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ACO, Healthcare Provider Alternatives and Strategies: Participating in Health Insurance Exchanges

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Navigant Healthcare presents at the 2013 National Health Insurance Exchange Summit on “ACO, Healthcare Provider Alternatives and Strategies: Participating in Health Insurance Exchanges.” Casey Nolan …

Navigant Healthcare presents at the 2013 National Health Insurance Exchange Summit on “ACO, Healthcare Provider Alternatives and Strategies: Participating in Health Insurance Exchanges.” Casey Nolan shared the provider perspective and implications of participation in the health insurance exchanges. Cynthia Arnold shared the health plan implications from the ACO and Network perspective. Cristine Vogel reviewed and discussed the Consumer Operated and Oriented Program (CO-OP) and Qualified Health Plan (QHP) opportunities and challenges.

For more information on Health Insurance Exchanges, please visit http://www.navigant.com/insights/hot-topics/health-benefit-marketplace/.

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  • Consumer oriented, non-profit – spend more money on benefits and servicesBusiness strategies and organizational models vary; dependent on sponsor organization (i.e. existing Medicaid or trade union plan, consultants, academic, providers)No existing: using subcontractors and rental networksOther challenges: financial resources, complete operations and qualified staffing, actuarial, risk management/cost of care, regulatory compliance, quality and accreditation, vendor management, IT systems and cross-functional system connectivityGood management teams but a lot to do in a short period of time with limited staff, resourcesSome CO-OP may expanded to other states with additional fundingLike any new company, out of 24, there will be success and failures
  • Caution:Regulations by state – i.e. product requirements, additional EHB, tiersMedicaid expansion by state – for commercial/HiX insurers, expansion is positive and non-expansion is more risky and difficult selection mixUncertainty of take-up ratePopulation socio-demographic mixSelection riskNon market share leaders are more wait and seeMay be attractive to commercial plans with Medicaid MCOsLatest – HealthPlus of Michigan – see attachmentLess robust – what incumbents will look at:Related to question of take-up rateAwareness and understanding of the Exchange and SubsidiesPotential low penalty level for individual and employer mandatesQuestion about cost for comprehensive benefits vs. traditional; Individual and small group designs (and state add-ons)Process to apply and enroll with a government sponsored programReadiness and user friendliness of the ExchangesState by state:Defensive plans such as BCBS with #1 share vs. non-defensive such as United and Aetna – all are approaching cautiously due to much uncertainty (market, regulation)Insurers are assessing and evaluating on a state-by-state basis:SBE, FFE, PFE and rulesState regs, DOIDelivery system and provider ratesExisting position and market share: commercial, MedicaidConsumer awarenessHealth insurance is complicated to begin withThe application and eligibility process is complicatedWill likely take time to evolve to an efficient and effective new marketJD Power survey: 73% of individual purchasers will use the Exchange and 48% of both individual and group are interested in Exchanges; higher interested with individuals in higher deductible plans and small companiesProvider ratesImpacts price pointsWill they be commercial or Medicare – or in-betweenProviders typically hold-out to the very endIncumbents could have constraints that providers hold them hostage to existing contracts/ratesMedicaid presence could have an impactDue to churnOpportunity for “Bridge“ productOpportunity to align or partner with Medicaid managed care plansThreat with ‘commercial, Medicaid manage care plans’ – WellPoint/Anthem, BCSB TN, BCBS NM, United, Aetna, Health Net recent award in Arizona


