2014 PLUS Medical PL Symposium Health Care Insurance Exchanges: The Rubber Hits the Road

Transcription

1 2014 PLUS Medical PL Symposium Health Care Insurance Exchanges: The Rubber Hits the Road Atlanta April 23 & 24, 2014

2 MODERATOR: PANELISTS: HEALTH CARE INSURANCE EXCHANGES: THE RUBBER HITS THE ROAD Phil Dyer, Senior Vice President, Kibble and Prentice/USI Genevieve Alexander, Vice President, NAS Insurance Services, Inc. Kim Delaney, RPLU, Vice President, Healthcare Management Liability Product Lead, Allied World Assurance David Lewison, Financial Services National Practice Leader, AMWINS Brokerage Group Leonard H. Sorrin, JD, Vice President, Congressional and Legislative Affairs, Premera Blue Cross

3 3,000 2,500 2,000 1,500 1, National Health Expenditures (Billions USD) 0 The U.S. Healthcare Industry Currently under enormous financial strain and demographic pressure, healthcare will have to reinvent itself over the next few decades National Health Expenditure as Share of GDP (%) In 2012: $2.8 Trillion dollars $8,937 per person By 2020: $13,709 per person (projected) SOURCE: Centers for Medicare & Medicaid Services, Office of the Actuary, National Health Statistics Group 3

4 Unprecedented Change: Drivers of Fundamental Disruption in Healthcare Delivery Systems and Payment Methodologies Medicaid Federal Rules on Health Insurance Medicare Fundamental Disruption Health Insurance Exchanges

5 The Pace of Change Network Changes/ Budget Impacts (Federal/State) 1 year, recurring annually Reimbursement Reform 10 years Cultural Transformation of Institutions 30 years

6 The current calm in healthcare professional liability An unprecedented period of stability in the low frequency of claims and a steady, predictable severity trend, coupled with record levels of financial capacity. Medical Malpractice Industry Combined Ratio 154% 100% 107% 108% 116% 130% 134% 142% 137% 112% 96% 91% 84% 78% 83% 81%

7 The ACA s 5 Biggest Changes in its 3rd Year March 25, 2013 Payment Reform Tied To Quality Measures Accountable Care Organizations New Provider-Payment Partnership Models More Robust Fraud-Fighting Efforts Uncertainty around Medicare/Medicaid

8 Provider Shortages

9 Pressures on Providers Legal & Business Complexity Dramatic increases Demand grows unabated Uninsured Patients Providers Emphasis on Margins, Costs & Resource Allocations Moving away from patient care as top priority Growing population adding to financial and system stress Reimbursements and Overall Medical Spending

10 Reform Stressors Drinking out of a Firehose Not enough doctors, expanded mid-levels Undiminished demand for specialists and no one on call Resource constraints Absence of tort reform

11 Florida doesn t have enough doctors for Medicaid expansion Tallahassee Bureau SunSentinel February 22, 2013 By Kathleen Haughney TALLAHASSEE Brace yourself for longer lines at the doctor's office. Whether you're employed and insured, elderly and on Medicare, or poor and covered by Medicaid, the Florida Medical Association says there's a growing shortage of doctors especially specialists available to provide you with medical care. And if the Florida Legislature goes along with Gov. Rick Scott's recommendation to offer Medicaid coverage to an additional 1 million Floridians part of the Affordable Care Act that takes effect next January the FMA says that shortage will only get worse.

