RI Rate Review: A First Step for Affordable Health

Insurance

State Coverage Initiatives National MeetingAugust, 2010

Deborah FaulknerFaulkner Consulting GroupRI Affordability Project Lead

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

1. Financial Solvency

2. Consumer Protection

3. Fair Treatment of Providers

4. Direct Health Plans towards system improvement

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Starting Point: RI Commercial Insurance Market

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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

What About the Costs?

Efforts in RI to Address Underlying Cost Trend

1. Health Plan Rate Review

2. OHIC Affordability Standards

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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

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2009 req. 2009 apprvd

2010 req. 2010 apprvd

2011 req 2011 apprvd

2009 req. 2009 apprvd

2010 req. 2010 apprvd

2011 req 2011 apprvd

2009 req.

Annual Rate of Price Inflation (% ) 8.5 7.9 7.3 10.0 10.0 8.4 7.4

Annual Rate of Utilization Inflation (% )

1.0 1.0 1.0 5.6 4.6 3.5 1.3

Composite Inflation Rate (%) 9.6 9.0 7.5 8.4 16.3 15.1 9.5 12.2 8.8

Annual Rate of Price Inflation (% ) 7.8 7.4 6.8 7.8 7.8 6.8 7.5

Annual Rate of Utilization Inflation (% )

5.3 5.2 5.2 5.5 4.5 7.5 4.2

Composite Inflation Rate (%) 13.6 13.0 9.9 12.4 13.8 12.6 10.5 14.8 12.0

Annual Rate of Price Inflation (% ) -- 4.8 4.8 5.4 7.3

Annual Rate of Utilization Inflation (% )

-- -- - 6.6 5.7 5.7 2.6

Composite Inflation Rate (%) 10.8 11.0 11.0 10.1 11.9 10.8 10.8 11.4 10.1

Annual Rate of Price Inflation (% ) 19.3 15.0 8.1 3.8 3.8 4.7 6.7

Annual Rate of Utilization Inflation (% )

3.5 3.7 4.9 6.7 5.8 7.1 1.3 Composite Inflation Rate (%) 23.5 19.3 19.3 13.4 10.9 9.8 19.3 12.1 8.1

Tufts Health PlansUnitedHealthCare of NEBlue Cross and Blue Shield of RI

Office of the Health Insurance Commissioner

2011 Health Plan Rate Factor Review Template: Submissions for Large Group

Category: Primary Care

Pharmacy

Category: Hospital Outpatient

Category: Hospital Inpatient

See www.ohic.ri.gov for full submission

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Rate Factor Review: Impact?

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BCBSRI UHCNE Tufts HP

Requested Approved Requested

Approved Requested

Approved

2011 Small Group 12.4% 9.8%** 15.5% 12.3%** 12.4% 11.0%**

Large Group 13.2% 9.8%** 11.7% 8.4%** 11.6% 10.2%**

2010 Small Group 13.9% 9.8%* 13.2% 6.3%* 9.7% 9.5%*

Large Group 16.3% 9.9%* 11.6% 6.0%* 9.7% 9.3%*

2009 Small Group 9.7% 8.3% 12.6% 9.5% NA NA

Large Group 9.3% 7.8% 11.0% 8.0% NA NA

* 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

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.

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

2010 Large Group Rate Factor Request: Cost Drivers

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

BCBSRI (13.4%) United (11.7%) Tufts (11.6%)

Ove

rall

Pre

miu

m In

flat

ion

Adjustment toPrior YearHosp IP

Hosp OP

Rx

Primary Care

Med/Surg otherthan PriCareAdmin

Profit &Reserves

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2011 Conditions of Approval

All health plan/hospital contracts must:

1. Utilize efficiency based units of payment for hospital services (other than fee for service)

2. Limit annual maximum price increase for inpatient and outpatient services to CMS hospital price index

3. Include performance incentives based on no less than three nationally accepted clinical quality, service quality or efficiency-based measures

4. Include mutual obligations for greater administrative efficiencies

5. Include terms that promote and measure improved clinical communication between the hospital and other providers

6. Include terms that relinquish the right to contest the public release of these terms by state officials

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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

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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 year and

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.

