February 17, 2014

Western Pennsylvania HFMA2014 Winter Education

Health Insurance Exchange Narrow Networks: Strategies for Managing Participation

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ECG is committed to delivering smart and practical resolutions to critical issues, on time and within budget, across the spectrum of healthcare organizations.

ECG Management Consultants, Inc.

For over 40 years, ECG has served as a trusted adviser to some of the nation’s leading healthcare providers.

• ECG is a national consulting firm focused on offering realistic, implementable solutions to healthcare providers.

• Our staff of approximately 130 consultants operates out of offices in Boston, Dallas, San Diego, San Francisco, Seattle, St. Louis, and Washington, D.C.

• We have a strong team of experts to assist you with managed care contract evaluation and negotiations.

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Kozyak Tropin & Throckmorton, P.A.

Kozyak Tropin & Throckmorton, P.A. (KTT )

is a boutique law firm based out of

Miami, Florida, that handles high-stakes,

complex business disputes and bankruptcy

matters throughout the country.

Our dedicated healthcare team focuses on:

• Complex healthcare business litigation.

• Managed care contracting and dispute counseling.

• Large-scale hospital and physician reimbursement litigation.

• Medicare appeals.

Over the past year, our healthcare team has counseled its clients on disputes arising out of being improperly excluded from the exchange plan narrow networks.

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Agenda

I. Introduction

II. Operational Tactics

III. Short-Term Strategy

IV. Long-Term Strategy

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I. Introduction

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I. IntroductionMarket News: Initial Problems

The error-filled start of the exchange launch has caused the number of enrollees to be well below the projections.

• As of mid-November, only approximately 107,000 people in total were enrolled – about a fifth of the estimated projected 500,000 enrollees, including 27,000 on the federal exchange.

• The delay has resulted in legislative proposals to extend the deadline for coverage from January 1 to March 31.

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“Almost 27,000 selected insurance

via HealthCare.gov.” – November 13, 2013

• Imitator sites have tried to take advantage of the slow rollout, requiring some states to take action.

• The sites are operated by private brokers and are prohibited by the Affordable Care Act (ACA).

• Any plans sold outside the official exchange before January 1, 2014, are not eligible for federal subsidies and would not have consumer protections under the ACA.

Source: http://www.nytimes.com/news/affordable-care-act/2013/11/14/california-shuts-down-sites-mimicking-state-insurance-marketplace/?_r=0.

Source: http://www.usatoday.com/story/news/nation/2013/11/13/aca-enrollment-statistics-wednesday/3517715.

“California shuts down sites mimicking state insurance marketplace.”

– November 14, 2013

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I. IntroductionKey Objectives

• The tempestuous rollout of the health exchange marketplace Web sites in October and November left many people frustrated and concerned about coverage for 2014.

• Some people will not obtain coverage until the end of March 2014, and others may have the option to roll over their existing plans for another year.

• The Web site issues and late enrollment will slow the influx of new health exchange members and allow many providers time to prepare for the newly insured members at a more controlled pace.

• Our objective for today’s discussion is to answer the following questions about preparing for the exchange marketplaces:

– How should providers prepare for this new type of insurance product?

– What are the day-to-day operating implications of health exchanges?

– What short- and long-term strategies should providers utilize in the next 2 years to optimize their position with this new product and new market?

In 2013, health exchange marketplaces dominated the healthcare headlines. 2014 will be a critical year for providers to incorporate the newly insured into the everyday operations and plan for 2014.

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I. IntroductionIncreasing Enrollment and Demographics

Sources: U.S. Department of Health & Human Services (HHS) press release, January 13, 2014, http://www.hhs.gov/news/press/2014pres/01/20140113a.html.

Forbes, January 18, 2014, http://www.forbes.com/sites/theapothecary/2014/01/18/coverage-expansion-fail-less-than-one-third-of-obamacare-exchange-enrollees-were-previously-uninsured.

• Of the almost 2.2. million:

– 54% are female, and 46% are male.

– 30% are age 34 and under.

– 24% are between the ages of 18 and 34.

– 60% selected a Silver plan, while 20% selected a Bronze plan.

– 79% selected a plan with financial assistance.

• 65% to 89% were previously insured.

• 10% to 25% previously had employer-sponsored coverage.

Despite the slow start, nearly 2.2 million people selected marketplace plans from October 1 through December 28, 2013.

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I. IntroductionPennsylvania Exchange Plans

• No Medicaid expansion.