12 Expanded Scope Of Practice Is Being Proposed In Legislatures

13 Sticker Shock

14 P/P/P Patient Provider Payment

15 Role Play? Providers Becoming Payors Payors Becoming Providers

16 It s Happening! Some hospital networks also become insurers By Roni Caryn Rabin Kaiser Health News, August 25, 2012

17 Increased Liability Issues New Standards of Care More Causes of Action Direct Liability ACO Vicarious Liabilities More Stringent Informed Consent Integration Challenges

18 Now add: Exchanges Additional million people in the system Some states have their own, others default to Feds Increased pricing of healthcare in individual and small group markets (bigger increases for younger enrollees Comm Rating) Enrollees with skin in the game more cost sharing

19 No One Ever Washes A Rental Car

20 Health Care Reform and the Exchanges: Where We Are Today April 23, 2014 Leonard Sorrin Vice President, Congressional and Legislative Affairs

21 the program widely known as Obamacare looks less like a sweeping federal overhaul than a collection of Individual ventures playing out unevenly, state to state, in the laboratories of democracy. New York Times, March 27, 2014

22 PREMERA s Market Experience Washington $150 million in federal grant money State Exchange functioning reasonably well Expanded Medicaid Oregon $303 million in federal grant money State Exchange doesn t work Expanded Medicaid Alaska No federal grant money. AK was the only state not to apply for the $1 Million exchange planning grant Federally Facilitated Exchange Did not expand Medicaid

23 How Is This Playing Out So Far? Alaska (HHS) 6,666 individuals have selected a marketplace plan 2,901 determined or assessed eligible for Medicaid/CHIP by the marketplace Oregon (Cover Oregon) 58,883 commercial enrollment 141,332 Oregon Health Plan (State Medicaid) WA Medicaid Enrollments (3/27/2014) 268,367 Newly Eligible Adults Enrollment 135,485 Previously Eligible but not Enrolled 408,086 Redeterminations (Previously Covered)

24 What sets Alaska, Oregon & Washington apart? Politics Alaska: Republican administration resistant to the ACA Oregon & Washington: Democratic dominated landscape, embraced ACA & state exchanges Ambition and Priorities Washington Relatively successful Politically balanced board Modest ambition: walk before you run Oregon Abysmal failure due to excessive ambition, poor project management Tried to do everything at once Decision to prioritize the SHOP exchange at the expense of the individual exchange

25 No One Knows What the Future Holds Obama Administration/HHS Extensions Delays Exemptions Delivery System Issues

26 Shifting HHS Deadlines/Delays/Policy Changes It s All About Politics Changes range from administrative disruptions to long term business impacts Employer Mandate Delay HHS permitted issuers to extend plans with policy years before October 1, States can elect which LOBs to extend Washington: No extension Alaska: Extended to October 1, 2016 Oregon: Initially extended one year, option for 2nd Oregon proposal to mandate use of 3:1 underwriting bands for all transitional plans in an effort to make ACA plan pricing more attractive Could encourage the purchase of ACA plans (make grandfathered plans more expensive); or Increase number of young invincibles (drop grandfathered coverage & do not buy ACA plans)

27 Emerging Delivery System Issues Provider Consolidation Continues Regulatory response: greater CON review powers Increased Medicaid enrollment and reimbursement concerns Scope of practice and reimbursement parity efforts Reimbursement land-grab as cost containment takes greater hold Provider Network Access Issues Narrow Networks Provider response Political and Regulatory Responses

28 With All of this in Mind, What do We See Ahead? Enrollment Impacts: Not enough of the younger demographic to balance the age/risk pool Costlier pool/higher 2015 premiums Lower than desired 2014 enrollment can create less stable pools and smaller pools across which to spread costs Too many uninsured not participating: Why? Transitional Plans: enrollees must ultimately transfer to ACA plans Will likely confront even higher ACA plan premiums than if transitioned on January 1 Resulting lack of uptake?

