market segments and distribution channels for the MCOs

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Chapter 6: Sales, Governance and Administration

Learning Objectives

Understand the basic structure of governance and management in payer organizations

Understand the basic elements of the internal operations of payer organizations, including:

Information technology (IT)

Marketing and sales, including insurance exchanges

Underwriting and premium rate development

Eligibility, enrollment and billing

Claims and benefits administration

Member services, including appeal rights

Statutory accounting and statutory net worth

Financial management

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Board of Directors

May be specific to a plan, may be pro-forma for a subsidiary of a larger company, etc.

Responsibilities:

Final approval of corporate bylaws

General oversight of the profitability or reserve status

Oversight and approval of significant fiscal events

Review of reports and document signing

Setting and approving policy

Oversight of the quality management program

In for-profit plans, responsibility to protect shareholders’ interests

In free-standing plans, hiring the CEO and reviewing CEO’s performance

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Typical Key Management Positions

Chief Executive Officer/Executive Director

Chief Operating Officer/Operations Director

May be a separate position from CEO in large companies

If separate from CEO, the COO may also be the President

Chief Medical Officer/Medical Director

Vice President (or SVP or EVP) of Network Management

Chief Financial Officer/Finance Director

Treasurer

Chief Marketing Officer/Marketing Director

Chief Underwriting Officer

Chief Information Officer/Director of Information Systems

Corporate Compliance Officer

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Typical Key Operational Committees

Quality Management Committee

Credentialing Committee

Utilization Review Committee

Pharmacy and Therapeutics Committee

Medical Grievance Review and Appeals Committee

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Foundational Information Technology (IT) Systems

Key software functionality includes:

Benefit configuration

Employer group and member enrollment

Premium management

Provider enrollment, contracting and credentialing

Claims payment

Document Imaging and Workflow

Customer Servicing

Medical Management

Ability for two-way EDI with insurance exchanges, employers, state and federal government, members, providers, etc.

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HIPAA Mandated Electronic Transaction Standards

HIPAA requires covered entities that conduct certain electronic transactions to use only ANSI X12N 5010 defined standards

ACA is creating new standards and requiring more standardization of implementation

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TransactionStandard
Provider Claims submissionANSI X12 – 837 (different versions exist for institutional, professional, and dental)
Pharmacy claimsNCPDP
EligibilityANSI X12 – 270 (inquiry) ANSI X12 – 271 (response)
Claim statusANSI X12 – 276 (inquiry) ANSI X12 – 277 (response)
Provider Referral certification and authorizationANSI X12 – 278
Health care payment to provider, with remittance adviceANSI X12 – 835
Enrollment and Disenrollment in health plan*ANSI X12 – 834
Claims attachment (additional clinical information from provider to health plan, used for claims adjudication)ANSI X12 – 275 (not finalized at the time of publication), and HL7 CDA
Premium payment to health plan*ANSI X12 – 820
First report of injuryANSI X12 – 148 (not yet issued)
* These are for voluntarily but not mandatory use by employers, unions, or associations that pay premiums to the health plan on behalf of members.

Source: Compiled by author based on 45 CFR §160.920 and other sources at the Center for Medicare and Medicaid Services (CMS);

Accessible at http://www.cms.gov

HIPAA Mandated Privacy and Security Requirements

HIPAA requires high levels of privacy and security for electronic information, to:

ensure the confidentiality, integrity, and availability of electronic PHI;

protect against any reasonably anticipated threats or hazards to the security and integrity of electronic PHI;

protect against any reasonably anticipated uses or disclosures of electronic PHI not permitted by the HIPAA privacy rules; and

ensure compliance with the above by its workforce (Source: Federal Register, 45 CFR § 164.308)

There are eighteen standards for HIPAA security rules:

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Security Management ProcessAssigned Security ResponsibilityWorkforce Security
Information Access ManagementSecurity Awareness and TrainingSecurity Incident Procedures
Contingency PlanEvaluationBusiness Associate Contracts
Facility Access ControlsWorkstation UseWorkstation Security
Device and Media ControlsAccess ControlAudit Controls
IntegrityPerson or Identity AuthenticationTransmission Security
Source: Federal Register, 45 CFR § 164.308(a & b), 45 CFR § 164.310(a-d); 45 CFR § 164.312(a-e)

