Richard Lieberman, Chief Data Scientist at Mile High Healthcare Analytics, gave a presentation on the current state of the individual and small group health insurance markets after the King v. Burwell Supreme Court decision. Some of the key points discussed included that the decision stabilized the markets by allowing subsidies to continue, with CBO predicting 23 million people covered in 2016. Repeal efforts are likely to continue as a political rallying cry rather than a realistic goal. Challenges remain in reaching the uninsured, stabilizing premium increases, and transitioning to value-based payments. Risk adjustment programs are working to balance risk across insurers but auditing has been delayed and accuracy remains an issue requiring education.

1. Copyright © 2015 Oracle and/or its affiliates. All rights reserved. |
Richard Lieberman
Chief Data Scientist
Mile High Healthcare Analytics
Clear Sailing After King: the Individual
and Small-Group Markets

2. TODAY’S AGENDA
• Putting King to rest (finally!)
• Getting more people covered
• Transitional policy impacts
• The mandate and its penalties
• Risk adjustment payment transfers
• IVA issues

3. “30 DAYS IN 30 SECONDS”
• The Cures bill passed the House and will pass the Senate
soon
• Huge changes to inoperability requirements
• The Medicaid mega-rule
• More states are expanding Medicaid: Alaska and Utah
• John Kasich just joined the race for President
• Avalere Health reports: Exchange Networks Have 34
Percent Fewer Providers

4. King v. Burwell: What Will Life be Like Without the Hype!
• On June 25, 2015, the Supreme Court upheld the distribution of
health insurance subsidies by states where the federal government
is running their exchange
• “A fair reading of legislation demands a fair understanding of the
legislative plan.”
• The Court rejected Chevron deference
• It also embraced the so-called “major questions” rule – the
presumption that Congress does not implicitly delegate major
statutory questions to agencies.
• The Court held “it is instead our task” – the Court’s own duty on such
a major question – “to determine the correct reading of Section 36B.”

5. What Happens After King?
• The resolution of King allows federal subsidies to continue to be provided to more
than 6 million people
• It calms the political waters surrounding the Affordable Care Act, allowing
implementation to continue in a more certain and predictable environment for the
health-care industry, states, and consumers.
• CBO predicts that 23 million people will be covered in 2016
• With so many covered and the ACA insurance reforms more firmly in place, repeal is
likely to be more a rallying cry for the right than an achievable objective
• ACA will eventually gradually join Medicare and Medicaid as a sometimes contentious
but more ordinary issue on the policy and political agendas

6. ACA Creates Winners and Losers
• It is impossible to move from a system in which people
with preexisting conditions can be denied health coverage
or charged much higher premiums to a system where
people pay the same premium regardless of their health
without some who have previously benefited having to pay
more
• Some of the winners might perceive themselves as losers
• Prior reforms of the US health care system typically
created only winners
• Medicare beneficiaries are uniformly better off than they
would be without coverage

7. But Of Course, Repeal is Just Around the Corner!
• Repeal will continue to be a rallying cry for the uninformed, the
misinformed, and the politically naïve
• Ironically, there significant opposition to the ACA from left-wing
liberals– they have been furious since 2009 that a single-
payer system wasn’t adopted
• Congress has already put off a “repeal vote” to the Fall; the
reconciliation procedure is not a vehicle for repealing the ACA
• The candidates that assert they will repeal “Obamacare” on
their first day in office, haven’t read or don’t understand the
Supreme Court majority’s opinion in King v. Burwell

8. The Challenges Faced by the Industry
• Reaching those who are uninsured, a generally more
difficult population to connect to insurance
• Stabilizing premium increases in the marketplaces as
insurers get a better handle on their risk pools
• Migrating to value-based payments

9. There is Evidence that the ACA is Increasing Coverage Access

10. What Happens When Politics Drives Public Policy!

11. Is Transitional Policy a Little Train Wreck?
• The Administration gave states the option
of letting insurers continue individual and
small group plans that would otherwise
have been cancelled in 2014, because
they did not comply with ACA standards,
until October 1, 2017
• Thirty-five states are allowing issuers to
continue transitional plans for one or
more years
• 21 states are allowing issuers extend
these plans through 2017