29 Long term financial sustainability Subsidy Costs Metallic benefit levels Political risk on revenue side Delivery System and Provider Network Access Issues: Consolidation will continue will increased quality and outcomes or increased pricing prevail? Upward commercial pricing pressure due to increased proportion of public program reimbursement levels Narrow networks will continue to drive savings (unless stalled by provider and consumer pushback)

30 The Good News By any estimation, many have obtained affordable coverage, some for the first time The proportion of young invincibles improved over the course of the open enrollment period In many states, Medicaid expansion filled a coverage gap for the very poor

31 What Does this Mean for You? Distribution Channel Increased customer churn Difficult environment for channel communications High customer expectations in an environment of: High premiums and deductibles, Narrow networks Constant chaos Related coverage and liability risk

32 The Only Thing That is Constant is Change - Heraclitus Health care- one of most regulated industries in the U.S. FCA Amendments Expand - 3, 5, to 10 year look back Tumultuous relationship between providers & payers Ambiguity & lack of communication increases vulnerability to allegations of improper billing, privacy violations The impact of turnover & shortages: More CEO turnover than any other industry (+50%) Changes in Medicare/Medicaid reimbursements, ACA Attending Physicians? 1 out of 3 physicians are over 55 years in age 2020 expected to see a shortages of 200,000 physicians, 800,000 nurses.

33 The Impact of Healthcare Reform The Threat of Transparency: Freedom of Information Act, CMS Physician Compare Website, etc. Providers may be targeted with allegations of Medicare fraud or abuse Financial viability and hospital admissions conflict with joining new valuebased payment models OIG releases Special Fraud Alert HIPAA and ICD-10 impact the entire payer organization: ICD-10 has more than 8X the number of codes under ICD-9 Procedures previously with 1 code may now have multiple codes

34 Cost-Efficiency, Coordination of Care vs New Revenue Streams Shift From Independent to Employed Physicians 60% of FP & pediatricians, 50% of surgeons, 25% of surgical subspecialties ACA Networks, Questionable Relationships = Increased Scrutiny into Billings Pressure from hospital employers to order more tests (tied to bonuses) Attractive employment deals better than private practice Base salaries of employed physicians related to the income generated Facility Fees Loss of Autonomy, Rise of Qui Tam New Insurance Products to help healthcare providers bridge gaps & transfer risk

35 The Rise of the Qui Tam Here Come the Feds Under FCA, a citizen may file suit on behalf of the federal government against those who have defrauded it. Whistleblowers (qui tam plaintiffs) are eligible for up to 30% of the recovery. 71% of all qui tam recoveries are attributed to healthcare qui tam actions The average qui tam (whistleblower) recovery by the Feds is $8.6 million Federal and State FCA cases recovered over $9 billion in civil & related criminal fines in FY 2012, compared to $30 billion in recoveries between 1986 & 2011 Aggregation of information & access to information increases liability Feeding Frenzy There is increased activity from the OIG s Fraud, Waste and Abuse Hotline, Departmental, GAO and DOJ referrals, Congressional requests and referrals from the Office of Special Counsel regarding whistleblower disclosures. Source: CMS

36 An Institute of Medicine Report disclosed $690 Billion caught in wasted spending for unnecessary, excessive, inefficient services or preventative failures. This is where every healthcare provider may be questioned on their billings by the Feds. $250,000,000,000 $200,000,000,000 $150,000,000,000 $100,000,000,000 $50,000,000,000 Unnecessary Services $210 Billion Excess Administrative Costs $190 Billion Inefficient Delivery of Care $130 Billion Inflated Prices Fraud $105 Billion $75 Billion $0 Wastes in Healthcare Source: Prevention Failures $55 Billion

37 Headlines Tennessee clinics settle False Claims Act allegations (Jan, 2014) Feds eye crackdown on cut-and-paste EHR fraud (Dec, 2013) OIG Says HCA's JFK Medical Center Must Repay $4.4M to Medicare (Nov, 2013) Doctors Abusing Medicare Face Fines and Expulsion (Jan, 2014)

38 The Feds & The Meds: New Investigation Methods Spring Board Claims: Medical Board Proceedings Beneficiary complaints hotlines, following beneficiaries home Voluntary Self-Disclosures Medicare claims being released to insurance carriers driven to keep costs down Collaborative Witnesses (CW) working inside a healthcare practice and recording conversations and funds being passed for referral relationships. 38

