Health Insurance Market Overview - Centers for Disease ...

1 Health Insurance Market Overview State Public Health Leadership Webinar Deloitte Consulting LLP. August 15, 2013. CDC Disclaimer: This webinar is provided as a public service. Inclusion of information in this webinar does not constitute an endorsement of the materials by the Centers for Disease Control and Prevention (CDC) or the federal government, and none should be inferred. CDC is not responsible for the content of materials not generated by CDC. Agenda Welcome Paula Staley, MPA, RN. Senior Advisor, Office for State, Tribal, Local and Territorial Support, Centers for Disease Control and Prevention Overview of the Health Insurance Mike Van Den Eynde, MBA. Market Director, Deloitte Consulting LLP. Public Health 's Role in ACA/Marketplace Frederic Shaw, MD, JD. Senior Advisor for Health reform , Office of the Associate Director for Policy, Centers for Disease Control and Prevention Overview of Vermont Experience Harry Chen, MD.

2 Commissioner, Vermont Department of Health Question & Answer Session All -2- Overview of the Health Insurance Market Mike Van Den Eynde, MBA. Director, Deloitte Consulting LLP. Overview Introduction Size and role of commercial Health Insurance markets Affordable care Act (ACA) impact on Health Insurance and challenges created Current state of Health Insurance Marketplaces and impact Definitions of medical loss ratio, administrative costs, etc. Medicaid expansion and impact Impact of dual eligible on commercial Market -4- Introduction Chronic Disease Model for Systematic care Management The goal of the webinar is to create a foundation of understanding upon which to discuss the role of state Health agencies in the Health Insurance Market . Community Health Systems Resources and Policies Organization of Health care (Governmental & Philanthropic).

3 Self Delivery Clinical Decision Management System Information Support Support Design Systems Informed Productive Prepared Activated Patient Technology-Supported Proactive and Family Interactions Practice Team Improved Outcomes (Quality-Adjusted Life Years). Source: The Wagner Model of Chronic care was developed by the MacColl Institute. -6- Current stakeholders face fundamental challenges -7- What is a Health Plan? Providers Health Plans Purchasers Hospitals Commercial Carriers Private Employers Physician Groups Government Business Integrated Delivery Employers Coalitions Systems Government Accountable care Individuals Organizations (ACOs) An intermediary between providers and Coordinated care purchasers in exchange for premium Organizations payments from the purchaser (CCOs). -8- Flow of Funds (2012).

4 Health plans represent a significant cost to the US healthcare system; the value received for that investment is under scrutiny. $ trillion in expenditures on Health Plans1,3. Government $ B $ B. (CMS Programs)2. Employers (Incl. $ B $1172 B. Health Plans Providers Government). $ B. $ B. Individuals Health plans consume of the $1172 billion that flow through Insurance providers' doors. As cost pressures in the US healthcare system continue to rise, the pressure to reduce this spending will continue to intensify. 1 Source CMS. 2 Government spending for the purposes of this analysis include only that spending for CMS programs (Medicare, Medicaid, Vetrans and SCHIP). It does not include government spending for: worker's compensation, Department of Defense, Maternal & Child Health , General Hospital/Medical NEC, ADAMHA/SAMHSA, Indian Health Services, OEO, Public Health Activities, Vocational Rehabilitation, Temporary Disability, General Assistance or State & Local Hospital/School Health .

5 3As a result of using only CMS program spending and of excluding other private Health care spending including industrial in-plant services and other private revenues including philanthropy, the numbers on the chart do not total to $ trillion. -9- Commercial Health Insurance Products Health plans offer a variety of products to their customers which control access and costs. Higher Lower Health Maintenance Cost Management Activity Organization (HMO). HMOs restrict Point-of-Service (POS) - access, but are Gatekeeper the least PPOs allow enrollees to expensive Access Point-of-Service select any (POS) - Open Access physician Preferred Provider Organization (PPO). Consumer Higher Managed Indemnity Directed Lower Plans Traditional Indemnity Lower Higher Cost Effectiveness - 10 - High Level Overview : Health Plan Value Chain Health plans seek to deliver value and achieve competitive differentiation in the marketplace by optimizing performance across key activities and addressing the changing dynamics of the Health plan value chain.