12. Or a Big Train Wreck?
• “Millions of small businesses nationwide —
and an estimated 70% of California's small
firms that offer employee health insurance
— haven't yet faced all the sweeping
changes that resulted from the ACA”
• Colorado has about 190,000 people in
transitional plans- 75,000 with individual
coverage and about 115,000 people in
small group plans
• There are only 140,327 enrolled in individual
market plans
Sources: http://www.latimes.com/business/la-fi-healthcare-watch-
20150413-story.html and
http://www.lifehealthpro.com/2015/03/13/colorado-firm-on-ppaca-
compliance

13. Individual Mandate Penalties Increase Over Time….

14. Mandate Penalties Are Still A Suggestion!
27-Year Old Individual
Percent of Federal Poverty Level
2015 Plan Year 100% 200% 300% 400% 500%
Individual Mandate Penalty $325 $469 $704 $938 $1,173
Lowest Cost Subsidized Bronze Annual
Annual Premium $0 $860 $2,162 $2,162 $2,162
Difference ($325) $391 $1,458 $1,224 $989
Percent of Federal Poverty Level
2016 Plan Year 100% 200% 300% 400% 500%
Individual Mandate Penalty $695 $695 $875 $1,167 $1,459
Lowest Cost Subsidized Bronze Annual
Annual Premium $0 $946 $2,378 $2,378 $2,378
Difference ($695) ($1,641) $1,503 $1,211 $919
Source of 2015 Results: “Individual Mandate Penalty May be Too Low to
Attract Middle-Income Individuals to Enroll in Exchanges” Avalere Health,
April 24, 2015 (www.avalere.com)

15. Even for Older People…Penalties Are Minimal
50-Year Old Individual
Percent of Federal Poverty Level
2015 Plan Year 100% 200% 300% 400% 500%
Individual Mandate Penalty $325 $469 $704 $938 $1,173
Lowest Cost Subsidized Bronze Annual
Annual Premium $0 $424 $2,291 $3,407 $3,684
Difference ($325) ($45) $1,587 $2,469 $2,511
Percent of Federal Poverty Level
2016 Plan Year 100% 200% 300% 400% 500%
Individual Mandate Penalty $695 $695 $875 $1,167 $1,459
Lowest Cost Subsidized Bronze Annual
Annual Premium $0 $466 $2,520 $3,748 $4,052
Difference ($695) ($1,161) $1,645 $2,581 $2,594
Source of 2015 Results: “Individual Mandate Penalty May be Too Low to
Attract Middle-Income Individuals to Enroll in Exchanges” Avalere Health,
April 24, 2015 (www.avalere.com)

16. Are Sicker-than-Average People Enrolling?
• Researchers used Express Scripts data to compare 1 million
Marketplace enrollees to a comparison group of members with
employer-sponsored insurance (ESI)
• There were marked differences in age and medication use between early
Marketplace enrollees versus those who enrolled later
• Marketplace enrollees had both lower overall drug spending and
medication use than did the comparison group with employer sponsored
coverage and lower use of most of the medication classes
• Marketplace enrollees had nearly four times higher odds of using HIV
medications than the comparison group. Out-of-pocket expenses for
specialty medicines were 36 percent higher among Marketplace enrollees
than in the comparison group as well

17. Monthly Prescriptions Filled, By Month Of Enrollment In The Marketplace
and the Employer-Sponsored Comparison Group, 2014
Julie M. Donohue et al. Health Aff 2015;34:1049-1056
©2015 by Project HOPE - The People-to-People Health Foundation, Inc.

18. Odds Ratios Of Any Use Of Specific Therapeutic Categories Among
Marketplace Enrollees Versus The Comparison Group, January–
September 2014
Julie M. Donohue et al. Health Aff 2015;34:1049-1056
©2015 by Project HOPE - The People-to-People Health Foundation, Inc.

19. The Need to Stabilize Premiums
• We know that many issuers guessed wrong in 2014
• This was to be expected; by everyone except the media and the pundits and the
partisans!

20. Fallout from the Payment Transfer
• On June 30, 2015, the risk adjustment payment transfer
system moved approximately $2.2 billion dollars between
issuers!
• $1.7 billion was transferred in the individual market
• Almost every issuer was involved in the payment transfer–
only 18 issuers out of 772 had a zero dollar payment transfer
• Plus, there were an additional $7.9 billion in reinsurance
payments
• Risk corridor impacts will be announced on August 14th

21. Anyone Doubt the 3-Rs?
• 2 of the three Rs are temporary…if you doubt
them for too much longer, they will be gone!
• Reinsurance and risk corridor programs expire
after the 2016 contract year
• Risk adjustment is a permanent program
• In 2014, many issuers were too inundated with
baseline ACA implementation challenges to give
adequate attention to risk adjustment
• Continuing that approach in 2015 should be
pursued at the issuer’s peril!