  • 2. NAVIGANT OVERVIEWWho is Navigant Consulting?» A 30+ years Global Consulting Firm with 2,500 professionals located in over 45 U.S. / Global BasedOffices» Navigant’s Healthcare Practice brings together a team of more than 600 seasoned consultingprofessionals and industry thought leaders. We help our clients design, develop and implement integrated,technology-enabled solutions that create high-performing healthcare organizations.Page 2Strategic AdvisoryOperations Management &ImplementationOutsourcing & Technology SolutionsNavigant provides healthcare executivesobjective, practical, results-oriented assistanceto set strategic directions that enable long termgrowth through the every changing industry.Navigant has extensive experience, and a successfultrack record, helping healthcare organizationsimplement solutions to improve financial, operationaland quality performance.Navigant provides outsourcing and technologysolutions to improve efficiency and help clientsmake more informed decisions based on betterinformation management .Health Systems Physician Groups Payers Life Sciences Companies
  • 3. PROVIDER ALTERNATIVES IN PARTICIPATING INHEALTH INSURANCE EXCHANGES:› Provider Perspective: Casey Nolan, Managing Director› ACO Perspective: Cynthia Peters Arnold, Director
  • 4. A HIGHLY VOLATILE AND COMPLEX INDUSTRYKey Trends Impacting Health Systems, Physicians and OthersMacroEconomicFactors1. Impact of demographic and disease burden trends2. Increasing health care as percent of GDP, and highest cost globally3. Global financial crisis, national debt crisis, state budget crisis4. Health care reform and changing payment models, flat NIH funding, scrutiny on costs and impact of research5. Growing regulatory burden and increased transparency6. Natural disastersScience andTechnologyTrends7. Growth in interdisciplinary and team science8. Growth of comparative effectiveness research and implementation science9. HIT adoption/proliferation, evolving into database/statistical science, digital revolution10. Blurring boundaries among academia, industry, government and fundersWorkforce andEducationTrends11. Generational shifts in leadership, faculty, staff, residents and students12. Physician/nurse shortages and resident work hours13. Team-based care and education/training14. Diversity shifts in patients, trainees and faculty/staff15. Evolution of maintenance of licensure and certificationHealth CareTrends16. Growing payer concentration17. Increased focus on outcomes, reliability, safety, cost and the patient experience18. Increasing emphasis on prevention and population health19. Health system consolidation and physician acquisition20. Emergence of accountable care organizations to improve quality and reduce waste21. Migration to lower acuity/cost settings
  • 5. THE EVOLVING HEALTHCARE ENVIRONMENT Reduce ALOS Build capacity Compete forcontracts Reduceinvestments Purchasetechnology Focus on process,service, facilitydesignIf you build it, they willcome.If you buy it, they willcome. Compete based on datato demonstrate value(low cost, high quality) Optimize use of whatyou have Increase connectivityTechnology Market2000sManaged Care1990sWholesale Market1980sAccountable Era2010sIf you prove it, they will come.Page 5
  • 6. LESSONS FROM THE FRONT LINESSince the PPACA’s passing in 2010, Navigant has intentionally invested in assisting clients in Massachusetts, the nations’laboratory of healthcare reform. Navigant has now completed over 250 post-reform engagements with a wide range of physicians,payors, health systems, and suppliers. Based on our experience, we believe reform has been the catalyst for the followingmarket forces and trends which are reshaping the healthcare landscape.#1. Under the Shadow of Reform,Reconfiguration = Recapitalization» Thinly capitalized and distressed hospitals& physician groups increasingly will seekpartnerships, resulting in sometransactions that could not have beenpredicted two years ago#2. Reimbursement Cuts areRequiring Improved Performance» Large federal and state budget deficits haveexacerbated Medicare and Medicaid solvencyissues, pressuring provider payment» The cuts are large enough to require anintegrated performance improvement /strategy/ financial approach#3. A New Reimbursement Paradigm isEmerging» Managed care contracts, offering incentives touse accountable care tools such as moregenerics, less high-end imaging and EDavoidance are being embraced by primarycare physicians, triggering acceptance byspecialists and hospitalsPage 6