Standardized SBC/SOC

ACA requires all health plans, including self-funded, must provide a standardized Summary of Benefits and Coverage (SBC), also called a Summary of Coverage (SOC) to all current and prospective enrollees

The SBC/SOC to be done in a uniform and common format that defines the number of pages, the exact information that must be provided, and even the size of the font

The SBC does not replace the far more detailed Evidence of Coverage (EOC), sometimes called a Certificate of Coverage or Certificate of Insurance

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Marketing vs. Sales

Marketing and sales are related but distinct activities

Marketing

Focus is on overall growth goals, strategies and tactics, management of the process

Compensation combination of salary and overall growth goals

Role in Insurance Exchange as well as outside exchange

Sales

The actual process of selling the plan’s offerings in the marketplace through any distribution channel

Compensation usually heavily weighted towards achievement of sales goals

No real role in the insurance exchange

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Fundamental Elements of Marketing

Brand Management

External Communications and Public Relations

Advertising

Employer versus consumer advertising

Collateral texts: outdoor, direct

Market Research

Lead Generation

Sales Campaign Support

Heavily regulated for individual and small group market through the Exchange

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Distribution Channels by Market Segment

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Health Insurance Exchanges…

ACA created state-based American Health Benefit Exchanges and Small Business Health Options Program (SHOP) Exchanges, administered by a governmental agency or non-profit organization, through which small businesses with up to 100 employees can purchase qualified coverage

Separate exchanges for individuals to access coverage

Permit states to allow businesses with more than 100 employees to purchase coverage in the SHOP Exchange beginning in 2017

States may form regional Exchanges or allow more than one Exchange to operate in a state

Feds operate exchanges in states that refused to build them

Office of Personnel Management to contract with insurers to offer at least two multi-state plans in each Exchange. At least one plan must be offered by a non-profit entity

Creation of plan rating systems similar to that used in Medicare Advantage

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Health Insurance Exchanges (cont.)

Brokers still allowed to operate in this market segment for health

Exchanges do not prohibit a non-Exchange market for individual and group coverage, but rates must be the same if sold both in and outside of the Exchange

Require the Office of Personnel Management to contract with insurers to offer at least two multi-state plans in each Exchange. At least one plan must be offered by a non-profit entity

Each multi-state plan must be licensed in each state and must meet the qualifications of a qualified health plan

Members of Congress and congressional staff may only enroll in either plans created under ACA (e.g., CO-OPs) or in plans offered in Exchange – but this also required a “fix” because ACA as written did not allow of an employer contribution to coverage purchased through the individual exchanges

Two-way data exchange requirements are huge

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Actuarial Services

Actuaries analyze the data and predict costs, adjusted for

Trend

Utilization

Costs

Benefits design

Behavioral shift

Distribution amongst different providers with different cost profiles

Actuaries generally do not create the rates, but only model costs

Large payers have their own, smaller and mid-sized plans use actuarial consulting firms

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Rating and Underwriting

Underwriting has had two distinct but related meanings:

Medical underwriting referred to using an individual’s or small group’s medical history to determine whether to offer coverage at all

General underwriting includes gathering of information to assist in the development of premium rates

Underwriters use the actuarial data and other factors to calculate rates

Three types of premium rating:

Community rating

Experience rating

Premium equivalent or imputed premium rates

Type of rating only affects the calculation of the base rate, not the mechanics of creating actual premium rates

Community rating requires the same base rate for all, though may be different for all individuals vs. all small groups

Experience rating uses base rate from actual costs of the group

Premium equivalent is calculated just like experience rating for the base rate

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Rating and Underwriting in the Individual and Small Group Markets under the ACA

Extension of dependent coverage to age 26

Prohibition on rescissions except in cases of outright fraud

Prohibition of preexisting condition exclusions and coverage rescissions

Lifetime and annual policy coverage limits prohibited

Require first-dollar coverage for preventive services

Minimum medical loss ratio (MLR) of 85% for large group and 80% for individuals and small groups – applies only to insured business, not self-funded (no premiums)

Insurers required to guarantee availability and renewability to individuals and groups.

