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RI Rate Review: A First Step for Affordable Health Insurance

RI Rate Review: A First Step for Affordable Health Insurance. State Coverage Initiatives National Meeting August, 2010 Deborah Faulkner Faulkner Consulting Group RI Affordability Project Lead. Background: RI Office of Health Insurance Commissioner.

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RI Rate Review: A First Step for Affordable Health Insurance

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  1. RI Rate Review: A First Step for Affordable Health Insurance State Coverage Initiatives National Meeting August, 2010 Deborah Faulkner Faulkner Consulting GroupRI Affordability Project Lead

  2. Background: RI Office of Health Insurance Commissioner History: New Cabinet-level position as of June 2004 Response to BCBSRI misconduct Frustration by employers and providers over costs of health care, reimbursement system, inability to engage health plans on larger issues Statutory Responsibility: Four Areas Financial Solvency Consumer Protection Fair Treatment of Providers Direct Health Plans towards system improvement 2

  3. Starting Point: RI Commercial Insurance Market • By the Numbers • RI population: 1 Million • Commercially Insured Lives: 575,000 • Small Group Market (<50): 90,000 • Individual Market: 15,000 • Individual Market: Good policy, bad politics • Single Carrier (BCBSRI) and single pool • Annual open enrollment, Two sub-pools – low risk subsidizes high • Small Group: Good access, recent declines in offer/takeup rates • Three carriers • Guaranteed issue, no pre-ex, 4-1 bands, Adjusted community rating • Large Group: Broker driven, less public oversight • Three carriers • Prior approval of rate manuals and rate factors 3

  4. What About the Costs? Efforts in RI to Address Underlying Cost Trend 1. Health Plan Rate Review 2. OHIC Affordability Standards 4

  5. I. Health Plan Rate Factor Review Idea: Health Plans in RI have unique standard: “Policies to promote affordability” Use rate factor review to educate public, align interests of health plans to get at underlying cost drivers. Elements: Annual review of large and small group rate factors. Public disclosure of information. Process (SmG + LgG) 45-60 Day Annual Process Key Components Preliminary Internal Review Public Comment Internal Actuarial and Substantive Review Propose Approved, Modified or Rejected Rate Factors to Carriers 5

  6. See www.ohic.ri.gov for full submission 6

  7. Rate Factor Review: Impact? * 2010 rate requests were received with highly publicized/ front page community reaction. OHIC called on carriers to withdraw requests. All three insurers withdrew, refiled six months later. Rates shown are for Q3/4 only. ** 2011 Rates were approved with six additional conditions, specifying hospital/health plan contract terms 7

  8. Rate Factor Review: Assessment Pro: More scrutiny of insurers More public education. Good way to get the attention of Insurers: Opportunity to squeeze admin costs, profits (cost shift back to self-insured) Opportunity to push harder on payment reform. Con: Greater politicization of process. Potential for unpredictable, non-rational decisions. Low rate factors now may mean big jumps later. Only indirect influence on consumers and providers Rate review, by itself, will not address the underlying cost of care in Rhode Island. 8

  9. Evidence from Rate Review: Insurance Premiums driven by delivery system costs 9

  10. 2011 Conditions of Approval All health plan/hospital contracts must: Utilize efficiency based units of payment for hospital services (other than fee for service) Limit annual maximum price increase for inpatient and outpatient services to CMS hospital price index Include performance incentives based on no less than three nationally accepted clinical quality, service quality or efficiency-based measures Include mutual obligations for greater administrative efficiencies Include terms that promote and measure improved clinical communication between the hospital and other providers Include terms that relinquish the right to contest the public release of these terms by state officials 10

  11. II. OHIC Affordability Standards Starting Point Delivery system reform is needed – rate review is not enough Health Plans are statutorily required to have policies that promote affordability, quality and access. Previous efforts unsatisfactory Carriers can do some but coordinated, multi-payor efforts are required Process OHIC’s Health Insurance Advisory Council. Grant-funded consulting staff, expert opinion and health services research. Off line work with health insurers Result : “Affordability Standards” Consequences tied to rate factor review -- rate factor review process as the affordability “gate”. Achieve alignment between plans and priorities in the community 11

  12. OHIC Affordability Standards Health plans will increase the proportion of their medical expenses spent on primary care by five percentage points over the next five years. This money is to be an investment in improved capacity and care coordination, rather than a simple shift in fee schedules. As part of the increased primary care spend, health plans will promote the expansion of the CSI-Rhode Island project or an alternative all payer medical home model with a chronic care focus by at least 25 physicians in the coming yearand Health plans will promote EMR incentive programs that meet or exceed a minimum value. Health plans commit to participation in a broader payment reform initiative as convened by public officials in the future. 12 (

  13. Value of Primary Care Spend Target Incremental Value of Increase (beyond inflation): >$150 million over five years 13

  14. Key Challenges Defining Investment PrioritiesWhere do we want to spend it? How much direction to give the carriers Monitoring Plan InvestmentsHow best to hold carriers accountable to the targets? Evaluation: System OutcomesInpatient Readmissions, ER visits, Primary Care Supply and System Costs VisibilityHow to increase statewide visibility of standards? 14

  15. Challenge # 1. Defining Investment Priorities Total ($) Portion Category $5.0 M 46% Patient Centered Medical Home $1.2 M 11% Electronic Medical Records Incentives $0.8 M 8% FFS Fee Improvements $0.6 M 5% Loan Repayment $3.4 M 31% Other, carrier-specific investments $11.0 M 100% Total Year 1 Planned Investment, 2010 15