  • 7. THE “TWO CURVE” CHALLENGEPage 7PerformanceTimeHospital and physician providers must addresshow to optimize performance in the currentenvironment while also preparing to “jump” fromCurve #1 to Curve #2NaturalTrajectoryCurve #1: FEE-FOR-SERVICE All about volume Reinforces work in silos Little incentive for “real” integrationCurve #2: VALUE-BASED PAYMENT Achieving “Triple Aim” , as per IHI: Better Care Experience for Individual Better Health for Populations Lower Per Capita CostsHow do you prepare for a future worldthat requires more clinical integrationwhile the health care system still rewardsa position of strength in the current FFS“foot race?”Source: futurist Ian Morrison; Institute for Health Improvement
  • 8. EXCHANGE (HIX) REIMBURSEMENT» Price Signaling is Occurring Nationally› Although the common initial ask is “Medicaid, Medicare or a steep discount”…..› Tenet strategy – participate in narrow/tiered network @<10% discounts off of commercial rates› Large Regional BCBS Plan – getting 5-10% discounts off commercial rates (up to 20%)› CHI – Very modest discounts off of commercial rates› Be mindful of out of network provisions (emergency, non-emergency, authorized vs. non-authorized,PPO vs. HMO)› Many Hospital CFO’s are assuming HIX plans will reimburse hospitals at or slightly above MedicareratesWhat is the anticipated reimbursement rate?Source: Wall Street Journal 3/1/13 “Another Big Step in Reshaping Healthcare”Page 8
  • 9. ACO/NETWORK IMPACT: WHAT IS LIKELY TO EVOLVE INTHE EXCHANGE MARKETPLACE?Implications for ACO/Provider Networks:» Access and network design will include:› Mental health and substance abuse› Avoiding providers who invite adverse selection (3 R’s minimize concern a little)› Impact of state QHP requirements on network design› Preference for narrow network» Payers will be interested in reducing medical claims costs through numerous networkstrategies:› Narrowing to lowest cost providers› Leveraging for more discounts› Creating tiered networks› Payors with limited experience with risk arrangements, may want to set up ACO and Bundled Paymentarrangements without sufficient experience in how to address risk adjustment and providing actionabledata to providersPage 9
  • 10. POTENTIAL PAYER MIX SHIFT (2012-2015) DUE TO THEIMPLEMENTATION OF THE ACA AND EXCHANGESPage 102012Payer Landscape2012Sample Payer MixMedicare FFS 42%HMO / PPO(predominantly BCBS)42%Medicaid FFS 11%Self-Pay &Other Unclassified5%Total 100%Net net, the positive financial gain from shifting“uninsured/self-pay” volumes from “no pay” to“some pay” is unlikely to offset the negativeimpact of “Cadillac BCBS” insured patientsshifting to Exchange plans.Potential 2015Sample Payer MixAnticipated 2015Payer Landscape45.0%Medicare FFSand/or HMO/ACO33.0%HMO / PPO(predominantly BCBS)Commercial ACO /“Narrow Network”6.0% Medicaid FFS6.5% Medicaid HMO/ACO7.5%Exchange(Gold, Silver, Bronze)2.0%Self-Pay &Other Unclassified100% Total2%1.5%5% 6%1.5%42%Driven by aging pop.33%6%3%
  • 11. ACO IMPACTCynthia Peters Arnold, Director, Navigant Healthcare
  • 12. ACO / NETWORK / HEALTH PLAN IMPLICATIONSImplications of Expanded Benefits and Coverage:» More coverage for mental health and chemical dependency services» It is assumed there will be a decrease in uncompensated care which will lead to more scrutiny of taxexempt status of provider organizationsImplications for Care Management:» Continuity of care issues/challenges› Pent up demand for care› Chronic illness management› Mental health and substance abuse demands for service and volume of those needing it will increaseImplications for Provider Reimbursement:» Plans will use “evergreen” contract clauses to continue current reimbursement without adjusting toaccommodate potential increase in acuity at the provider level for “Exchange” population» Plans in Medicaid may try to apply the Medicaid fee schedules to move into individual and small groupmarkets» Increase of risk transfer arrangement to providers, possibly without adequate data and risk adjustmentbecause the population will be “new”Page 12
  • 13. ACO / NETWORK / HEALTH PLAN IMPLICATIONSImplications for Payor Operations that may impact ACO Networks/Providers:» Appeals and complaints requirements and processes - Collections might become an issue forhospitals/providers because of confusion over coverage and effective dates» Premium billing and collections challenges» Impact on uncompensated care for providers (payer contracts, tax exempt status, financial planning)» Expect accelerated tiered network products with any related provider costs and quality informationreported on the exchange website:› Provider cost and quality variation will be shown on the web sites by a significant number of states andpayers are likely to condition payment on this data/performance» Payers could narrow networks even further than tiering:› There are basic network adequacy requirements but still less pressure to provider broad geographicaccess to PCPs because its an individual and small group market› States must meet minimum federal network access requirements but can make QHP requirementsmore stringent than federal requirementsPage 13