6 Health Plan Functions Health Plan Core Processes Product Sales Establish & Manage Develop & Manage Perform Pricing & Market & Promote Marketing Customer Products Risk Management Products Actuarial Relationships Underwriting Network care management Develop & Maintain Perform care Data Analytics and Medical Informatics Provider Network Management Reporting Enrollment Billing Manage Provide Manage Benefits &. Benefits Membership & Customer Claims Claims Accounting Service Service Support Functions Finance, Legal, Compliance/Regulatory, Quality/Audit, Human Resources, Technology - 11 - ACA Impact on Health Insurance Health reform 's transformation will unfold over many years These provisions will unfold in three phases over the next 5 10 years. Timeframes and Highest Impact Provisions Early Groundwork Market Transition New Status Quo 2010 - 2013 2014 2015+.

7 Minimum Medical Ins. High Loss Ratio (80- Insurance Marketplaces 85%) with Rebate HIPAA 5010 / Marketplaces (>100 employees ICD-10 (<100 employees). - 2017). Medicare Adv. Payment Changes Excise Tax: Impact on Health plan performance / quality bonus $ in 2014 - $ 2018. Premium Review and/or operating model Process Rating Rules/. Administrative Restrictions Dependent Simplification Coverage up to 26 Years Medicaid Cadillac Tax Participation Expansion (2018). Limitations on standards &. annual reporting Essential maximums requirements Benefits & Health care No pre-existing RAC audit Actuarial Value Choice Compacts condition exclusions expansion (2016). (children < 18) (Medicaid). Ban on Rescinding Coverage Risk Adjustment Temporary High Medium Risk Pools 2010 2011 2012 2013 2014 2015 2016. Time to Implementation - 13 - Health reform impact on Health plans Health reform will bring long-awaited customer growth, but will also compress industry margins, neutralizing profit growth.

8 Industry premium revenues (2011/2020) Industry operating profit (2011/2020). $1,172B. $33B $33B. Commercial (Marketplace). $583B. Commercial (Off Marketplace). Government (Medicare &. Medicaid). 2011 2020 2011 2020. Source: Deloitte analysis Note: Not to scale versus revenue - 14 - Health plans must make strategic choices in three areas to define their future Health plans must address three major strategic questions to create an effective post- reform strategy. To answer these questions, plans must understand the legislation changes and the Market 's likely response. reform Markets Incentives Standardization Impact Areas What incentives will Which markets should In the face of increased Strategic influence providers and you serve? Which standardization, how will Choices consumers to make products and services you create opportunities efficient and effective should you offer?

9 For differentiation? healthcare decisions? Marketplaces Transparency Products and Statutory pricing Medicare and Provider Changes Medicaid reimbursement Administrative and delivery standardization Large groups and systems employers - 15 - Health Insurance Marketplaces will fundamentally alter the industry Health plans must develop strategic strategies for each Insurance Marketplace (sub-state, state or region and individual and/or small group). Key Changes Expected Outcomes By 2014, States will establish marketplaces In 2014, Marketplaces will become a for individuals and small groups (in 2015) significant distribution channel for the consisting up to 50 or 100 individuals. individual markets. Health plans must cover minimum essential Transparency around quality and member benefits with actuarially equivalent plan satisfaction will play increasingly large roles in designs.

10 Consumer plan selection over time. Marketplaces will use standard forms and Marketplaces will lower barriers to Market processes to determine program eligibility entry. and plan enrollment. Many different marketplace models will In 2014, the HHS Secretary will rate each emerge, requiring different strategies and plan on the Marketplaces on quality, price, operations in different states. and patient satisfaction. Which states represent Which products will How will Health Plans Health Plans offer on Strategic the best growth differentiate products each Marketplace, and Choices opportunities for on the Marketplaces? Health Plans? how will they price them? - 16 - Most Marketplace consumers will be previously uninsured and inexperienced These individuals will have a different set of expectations and needs than previously insured consumers.