– Creation of “doughnut hole” of coverage at 100% to 138% of federal poverty level (FPL).

– Number of uninsured who would have been covered if Pennsylvania opted in: 435,088.

• Limited offerings.

– Three insurers: Highmark, Coventry HealthAmericaOne, and UPMC Health Plan.

– 35 to 40 plans.

– Only one Platinum plan.

• Allegheny County premiums.

– Individual (age 35): $139 to $374 per month.

– Family of four: $423 to $1,137 per month.

Source: The Morning Call, January 30, 2014, http://articles.mcall.com/2014-01-30/news/mc-pennsylvania-deaths-no-medicaid-expansion-20140130_1_medicaid-expansion-expanding-medicaid-medicaid-program.

Completed Applications (May Include Multiple

Individuals)Individuals Eligible

to Enroll

Eligible Individuals Who Qualify for

Subsidy

Individuals Assessed as Eligible

for Medicaid/CHIP

Individuals Who Have Selected a Plan

161,687 209,003 105,218 17,897 81,320

Source: The Henry J. Kaiser Family Foundation, as of December 28, 2013, http://kff.org/health-reform/state-indicator/state-marketplace-statistics-2.

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II. Operational Tactics

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II. Operational Tactics

Utilization Changes

Organizational Health Exchange Readiness

Assessment

The introduction of new health plan benefit structures and an influx of new patients provides organizations an opportunity to examine operational processes and policies.

Patient Interaction Processes

Finance Policies

• Clinic scheduling.

• Ancillary service volume.

• Provider availability.

• Financial performance.

• Pricing transparency.

• Bad debt policy.

• Plan premium support.

• Grace period.

• Exchange guidance.

• Elective out-of-network procedures.

• Emergency department (ED) payment policy.

Developing and communicating a plan to the pertinent personnel will result in an easier transition for both patient and provider.

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II. Operational TacticsReadiness Assessment

Department Readiness Assessment Questions

• What do you anticipate will be the major impact on your department or functional area?

• What action will be needed to plan for the managed care changes?

• What information will you need to communicate, to whom, and by when?

• What is your preparedness plan for 2014?

Example Readiness Plan Goals

• Evaluate the financial performance of the new managed care contracts.

• Plan and implement the appropriate operational changes (e.g., capture accurate information at the time of registration).

• Communicate with/educate the staff, physicians, patients, and community.

• Provide timely communication, as payor contract status may change.

Many organizations are developing and implementing plans for their managed care, revenue cycle, and patient financial services

departments after completing a readiness assessment.

II. Operational TacticsFinance Policies: Financial Performance

Monitoring the Impact of New Managed Care Contracts

• Establish new plan codes to accurately capture health exchange patients at the time of registration/admitting.

• Educate staff on the new plans.

• Monitor the financial performance by health plan.

• Review the co-payment and coinsurance levels for the new plan(s).

• Renegotiate the contract terms if the financial performance of the product is unsatisfactory.

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Just as providers evaluate the financial performance of their total managed care contracting portfolios, they should update their basic monitoring processes to include the new health exchange products.

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II. Operational TacticsFinance Policies: Pricing Transparency and Bad Debt

Pricing Transparency

• An increase in patient financial responsibility will result in greater cost scrutiny by patients.

• Patient demand for information will likely accelerate the movement to improve pricing transparency.

• Pricing will only grow in importance as a key differentiator among patients carrying a larger financial responsibility.

Bad Debt

• The increase in patient financial responsibility is expected to raise the incidence of bad debt for insured patients.

• Review and revise, as necessary, your organization’s bad debt policies.

• Review the applicability of charity care policies with the new products.

• An organization may choose not to provide charity care to an individual who does not buy insurance.

A key component of the new health exchange plans is the higher level of patient responsibility in paying for care.

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II. Operational TacticsFinance Policies: Plan Premium Support

• HHS Secretary Ms. Kathleen Sebelius suggested in a letter to Mr. Jim McDermott, U.S. Representative, that providers could provide premium support for patients. The logic is that health exchange marketplace-based plans are not federal insurance programs, and therefore, the payments would not violate federal Anti-Kickback Statutes.

• Subsequently, the CMS Center for Consumer Information & Insurance Oversight issued conflicting guidance and suggested that providers should not make premium payments on behalf of patients.

• A week later, the American Hospital Association restated its position that the CMS guidance does not legally prevent the hospital subsidies.3

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“HHS does not consider QHPs … to be federal

health care programs.” 1

– October 30, 2013

Conflicting guidance from CMS and HHS has raised a question about the legality of premium support for patients.