  • 14. INCREASING ALIGNMENT OF MARKETS, DELIVERY ANDPAYMENTJourney Toward Value-based Payment SystemCurrent System Cost–Based, Market–Based SystemMilestonesValue-Based Payment SystemMilestones• "Pay me more" versus "pay youless" rhetoric• Major cross subsidies and crossshifts• Payment success equalcontractual loopholes plusnegotiation power• Limited if any relationship betweenprice, cost, quality, value• Awareness of cross subsidies,irrational unit reimbursement,over/miss/underuse of services• Establishment of a method thatbasis prices on incremental costsand market competitors, andqualitative indicators of value• Customer First• Payer and providers agree to a"pay me right" method• Managers spend "unitreimbursement, utilization, andmix) strategically• New payment mechanisms suchas hospital/physician bundling, 30day episodic payments,guarantees, and peak pricing thatclarify who is accountable tomaximize patient value for theincremental dollarPage 14Aligning Markets With Provider Networks: Requires Alignment of Delivery Systemsand Payment Mechanisms
  • 15. INCREASING ALIGNMENT OF MARKETS, DELIVERY ANDPAYMENTProvider Cross Subsidy MatrixResults Hospital Cross Subsidy in Action Physician Cross Subsidy in Action• Margin Makers • Radiology• Laboratory• Supplies• Drugs• High-end Cardiac Procedures• Lab• Injections• Radiology• Crowns• Other Ancillaries• Margin Losers • Emergency Care• General Medicine• Evaluation And ManagementCodes• Procedures• Unintended Consequences • Over investment In High-end,Acute, Specialty Services• Under investment In Access ToPrimary Care, Prevention, etc.• Over invest in the Proliferation ofCommodity Services• Under invest in Access to PrimaryCare, Prevention, etc.Page 15Aligning Markets With Provider Networks: Requires Alignment of Delivery Systemsand Payment Mechanisms
  • 16. CONSUMER OPERATED ANDORIENTED PLANS (CO-OPS)Cristine Vogel, Associate Director, Navigant Healthcare
  • 17. CO-OPS: NEW & DIFFERENT COMPETITION IN 24 STATESWhat are Consumer Operated and Oriented Plans – CO-OPs?» ACA included a loan program to finance the creation of CO-OPs and provided forfederal start-up and solvency loans to qualified applicants» Nonprofit, member-governed, consumer driven health plan choice» Innovative care delivery and payment models to compete in the health insurancemarket» A clean slate - no constraining legacy business» No existing license, networks, operational capabilities, market intelligence, reputationPage 17
  • 18. 24 CO-OPS IN 24 STATES NOTEPage 18CO-OPs located in:• Arizona• Colorado• Connecticut• Illinois• Iowa• Kentucky• Louisiana• Maine• Massachusetts• Maryland• Michigan• Montana• Nebraska• Nevada• New Jersey• New Mexico• New York• Ohio• Oregon• South Carolina• Tennessee• Utah• Vermont• Wisconsin
  • 19. CO-OPS AND MARKETPLACESFederally-FacilitatedMarketplace (FFM)State Partnership Marketplace(SPM)State-Based Marketplace (SBM)Arizona Illinois Colorado New MexicoLouisiana Iowa Connecticut New YorkNew Jersey Michigan Kentucky OregonSouth Carolina Maryland UtahTennessee Maine* Massachusetts VermontWisconsin Montana* NevadaNebraska*Ohio*Page 19CO-OPs are required to sell two-thirds of their contracts in the newly createdMarketplaces• Mostly targeting the individual and small group markets• Large employers can participate but limited to about one-thirds of the contracts*These states are not partners but willing to review QHP market rules
  • 20. CO-OPS: CHALLENGES» Difficulties creating a start-up health plan in the expedited timeframe› Hire management and staff› Obtain state licensure› Comply with the new ACA rules regarding benefit designs› Develop provider networks and provider directories› Contract for claims processing and payment systems› Contract for call center operations› Develop marketing strategies and create marketing materials› Interface systems with state and federal agencies» No name recognition and limited resources for marketing» No claims history data for product pricingPage 20
