The Role of a Provider Initiated The Role of a Provider Initiated Managed Care Organization in Managed Care Organization in New York State New York State and Some Actuarial Insights Into the Real and Some Actuarial Insights Into the Real State of Health Care There Circa 2004 State of Health Care There Circa 2004 Daniel W. Bailey, MAAA, IAA Daniel W. Bailey, MAAA, IAA
Overview of CDPHP • 1984--Founded by physicians as a ‘non-profit’ community HMO. Two subsidiaries to cover 1) ASO and 2) Experience Rated (ExpRate) PPO & POS. • Mission--Provide affordable high quality health care and serve as a model for the finance. delivery, and administration of health care. • Serves 24 upstate counties in NY state; not in NYC. (NYS is 62 counties). • Federal and dual state regulation (DOH & DOI)-- extent depends on line of business.
Overview of CDPHP (con’t.) • New York is considered the most rigorously regulated state in US for insurance. Strict Community Rating (CR) enforced for all small group business (l.t. 51 EEs) and for all HMO group health business. • Commercial market is highly competitive--both for- profit and non-profit carriers. • Gov’t. programs--perennially under-funded, w/ varying heavy-handed regulatory involvement & higher admin cost. Might break even financially in the long run.
CDPHP Members (as of 1/1/04): 368,000 Total Commercial Programs (Private, Fully Insured): 237,000 Large Group HMO * (see note) 175,000 Small Group HMO ** (2 - 51 EEs) 50,000 Sole Proprietor (SG) ** (1 Employee) 500 Individual (Direct Pay) 1,500 Healthy New York (HNY) 5,000 POS/PPO Experience Rated 5,000 * Includes 14,000 FEHBP members and 45,000 NYSHIP members. ** Down to 2 EE’s under HIPAA. NYS also mandates Sole Props--1 EE.
CDPHP Members (as of Jan. 1, 2004 ): (con’t.) 81,000 Gov’t. Programs : (Public, Fully Insured) Medicare + Choice (M+C) 10,000 Child Health Plus (SCHIP) 14,000 Family Health Plus (FHP) 7,000 Medicaid {TANF & SSI} 50,000 55,000 Self Funded (Private, ASO) • Administrative Services Only. Larger groups have lower PMPM than HMO community average. Employer (ER) assumes risk for cost. Not subject to benefit mandates, but cannot avoid NY HCRA.
Who Pays For Health Care? • Commercial Programs (Private, Fully Insured) Employer Groups: ER pays most, but EE “contributes” to premium cost, & shares cost at or after time of service w/ copay, coins., deductible, or balance bill. Shift to Consumer Driven HP. Sole Proprietor: Self-employed in NY may now purchase small group health coverage directly and pay 120% of SG cost. Individual: Purchased only by those who need it and can afford it. Rich plan. High level of adverse selection! Member pays all, but NY health carriers usually take a loss due to rate regulation. Commercial groups must subsidize individuals.
Who Pays For Health Care? (2) Healthy New York (HNY): Individuals, sole props, and small groups. Eligibility criteria. Former 2 pay 100%. State subsidizes SG. Mandated by NYS 2 years ago to help uninsured. NY has 40k HNY enrollees currently, but 3 million people are still uninsured in NY statewide. NYS stop loss program helps health carriers pay portion of cost of large claims for HNY and Individual. Financed partially by funds from tobacco corporations sued by Attorneys General .
Who Pays For Health Care? (3) • Self Funded: Large ER assumes insurance risk, not MCO. Buys stop loss coverage to manage high individual claims risk. EE usually contributes, also shares cost for services (copays, etc.) as in fully insured. ER avoids state mandated benefits and premium tax in most states. Over 1/2 of commercial in US is self- funded--increasing as MCOs offload insurance risk. • Government Programs: Various funding sources-- federal, state, and county governments. Participating MCOs accept gov’t revenue in return for fully insured managed care program w/ MC advantages over FFS:
Who Pays For Health Care? (4) A. Medicare + Choice: For the elderly , blind, and disabled. Federal program under CMS (formerly HCFA). Small monthly premium. Member cost sharing. Richer plan than FFS Medicare, depending on MCO; may include RX. Title XVIII, federal law. B. Medicaid {TANF & SSI}): For poorest adults and children. At least 50% (to 82% in poorest states) is federally funded. State and county finance remainder; some counties spend most of property tax revenue on Medicaid. State administers. Tied to receipt of public assistance (welfare). Title XIX.