While this situation is not likely to be resolved quickly, preparing an organizational policy for premium support is a recommended strategy.

“HHS discourages [premium support] and encourages

insurers to reject such third-party payments.” 2 – November 4, 2013

1 Source: http://mcdermott.house.gov/images/The%20Honorable%20Jim%20McDermott.pdf.2 Source: http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/third-party-qa-11-04-2013.pdf.3 Source: American Hospital Association Legal Advisory, November 13, 2013.

Coverage Paid by Insurance(30 Days)

II. Operational TacticsFinance Policies: Premium Payment Grace Period

Section 156.270 – Termination of Coverage for Qualified Individuals:1

A QHP must provide a grace period of 3 consecutive months if an enrollee receiving advanced payments of the premium tax credit has previously paid at least 1 full month’s premium during the benefit year.

During the grace period, the QHP must do the following:

1. Pay all appropriate claims for services rendered to the enrollee during the first month of the grace period and may pend claims for services rendered to the enrollee in the second and third months of the grace period.

2. Notify HHS of the nonpayment.

3. Notify providers of the possibility for denied claims when the enrollee is in the second and third months of the grace period.

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The annual open enrollment period for health exchanges extends through March 2014. Once the initial premium is paid for the health exchange

product, the member has a 90-day grace period to pay for Months 2 and 3.

1 45 CFR 156: Health Insurance Issuer Standards Under the Affordable Care Act, Including Standards Related to Exchanges.

Grace Period – Provider at Risk(60 Days)

Premium Paid

II. Operational TacticsFinance Policies: Premium Payment Grace Period – Proactive Tactics

• Work with payor for notification at the time of eligibility verification if the patient has not paid his/her premiums.

• Ask the patient if he/she has paid his/her premiums and/or request proof of payment from the patient.

• Review your admissions forms to verify that it is clear that the patient is responsible in the event of noncoverage.

• Determine if a special consent form is needed for health exchange patients. This may vary by health plan.

• Process a patient as self-pay if he/she has not paid his/her premium or if you can not verify he/she has insurance.

• Request payment in advance for elective services when insurance eligibility can not be verified.

• Consider premium payments on behalf of the patient.

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Providers can take proactive steps now in order to limit the risk of providing services to patients who have not paid their premiums for Months 2 or 3.

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II. Operational TacticsUtilization Changes

Issue Considerations

Clinic Scheduling

• Utilization increases are likely to be found in primary care initially.

• Adding new patient appointments will be necessary to accommodate the influx, depending on the uninsured population.

• What do you anticipate the volume changes will be?

Ancillary Activity

• Diagnostic services will be needed to evaluate newly covered members and the current health status of patients with preexisting conditions.

• Will imaging and lab activity increase as new members seek care?

Provider Availability

• Physicians in your network may not have an open panel.

• Some may need incentives to open panels and increase access.

• Will your organization need to expand hours or hire additional primary care providers, including extenders?

As new patients gain coverage, there is likely to be a shift in utilization. The magnitude of the shift will depend on the patient mix in your market.

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II. Operational TacticsPatient Interaction: Education and Guidance

• Provide initial health exchange education to staff (e.g., contracted products).

• Reach out to organizations that have received grants for health exchange education (e.g., to provide training and informational materials).

• Work with the broker community on identifying the health plans and products that are under contract.

Taking the time to educate patients on insurance coverage options (Medicaid and premium subsidies) can improve enrollment and reduce uninsured care write-offs.

Community Organizations

Brokers

Patients Presenting

at EDSchools

Organization Staff

II. Operational TacticsPatient Interaction: Out-of-Network Elective Procedures

• Out-of-network reimbursement by the insurer for elective services will be limited.

• Expect health plans to deny payment or pay providers at reduced benefit levels.

• Hospital efforts in checking eligibility and benefits will be even more vital.

• Patients will experience much higher out-of-pocket costs, raising bad debt risk.

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It is likely that providers will not be in-network for all the health exchange plans in the market. How will you handle out-of-network patients seeking elective services?

Response to Noncontracted Payors

Strategy A Strategy B

• Take a wait-and-see approach.

• Monitor denials, payments, deductibles and co-payments in real time.

• Determine your policy and practice once you have more payor and patient information.

• Redirect all patients seeking elective services when their health plan is noncontracted.

• Repatriate inpatients once stabilized.