  16. Challenge # 2. Monitoring Plan Investments A Moving TargetRevised 2010 Spend Requirements to account for membership loss (Combined, both carriers) Based on 2009 actual spend data, as reported by the carriers in April, 2010 We estimated that achieving 6.6% Primary Care Spend in 2010 required carriers to invest $11M in Primary Care After adjusting for 2009 base data, achieving 6.6% Primary Care Spend in 2010 only required carriers to invest $8M in Primary Care, mostly due to the substantial, one-time decline in enrollment 16 16

  17. Requires frequent and detailed review2010 Carrier Investment Plans: Latest Forecast* Challenge # 2. Monitoring Plan Investments UHCNERequired Investment $1.5 M BCBSRI Required Investment $6.5 M Oct. 09 Fcast June 2010 Forecast Patient Centered Med.Home $ 4,535,000 $6,900,000 (all-payor and plan specific) Electronic Medical Records 905,000 $320,000 $ Incentives $ - FFS Fee Improvements 455,000 $ 1,800,000 500,000 $ $ 0 Loan Repayment Other, carrier specific investments (BH/PC integration, Specialist/hosp delivery 2,700,000 $ $1,900,00 system improvements, PforP, ACOs) 9,095,000 Total $ $10,920,00 (1) * OHIC estimates based on carrier reporting and discussions. Highly preliminary estimates. 17

  18. Challenge # 3. System Metrics are Key to This Effort Process Measures Outcome Measures • Primary Care Spend Percentage -- Target vs. Actual • All-Payor Medical Home Initiative (CSI)-- Number of sites-- Total spend • EMR Incentive-- Participating primary care providers-- Bonus payments ($) • Primary Care Physician Satisfaction-- Annual survey • Primary Care Supply-- Primary care provider count-- Primary care share (PC/total providers) • System Efficiency Improvements-- Hospital Use (Total, ACS)-- Re-hospitalization-- ER Use (Total, Preventable/Avoidable, ACS) • Total Medical Trend 18

  19. Affordability Standards: Current Status • Primary Care Spend2010 Investments on target – over $8 Million investment in primary careWorking thru reporting, monitoring process – should run smoothly for 2011Need to build stronger stakeholder engagement • CSIBegan in October 2008 -- 5 primary care practices with 27 providers Expansion in place as of April 1 adding 25 providersInitiative is well established, with broad stakeholder support. • EMRHealth Plans have incentive programs in place. Flat take up. No coordination between them and with RIQI. Eclipsed by REC? • Hospital Payment ReformLegislation suggested, did not pass Rate Review Conditions – will they work? All payor hospital payment study planned for fall/winter 19

  20. The Case for Payment ReformHospital Payment Variation is Real Case Mix Adjusted Inpatient Med/Surg Payments, Indexed to percent of Medicare fee fpr service BCBSRI and UHCNE Fully Insured Payments, CY 2008 Lifespan Care New England Unaffiliated 20

  21. In Closing… • We have an active rate review process in Rhode Island. This process holds carriers accountable, puts pressure on admin/profits – but does not, by itself, address the underlying cost of care • However, the rate review process provides a critical foundation and gating mechanism for the affordability standards. We think this combination of rate review and affordability standards may provide a path to cost containment. • Conditions of Rate Approval • Required Investments in Primary Care Infrastructure • Multi-payor collaboration/initiatives • We need to continue to work on: • Monitoring and measuring • Stakeholder engagement • Hospital payment reform 21

  22. For More Information Any Questions: Contact Deb Faulkner, dtfaulkner@gmail.com, 401-486-3700 or go to www.ohic.ri.gov Rate factor review: http://www.ohic.ri.gov/2009%20RateFactorReview.php Conditions: http://www.ohic.ri.gov/documents/Insurers/Regulatory%20Actions/2010_July_Rate_Decision/2_%20Conditions%20Summary.pdf Affordability Standards: Documented Standards: http://www.ohic.ri.gov/Committees_HealthInsuranceAdvisoryCouncil_%20Materials%202009.php Issue Brief: http://www.ohic.ri.gov/documents/Committees/HealthInsuranceAdvisoryCouncil/affordability%202009%20/6_Issue%20Brief.pdf 22

  23. Additional Resources The Providence Journal on rate review conditionshttp://www.projo.com/news/content/CURB_HOSPITAL_COSTS_07-08-10_MNJ4HCV_v21.13150d4.html Press release on rate review conditionshttp://www.ohic.ri.gov/documents/Insurers/Regulatory%20Actions/2010_July_Rate_Decision/1_Press%20Release%20Rate%20Factors%202011.pdf Conditions of rate approval, 2011http://www.ohic.ri.gov/documents/Insurers/Regulatory%20Actions/2010_July_Rate_Decision/2_%20Conditions%20Summary.pdf Health Affairs article:  Affordability standardshttp://www.ohic.ri.gov/documents/Committees/HealthInsuranceAdvisoryCouncil/affordability%202010/HEALTH%20AFFAIRS%20ARTICLE%20-%20May%202010.pdf Issue brief:  Affordability standardshttp://www.ohic.ri.gov/documents/Committees/HealthInsuranceAdvisoryCouncil/affordability%202009%20/6_Issue%20Brief.pdf

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