Who Pays For Health Care? (5) C. Child Health Plus (SCHIP): Federal program (Title XXI) implemented at state level in all states. For uninsured low income children that are not poor enough for Medicaid. State sets eligibility. Some split-funding-- admin. nuisance! Financed with federal income tax. D. Family Health Plus (FHP): For parents of SCHIP children in NY; adults in income strata above Medicaid. Federal and state income tax.
Who Pays For Health Care? (6) Note: Gov’t pays providers less per service for gov’t programs, (Medicare & Medicaid), especially under unmanaged fee-for- service (FFS) basis (without MCOs). Providers, esp. hospitals, then make up for gov’t. under-funding by charging private payers more for the same care. Controversy over how much the uninsured pay. Managed care orgs (MCOs) promote market efficiencies and drive change in delivery and financing -- eliminate redundancy and waste, contract with providers in “network”, promote quality care and affordability, control fraud & abuse, and effect administrative economies (that gov’t can not in traditional FFS programs). But gov’t funding to MCO is variable--funding may decrease during economic downturn. Need sufficient surplus (deep pockets) to withstand probability of ruin.
PMPM CLAIMS COST OF HEALTH CARE Cal. Yr. 2003 Portion Paid by CDPHP--does not include member cost sharing Medical Only Drug INSRD L.O.B. COMBINED $205 LG HMO $160 $45 SG HMO $165 $40 $205 * $520 Individual $380 $140 HNY $120 $20 $140 $570 M+C $544 $26 Medicaid $150 n/a $150 $122 SCHIP $100 $22 FHP $190 $60 $250 $148 $42 $190 Exper. Rated POS
Competition For Preferred Risk • Adds to admin. cost of health care; exacerbates uninsured problem. Insurers covering sickest tend to be less profitable/competitive. Competition to avoid sicker members/groups. HMO must CR; PPO can ExpRate. Market segmentation into homogeneous risk classes. • In the SG (<51 EEs) & Individual market, pooling mechanism established in 1999 to level SG risk among NY health carriers. In April 2004, state has not yet finalized results for any year!! When will we know if it works? To be safe, some MCOs “cherry-pick”.
Competition For Preferred Risk (con’t.) • LG HMO is community rated (CR) in NYS, but PPO and ASO are not-- younger & healthier large HMO groups go PPO or ASO when they realize they are less costly than average. Competitors that understand the predatory pricing game compete for younger, healthier groups; some give poor service to costly groups. At street-level, the business of health insurance inevitably involves risk avoidance. Some HMOs allegedly drop doctors from network that have sicker (such as HIV+) patients, or avoid groups with sicker members. • Gov’t regulators are at least one step behind in ongoing cat & mouse game. State’s regulatory perspective is limited.
Why Participate In Government Programs?!? • Non-profits do--often as matter of public health policy. For-profits avoid it--”where’s the ROI?”, e.g., Medicare Risk. • Annual application/negotiations with state over SCHIP for 14k members consume as much time & energy in Actuarial as Commercial program with 240k members. State has limited pre- budgeted funds to distribute among par health carriers. We ask for less than we need, and we receive less than we ask for. • Dual state regulation--DOI and DOH. Additional federal regulation on M+C by CMS.
The Bottom Line • 15% (12% to 18%) of the population is uninsured in our service area--as in rest of nation. Health wants & needs gratified for those with insurance. Irrational rationing? • Is too much spent for lost causes? Cost of 1 episode of IC buys preventive care for many... Is there a medical ethicist in the house? • By starting their own HMO, Albany docs achieved greater control--public health is as improved here as it is elsewhere, and still has a long way to go everywhere. • Local competition has positive and negative effects...
The Bottom Line (2) • Members are happy if they have choice of providers, claims are paid promptly, and they are serviced fairly without bureaucracy. Want to avoid poor quality care. • State’s regulatory ability is highly imperfect!… • Media contributes to the “baby-in-the-well” mentality. • Perpetual Tension--Trust democracy to resolve issue by argument from every direction. Special interests can undermine the common good.
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