Insurers not allowed to use health status as a rating variable

Only the following will be allowed:

Age related pricing variations are limited to a maximum of 3 to 1.

The number of people covered under the policy (e.g., “single” vs. “family” coverage).

Tobacco use (except rates may not vary by more than a ratio of 1.5 to 1)

Other provisions such as out-of-pocket cost limitations based on income, etc.

Requirement to include Essential Health Benefits at one of four different coverage levels

Premium risk-adjustment mechanism for individual and small group markets

Beginning in 2018, impose an excise tax of plans with premiums that exceed a certain level

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The ACA’s Four Coverage Tiers What’s in Your Wallet?

Allows for 40% swing in cost sharing between Platinum and Bronze plan designs

Coverage levels based on in-network costs for all but emergency care (defined via “prudent layperson), not billed charges

Coverage based on actuarial equivalency, so may be spread around benefits, except cannot have different cost-sharing for MH/BH than for Med/Surg.

Room to futz with benefits as long as cost sharing ends up where it’s supposed to

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High deductible plan with preventive services and limited office visit coverage for the under-30s

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Eligibility in the Commercial Market

Eligibility in the commercial (non-Medicare/Medicaid) market may be thought of in four categories:

Eligibility in Employer Sponsored Group Benefits Plans

Eligibility changes based on life events

Individual eligibility

Eligibility for subsidized coverage

Employer sponsored coverage

Must be full time

Dependent coverage through employee

Must first enroll during defined periods such as upon employment following a defined number of days after they start working

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Life Events and Eligibility Options

[Put Table 6 – 2 here]

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Life Events and Eligibility Options (cont’d)

[Put Table 6 – 2 here]

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Elements of Claims Complexity

Multiple Lines of Business

Provider Payment Rules

Sophiscated Px & Dx Coding

Unbundled Claims

Referral/Authorization Rules

Government Mandates

Medicare/Medicaid Standards

Other Party Liability

Cost Sharing Features

Benefit Plan Variations

Multiple Lines of Business

Rules and Regulations of Exchange

Tracking MLR for Groups and Individuals

Value Based Benefits

New Payment Models

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Claims Operational Functions

The modern claims capability is the set of operational functions within the payer organization that together process claims from receipt to issuance of payment and/or Explanation of Benefits (EOB).

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Determination of Eligibility & Liability

Benefit plan in force on the date of service

Provider network and/or PCP on date of service

Coordination of Benefits (COB), Other Party Liability (OPL), and Subrogation

Benefits Administration

Applying the applicable schedule of benefits in force on the date of service

Requires CPT codes, Hospital Revenue Codes, HCPCS codes, ICD-10

Computation of cost sharing amounts

Application of appropriate medical policies

Application of appropriate provider payment schedules based on specific network at time of service, in vs. out of network, etc.

Management of pended claims, resubmissions, and duplicate claims

Adjustments and appeals

Detection of fraud and abuse

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Core Claims Determinations in the Adjudication Process

Role of Member Services and Consumer Affairs

Help members understand how to use the plan

Help resolve members’ problems or questions

Measure and monitor member satisfaction, administer surveys

Monitor and track the nature of member contacts

Allow members to express dissatisfaction with their care

Help members seek review of claims that have been denied or covered at a lower than expected level of benefits

Manage member problems with payments

Help address routine business issues

State health insurance exchanges may play a similar function, but unclear at this point

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Formal Internal Appeals Process Requirements

[Put Table 6 – 3 here]

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Formal External Appeals Process Requirements

[Put Table 6 – 4 here]

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Financial Management

Four primary responsibilities

Operational finance

Budgeting

Treasury function (managing cash and investments)

Reporting

Key concepts

Accrual accounting

Statutory Accounting Principles (SAP) vs. Generally Accepted Accounting Principles (GAAP)

Only cash and cash equivalents can be counted as assets, not things like IT systems, buildings, long-term investments, etc.

Statutory Net Worth requirements, using SAP

Calculation and management of claims reserves, including Incurred But Not Reported (IBNR)

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