mind staying in-network and getting referrals from their primary care doctor

Medicare Advantage Enrollment Soars

About 17.3 million people were enrolled in Medicare Advantage plans as of March 2015, an increase of more than 1.3 million members year-over-year, according to a study by Mark Farrah Associates. Eighty-two percent of Medicare Advantage members have individual plans while only 18% are in employer group health plans.

All but two leading Medicare Advantage companies grew their membership. Group membership rose 6%, primarily driven by UnitedHealth plans. UnitedHealthcare is the top Medicare Advantage organization with 3.4 million enrolled, gaining 271,245 new Medicare Advantage members. UnitedHealth owns nearly 20% of the market with Humana a strong second at 18%. Humana added 369,747 new members for a net gain of 13.2%. Aetna and Kaiser Permanente also saw significant gains with more than 1.2 million Medicare Advantage. Carriers with more than 250,000 members cover 67% of all Medicare Advantage enrollees.

Insurers rely on February and March enrollment reports to assess which competitors gained and lost members during the last open enrollment period, which occurs from October 15 to December 7 each year.

HMO plans have been the predominant type of coverage in the Medicare Advantage segment for several years. As of March 2015, about 62% of members were enrolled in an HMO plan. PPOs, including local and regional plans, covered 31% of Medicare Advantage enrollees.

The Medicare Advantage market is still ripe for growth with an unpenetrated market of 37 million and growing, according to the Centers for Medicare and Medicaid Services (CMS).

Many Americans Don’t Ask Basic Questions Before Choosing a Plan

Three out of four Americans say they understand health insurance. But 42% say they are somewhat likely or not at all likely to review plan details before signing up for coverage, according to a survey by the American Institutes for Research (AIR).  “Because many people believe they know more than they actually do about health insurance,…they may face the shock of high out-of-pocket expenses they didn’t expect,” said Kathryn A. Paez, Ph.D., R.N., an AIR principal researcher, and coauthor of the study. The survey reveals the following:

  • About half can identify general characteristics of an HMO, and 23% can identify the characteristics of a PPO.
  • While most can identify common insurance terms, such as “appeal” (80%) and “premium” (81%), far fewer can identify more complicated concepts, such as “step therapy” (37%) or “medically necessary” (60%).
  • Only 20% can calculate how much they would owe for a routine doctor’s visit.
  • Seventy-nine percent are at least moderately likely to check which hospitals and physicians are covered by various plans.
  • Those aged 22 to 34 answered 55% of the knowledge and skills items on the survey correctly, compared to 63% of 55- to 64-year olds.
  • People who have not seen a doctor in the past year answered 49% of the knowledge and skills questions correctly compared to 64% of those who see a doctor several times a year.

Last Updated 07/21/2021

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