39 New collaborative efforts pursuing transparency in auditing efforts have the Feds calling on the public and commercial payers to assist in their investigations. A sample list of collaborative parties: America s Health Insurance Plans Amerigroup Corporation Blue Cross and Blue Shield Association Blue Cross and Blue Shield of Louisiana Coalition Against Insurance Fraud Humana Inc. National Association of Insurance Commissioners National Association of Medicaid Fraud Control Units National Health Care Anti-Fraud Association National Insurance Crime Bureau New York Office of Medicaid Inspector General Tufts Health Plan UnitedHealth Group WellPoint, Inc. Source: CMS 39

40 Recovery Figures What s Happening? Recovery Audit Program Corrections, in Millions Total National Program FY 2010 FY2011 FY2012 FY 2013 Through June Overpayments Collected $75.4 $797.4 $2,291.3 $2, Underpayments Returned $16.9 $141.9 $109.4 $ $3.16 B $268.M Total Corrections $92.3 $939.3 $2,400.7 $2, $3.43B 94% of claims were not appealed 56% of all those appealed, were overturned The AHA has the success rate of appeals at over 75% Collections were highest in the following states: California - $143 million New York - $45 million Illinois - $43 million Michigan - $39 million Florida - $32 million Missouri - $31 million Source: OIG Medicare Recovery Audit Contractors and CMS s Actions to Address Improper Payments, referrals of potential fraud and performance August 2013; 40

41 The Feds & The Meds: Recoveries The Feds Crack Down: The OIG recovered $6.9 billion in FY 2012 from auditing healthcare providers. This marked the highest recoveries to date, a 50% growth since 2008 and an return on investment for of $7.9 for every $1 the Feds spent Excluded Provider Lists are Growing: 3,131 individuals and organizations were excluded from participation in Federal Healthcare Programs 41

42 Emerging Changes in Healthcare: Underwriter/Broker Focus What s changed? What are we seeing? Structural changes New (or heightened exposures) New challenges Evolution of Management Liability What s on the horizon? Where is D&O going from here?

43 Massive changes: New business models New contracts New alignments M&A Changing reimbursement structure Change in quality assessment/tracking

44 What we see as a result of the changes: New regulations Structural changes and M&A claims Nonprofits going private Joint Ventures Private Equity participation Insurance implications

45 New/heightened exposures in Management Liability: Contracting Regulatory Blending of Coverages Antitrust Fundamental Disruption Exposures EPL

46 Massive Legal costs & Complexity Winning battles FTC Antitrust Consumer Most recent Competitor Significant exposure

47 Other areas of concern: EPL Regulatory Bankruptcy

48 Challenges: Lack of information Timing Segregating risks Bucketing exposures Education

49 Evolution of D&O Side A and Side B, or D&O Only Coverage Side C Entity Coverage Enterprise Risk Policy?

50 What s next? Bleed of coverage Variety of structures Higher Med Mal payments More Utilization Review claims Understanding the implications of Exchanges and ACO s

51 What s next? More Players? Less Players? Reduction of Limits? New Products? New Exclusions?

52 Cyber Liability An Upward Trend In 2013, 199 major breaches affected 7.1 million patient records; compared to major breaches affecting 3 million patient records. The upward trend highlights the impact of electronic healthcare records and the ease of losing significant amounts of private information. 60% of private practices refusing to join ACO model, vulnerabilities increase 36% of breaches stemmed from inadvertent misuse of data by employees 25% by malicious insider Business associates have been implicated in about 21 % of 571 breaches (affecting 500 or more individuals) that DHHS has tracked since

53 Cyber Liability A Changed Landscape, Who is to Blame? Regulatory actions vary by state, balancing multi-state law implications Aggregation of information Transparency and media awareness driving cyber liability purchasing decisions 53

54 2014 and Beyond.. New markets Carriers become more bold Aggregation of Data, Increased Limits, Losses rise New coverage components will drive purchasing decisions, such as Reputational Harm Billing Fraud & Abuse and Cyber Liability will become standard placements 54

55 Questions?