II. Operational TacticsPatient Interaction: Emergency Out-of-Network Claims

Out-of-Network Reimbursement

ED reimbursement for out-of-network patients is expected to be at an amount equal to the greater of the following:1

1. The median amount the payor pays to in-network providers for emergency services.

2. An amount based upon the same methods generally used by payors to pay for out-of-network services, such as usual and customary.

3. The amount Medicare would pay for services provided.

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Reimbursement for out-of-network hospitals is likely to be an issue due to new narrow-network products in the exchange marketplaces. This will be an issue,

particularly related to emergency visits for relatively close facilities.

1 Douglas Wolfe, Esq., “Paying for Out of Network Emergency Services Under the Affordable Care Act.”

II. Operational TacticsPatient Interaction: Emergency Visit Cost-Sharing

Cost-Sharing Requirements

• Patients are protected from higher co-payments and coinsurance for out-of-network emergency visits.

• Payors can not impose higher co-payments or coinsurance for out-of-network services.

• Minimum payment amounts from payors are intended to protect the patients from excessive balance billing as a result of low reimbursement to providers.

• Once the payor has paid the provider, providers can balance bill the patient the difference between the insurance payment and billed charges.1

• If patients have met their out-of-pocket maximums, payors may be subject to paying billed charges.

• Cost-sharing requirements will impact patients, providers, and payors.

• State law may prohibit payors from balance billing patients.

• Balance billing is a policy and public relations question that should be reviewed by the providers.

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1 Providers need to evaluate any state regulations that may prohibit balance billing.

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III. Short-Term Strategy

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III. Short-Term StrategyPreparations: Payors and Products

• Evaluate the Payors in the Market

– How many of your payors have a product on the exchange?

– Are these your largest payors or smaller payors?

– What payors are not in the health exchange market?

– Based upon the mix of payors, what strategic concerns do you have?

– Are there any concerns with volume shifts between payors?

• Evaluate the Products Being Offered in the Market

– How many HMO and PPO products are there?

– Is the market balanced, or are there more PPO products?

– Will more HMO products enter the market over time?

– Is there a Medicaid managed care product?

– How are the products priced in terms of total premiums and premiums after subsidies?

Providers should first evaluate the payors and corresponding products that are being offered in the market and determine the

significance of any contracting gaps in their managed care portfolios.

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III. Short-Term StrategyPreparations: Hospital Competitors and Physicians

• Evaluate Your Hospital Competitors

– Are your competitors contracted for the health exchange products?

– Which health plans are they contracted with?

– Will competitors gain any market share based upon their contracted health plans vs. your contracted health plans?

– Were narrow networks established in your market?

– Are your competitors participating in narrow-network products?

– How would you describe your health exchange market position, as compared to your competitors’?

• Evaluate the Physician Networks

– What physicians are contracted, by health plan and by product?

– How do the physician payor contracts align or not align with your hospital contracting status?

– Are there certain key specialists who are not contracted for certain payor products?

With a new product in the market, a close evaluation of your competitors’ contracting status, along with evaluation of contracted physician networks, will be required.

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III. Short-Term StrategyPreparations: Contracted Health Plan Example

Health Plan Exchange Products? Contracted? Comments

Aetna Yes No In negotiations.

Blue Cross Yes Yes Multiple products.

Blue Shield No N/A

Cigna Yes Yes Aligned group not contracted.

Health Net, Inc. Yes Yes Not participating.

UnitedHealthcare Yes No Example county only.

Providers can develop a simple matrix to explain their health exchange contract status and plan for future contracting strategies.

Example Matrix

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III. Short-Term StrategyPreparations: Health Plan Products and Premiums

Health Plans Product Total Premium1

Premium After Subsidy

Anthem Blue Cross HMO $483 $286

Blue Shield of California PPO $482 $285

Health Net HMO $449 $252

Molina Healthcare, Inc. HMO $473 $276

In San Bernardino County, California, the four products being offered at the silver level have similar premiums after subsidies. Therefore, choosing a plan is likely

to be influenced by brand recognition or contracted provider network status.

Since Health Net has the lowest premiums in the market, will providers lose volume if they are not contracted with Health Net?

1 Premiums are based upon an annual income of $40,000 and two adults age 35 and 28.

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III. Short-Term StrategyWestern Pennsylvania Health Insurance Marketplace

• Western Pennsylvania.

– Exchange plans are available from UPMC, Highmark, and Coventry.