(

Value of Primary Care Spend Target

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Incremental Value of Increase (beyond inflation): >$150 million over five years

Key Challenges

1. Defining Investment Priorities Where do we want to spend it? How much direction to give the carriers

2. Monitoring Plan InvestmentsHow best to hold carriers accountable to the targets?

3. Evaluation: System OutcomesInpatient Readmissions, ER visits, Primary Care Supply and System Costs

4. VisibilityHow to increase statewide visibility of standards?

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Challenge # 1. Defining Investment Priorities

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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

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2010 Key Assumptions 2010 Key Assumptions

Total Medical ($M) 978$ 9% trend, 2008 base year 806$ 7.4% trend, 2009 base year

Primary Care Spend @ Baseline

55$ 5.6% of total medical 45$ 5.6% of total medical

Required Spend 66$ 6.6% of total medical 53$ 6.6% of total medical

Investment Required ($M) 11$ 8$

2010 Projection (old) 2010 Projection (new)

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

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Challenge # 2. Monitoring Plan Investments

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Requires frequent and detailed review2010 Carrier Investment Plans: Latest Forecast*

* OHIC estimates based on carrier reporting and discussions. Highly preliminary estimates.

UHCNERequired Investment $1.5 M

BCBSRI Required Investment $6.5 M

Oct. 09 Fcast Apr 10 Fcast

Patient Centered Medical Home 475,000$ 410,000$ (all-payor and plan specific)

Electronic Medical Records (EMR) Incentives

247,000$ 90,000$

FFS Fee Improvements (e.g., vaccine administation)

380,000$ 520,000$

QTIAC requests (e.g., Loan Repayment) 133,000$ -$

Other, carrier specific investments 665,000$ 50,000$ (pay for performance, after hours incentives, benefit changes, etc.)

425,000$

Total 1,900,000$ 1,495,000$

2009 Additional Primary Care Spend

Oct. 09 Fcast June 2010 Forecast

Patient Centered Med.Home 4,535,000$ $6,900,000 (all-payor and plan specific)Electronic Medical Records

Incentives905,000$ $320,000

FFS Fee Improvements 455,000$ - $ 1,800,000 Loan Repayment $ 500,000 $ 0

Other, carrier specific investments (BH/PC integration,

Specialist/hosp delivery system improvements, PforP, ACOs)

2,700,000$ $1,900,00

Total 9,095,000$ $10,920,00 (1)

Challenge # 2. Monitoring Plan Investments

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Challenge # 3. System Metrics are Key to This Effort

1. Primary Care Spend Percentage -- Target vs. Actual

2. All-Payor Medical Home Initiative (CSI)-- Number of sites-- Total spend

3. EMR Incentive-- Participating primary care providers-- Bonus payments ($)

1. Primary Care Physician Satisfaction-- Annual survey

2. Primary Care Supply-- Primary care provider count-- Primary care share (PC/total providers)

3. System Efficiency Improvements-- Hospital Use (Total, ACS)-- Re-hospitalization-- ER Use (Total, Preventable/Avoidable, ACS)

4. Total Medical Trend

Process Measures Outcome Measures

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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 Reform Legislation suggested, did not pass Rate Review Conditions – will they work? All payor hospital payment study planned for fall/winter

Lifespan Care New England Unaffiliated

112% 127%

167%

113% 121%

79%

100% 104%

126%

96% 106%

116%

0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

Rhode Island

Miriam Kent County St. Joseph Women & Infants

Roger Williams

South County

Memorial Newport Westerly Landmark Average

The Case for Payment ReformHospital Payment Variation is RealCase Mix Adjusted Inpatient Med/Surg Payments, Indexed to percent of Medicare fee fpr service BCBSRI and UHCNE Fully Insured Payments, CY 2008

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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

For More Information

Any Questions: Contact Deb Faulkner, dtfaulkner@gmail.com, 401-486-3700 or go towww.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

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Additional Resources• The Providence Journal on rate review conditions

http://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