  • 21. CO-OP: OPPORTUNITIES» Brand new market rules effective January 2014 levels the playing field» New “kids on the block” may get additional attention» Not all competitors will participate inside the Marketplace leading to greater marketshare» Providers may be more willing to participate in the network due to nonprofitconsumer governed organizational structure» Price competitive because lack of “legacy infrastructure”Page 21
  • 22. QUALIFIED HEALTH PLANS(QHPS)Page 22Cristine Vogel, Associate Director, Navigant Healthcare
  • 23. ENVIRONMENTAL LANDSCAPE» Insurers are cautious about the initial opportunity of the Marketplace» Participation in Marketplaces is likely to be less robust than originally envisioned» Insurers are assessing and evaluating on a state-by-state basis» Blues are likely to be the mainstays in the Marketplace» Narrow networks on the Marketplaces are expected» Provider rates are a big question mark – although starting to see some light on thistopic» People will shift between the Marketplace and Medicaid – opportunity for Bridgeproducts or Medicaid expansion on the MarketplacePage 23
  • 24. THE NEW HEALTH INSURANCE MARKET» In 2014, the ACA changes nearly all of the market rules› Essential Health Benefits & Actuarial Value requirements for the entire individual and smallgroup markets› Guaranteed availability› Single risk pool for the individual and the small group markets for each issuer› Limits on cost sharing› Rating rules» Individuals will be required to have health insurance» Individuals with lower incomes will be eligible to receive federal premium tax creditsand reduced cost sharing» Large employers (>50 FTEs) may pay a fee if the health coverage offered does notmeet federal requirementsPage 24
  • 25. QUALIFIED HEALTH PLANIssuer Standards• State licensed and ingood standing• Quality improvementstrategies• Risk adjustmentstandards• AccreditationRating Standards• Justify and post ratingincreases• Set rates and benefitsfor an entire plan yearTransparencyRequirements• Standardized plainlanguage• Ability to submit dataacross a number offederal and stateagencies• Reporting andauditingProduct Design &MarketingRequirements• Network adequacy• Rating variations• Enrollment periods• Marketing approachesand materialsPage 25Only health plans that become certified as Qualified Health Plans (QHPs) can beoffered in the Marketplace
  • 26. STATES BY MARKETPLACE TYPEFederally-FacilitatedMarketplace (FFM)State PartnershipMarketplace (SPM)State-Based Marketplace(SBM)19 States 7 States in a Partnershipagreement17 States plus DC7 States that agreed to reviewQHPs for market rule complianceTotal = 19 Total = 14 Total = 18Page 26The timing for QHP certification varies by state and by Marketplace type:» QHPs in most SBMs will be certified by July 31st» QHPs in SPMs will have the State “recommend” to HHS those QHPs that should receive certification by July31st, but HHS will officially certify QHPs in early September» QHPs in FFMs will be certified in early September
  • 27. MARKETPLACE RATES?Although no Marketplace has approved any QHP rates at this time, we are getting a glimpseinto the rate filings from some Marketplaces…Page 27State Number of Insurers thatSubmittedEarly Indications to Premium CostsCalifornia 33 insurers applied, 13 selected Average individual monthly premiumapproximately $300Connecticut 5 insurers intend to file (2 havesubmitted)Average monthly premium for individual isapproximately $575; and for SHOPapproximately $425Oregon 12 insurers Individual monthly premium ranges from $169 to$422Vermont 2 insurers Average individual monthly premiumapproximately $350 and family coverageapproximately $980 monthlyWashington 9 insurers (57 plans) Average individual monthly premium for 21 yearold $225; for a 40 year old $280; and for 60 yearold $600
  • 28. NEXT STEPS FOR QHPS?» The insurers who submitted their QHP applications and rate filings to theMarketplaces will begin to learn of their certification during July, August andSeptember› Some SBMs will make the monthly premiums rates available to the public as soon as theQHP rates have been approved› The FFM and SPM will post the rates on October 1st when Open Enrollment begins» QHPs are developing their marketing strategies to identify who are the “newlyeligible” and who will enroll› What are the market segments and how can you to attract a mix of segments› Profitable growth and satisfaction in a new market with much uncertainty› Different social, economical and cultural population than traditional commercial businessPage 28