• Highmark offers the cheapest Silver plan in the nation through its narrow Highmark Community Blue Network plan.

– The table below illustrates the 47% higher premium for the broad network.

• It is reported that the Highmark agreement with UPMC will terminate in 2014. UPMC providers will be out of network, and patients will face higher out-of-pocket expenses.

What dynamics will impact Western Pennsylvania providers?

1 Source: http://health.usnews.com/health-insurance/pennsylvania/marketplace-plans.

Broad Network Lower Network

Physicians 11,000 8,000

Hospitals 63 54

Premium (Single, Age 27) $197 $134

UPMC will need a strategy that anticipates patients will select the cheaper network but still want to access its facilities and professionals.

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IV. Long-Term Strategy

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IV. Long-Term StrategyPayor Contracting Strategic Considerations

Year 1

• Monitor health exchange volume and financial performance by payor and by product on a quarterly basis.

• Determine if you are losing volume due to noncontracted status.

• Analyze the contracted status of your competitors, including hospitals and physicians (aligned and nonaligned).

• Evaluate the narrow networks in your market, specifying contracted and noncontracted hospitals and physicians.

• Begin to plan your Year 2 strategy.

• If you have payor contracting gaps, determine the strategic and financial value of being contracted.

Year 2

• Renegotiate the contract terms if the financial performance of the product is unsatisfactory.

• Negotiate an annual rate increase.

• If you are losing volume due to noncontracted status or exclusion from a narrow network, determine what it will take to be included in the network.

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IV. Long-Term StrategyReview of Current Contracts

There are a number of tactics that your organization can take to stay ahead of the curve in responding to health exchanges for future years.

• Proactive Engagement – Proactively engage payors regarding exchange products.

• New Products – Understand that payors may want to include the new products in existing agreements.

– Determine if current agreements allow for add-on products (e.g., exchange products) at will.

– Focus on creating freestanding agreements for the exchange products so that reimbursement for that population can be isolated.

– If an amendment is necessary, add an amendment term clause.

• Competition – Evaluate the likely response of your competitors.

• Pricing Strategy – Determine your preferred pricing strategy for these products.

MedicaidRates

5% to 10% Discount

From Commercial

100% of Medicare Rates

90% of Medicare Rates

135% of Medicare Rates

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IV. Long-Term StrategyContract Questions

• What types of contracts will your organization be offered from the payors?

– Plans are likely to continue to use existing reimbursement structures.

• What other approaches might payors in the exchange take?

– In many markets, payors are building narrow networks to care for exchange patients.

– Narrow networks may include non-exchange patients.

• Will your competitors be contracting for exchange patients?

• How will you respond if the payors continue to pay current contract rates, even if your contract does not include a health exchange product?

FFS

Case Rates

Medicaid Basis

Percentage of Medicare

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IV. Long-Term StrategyPreferred Contracting Approach

New Contract Considerations

• A new agreement allows for the greatest flexibility for the provider.

– Ability to negotiate rates.

– Flexibility to limit the term.

• A provider can clearly specify the exchange participants (e.g., individuals and small groups only).

• A new contract does not interfere with your current HMO and PPO agreements.

• The base agreement requires amendments or mutual agreement for the addition of new products.

A new contract for exchange products is the preferred approach because it allows for the greatest flexibility. Most health plans are seeking to amend existing contracts.

Given the uncertainty of pricing, levels of participation, and potential migration of commercial business to the exchange, providers need

flexibility to negotiate rates and exit the contract if necessary.

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IV. Long-Term StrategyContract Language

• Product Definitions – Clearly specify in the contract that the rates are for health exchange patients only.

• Related Entities – Define if other owned or affiliated organizations can access the health exchange contract rates.

• Other Payors – Determine if other payors can access the rates.

• Product Offering off and on the Exchange – Clarify in the contract if the product being added is inside or outside the exchange.

• Payor Filings – Ensure that your hospital is not being filed with the state as in-network at current contract rates without being informed.

• Narrow Networks – Verify that your competitors are included or excluded from the narrow-network definition.

• Existing Product to Become New Health Exchange Product – Payor selects an existing product to be the health exchange product, then requests a lower contracted rate. If a new contract is not agreed to, then the current product is terminated by the payor.

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Douglas Wolfe, Esq.Attorney

Kozyak Tropin & Throckmorton, P.A.daw@kttlaw.com

305-728-2929

Mr. Charles A. BrownSenior Manager

ECG Management Consultants, Inc.cbrown@ecgmc.com

703-522-8450