22. Reinsurance Parameter Changes in 2015 and 2016
2014 2015 2016
Attachment Point $45,000 $45,000 $90,000
Reinsurance Cap $250,000 $250,000 $250,000
Coinsurance Rate 100 percent 50 percent 50 percent

23. Initial Validation Audits in 2015
• CMS has cancelled the audits for 2015
• First “practice” audit will occur in 2016 for the 2015 contract
year
• However, the two “practice” audits are now reduced to one
• Secondary “audit-driven” payment transfers still begin in
2018 for the 2016 contract year

24. Cancelled IVA Audits are a Mixed Blessing
• No 2015 audit is one less thing to deal with
• But there is likely to be significant incidence of diagnoses
that will not substantiate against the medical record upon
audit
• Unlike Medicare-Advantage’s “paper tiger” RADV audits, the
commercial IVA process will impact every issuer
• Issuers should conduct mock-audits on larger sample sizes
• Issuers need baseline risk score accuracy data at the level of
provider groups

25. Well, Can’t We Just Code with Abandon?
• Just because there are no IVA audits in 2015, doesn’t mean
that it’s time to party
• The dissemination of accurate risk adjustment knowledge is
so limited, that issuers need to use the “breathing room” to
teach clinical documentation to their providers
• Develop incentive programs around clinical documentation
• Consider a shared savings approach- it may be difficult to rely
on percent of premium capitation

26. False Claims Act
• The government still has the False Claims Act, which has been
dramatically expanded under the ACA
• Overpayments now have to be reported to HHS within sixty days of detection
• Elements a False Claims Act violation:
• defendant makes a false statement or engages in a fraudulent course of
conduct
• do so with the required scienter (intent or knowledge of wrongdoing)
• the statement or course of conduct is material
• the statement or course of conduct caused the government to pay out
money of forfeit moneys due

27. Two Active Court Cases
• U.S. v. Isaac Kojo Anakwah Thompson
• U.S. District Court for the Southern District of Florida (15-
20012-CR-ZLOCK/HUNT)
• Criminal fraud case
• Olivia Graves, on behalf of herself and the U.S.
• Humana is defendant in this case
• U.S. District Court for the Southern District of Florida (10-
23382-CIV-MORENO)
• False Claims Act case

28. Department of Justice is Trying Out a Fraud Theory Against Alleged
Risk Adjustment Violations

29. Try Typing “Medicare Advantage Whistleblower” into Google

30. MHHA Risk Adjustment Advisory Service
• Most risk adjustment staff inside health plans and vendors have learned about
risk adjustment from the Medicare-Advantage Participant Guide or just by trial-
and-error
• The Medicare-Advantage Participant Guide is several years old (last updated in
2008), incomplete, and geared to Medicare-Advantage
• Most risk adjustment professionals are too reliant on vendors; many of which have
limited knowledge of risk adjustment
• Commercial risk adjustment is far more complicated than MA
• The MA revenue management strategies, while seemingly applicable on the
surface, will not work without modification

31. MHHA Risk Adjustment Advisory Service
• It has become apparent that while most risk adjustment
professionals have their “hearts in the right place” and
want to do right by risk adjustment, there is rarely a
“grown-up in the room.”
• Mile High Healthcare Analytics will serve as that “grown-
up” in the room
• Our team can teach, advise, improve data, build analytical
systems, and oversee vendors

32. Composition of Risk Adjustment Advisory
Service
• Our team is comprised of clinicians, data management experts, senior-level policy wonks,
and health plan operations experts who have “had a seat at the table” when key risk
adjustment decisions have been made
• Our clinicians can train physicians and risk adjustment staff on how to maximize risk
adjustment operations and how to oversee vendors supporting the risk adjustment process

33. New Risk Adjustment
Educational Series
Learn More and Register
at:
http://www.healthcareanalytics.exp
ert/educational-series/

34. QUESTIONS?
Send your questions to:
mhh@healthcareanalytics.expert

35. CONTACT INFORMATION
Richard Lieberman
rlieberman@healthcareanalytics.expert
720-446-7785 (voice)
www.healthcareanalytics.expert