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Entries in health plans (72)

Friday
Sep202019

Health Plan Medical Ratio and Administrative Expense Snapshots

by Clive Riddle, September 20, 2019

Two reports on health plan performance were released this week:  Mark Farrah Associates issued an analysis brief providing insights into mid-year profitability for commercial and government lines of health insurance business entitled: Health Insurance Segment Mid-Year 2019 Profitability; and Sherlock Company's September 2019 Plan Management Navigator summarized cost trends among Medicare-focused plans.

Key findings from the Mark Farrah report on health plan profitability include:

  • At the end of second quarter 2019, the average medical expense ratio for the Individual segment was 73.9%, as compared to 69.0% the previous year.
  • Growth in medical expenses pushed the average medical expense ratio for the Employer-Group segment up to 81.4% for 2Q19 from 80.5% in 2Q18.
  • For Medicare Advantage, premium growth outpaced increases in medical expenses pushing the medical expense ratio down to 84.7% from 85.5% in 2Q18.
  • An increase of 9.7% in medical expenses per member per month pushed the medical expense ratio for Managed Medicaid up to 92.0% from 88.8% in 2Q18.

Their report concludes “at mid-year 2019, all four health care segments are signifying reduced levels of profitability for health insurers over 2018.  Due to the minimum MLR constraints placed upon the individual segment, the stagnation of premium growth along with the rise in the mid-year med expense rations is not surprising, especially after the underwriting gains reaped in 2018.”

While Mark Farah Associates focused on profitability driven by medical expenses, Sherlock Company reported on administrative expenses and found that “for 2018, Medicare-focused plans experienced administrative cost growth, excluding Miscellaneous Business Taxes, of 6.4%. Account and Membership Administration [expenses were] also trending higher in 2018 at 7.0%, up from last year’s increase of 3.7%.

For Medicare-focused plans, they found “High cost Medicare Advantage grew at a median rate of 4.1%, Medicare SNP grew at a median rate of 5.7%, while low cost Medicaid increased at a median rate of 1.1%. The Commercial Insured product membership fell by a median rate of 2.1%, while Commercial ASO grew at a median rate of 3.5%. Overall, commercial membership decreased by 1.9%. Comprehensive membership in continuous plans fell by a median rate of 1.5%.

Friday
Sep202019

Health Plan Medicare Ratio and Administrative Expense Snapshots

by Clive Riddle, September 20, 2019

Two reports on health plan performance were released this week:  Mark Farrah Associates issued an analysis brief providing insights into mid-year profitability for commercial and government lines of health insurance business entitled: Health Insurance Segment Mid-Year 2019 Profitability; and Sherlock Company's September 2019 Plan Management Navigator summarized cost trends among Medicare-focused plans.

Key findings from the Mark Farrah report on health plan profitability include:

  • At the end of second quarter 2019, the average medical expense ratio for the Individual segment was 73.9%, as compared to 69.0% the previous year.
  • Growth in medical expenses pushed the average medical expense ratio for the Employer-Group segment up to 81.4% for 2Q19 from 80.5% in 2Q18.
  • For Medicare Advantage, premium growth outpaced increases in medical expenses pushing the medical expense ratio down to 84.7% from 85.5% in 2Q18.
  • An increase of 9.7% in medical expenses per member per month pushed the medical expense ratio for Managed Medicaid up to 92.0% from 88.8% in 2Q18.

Their report concludes “at mid-year 2019, all four health care segments are signifying reduced levels of profitability for health insurers over 2018.  Due to the minimum MLR constraints placed upon the individual segment, the stagnation of premium growth along with the rise in the mid-year med expense rations is not surprising, especially after the underwriting gains reaped in 2018.”

While Mark Farah Associates focused on profitability driven by medical expenses, Sherlock Company reported on administrative expenses and found that “for 2018, Medicare-focused plans experienced administrative cost growth, excluding Miscellaneous Business Taxes, of 6.4%. Account and Membership Administration [expenses were] also trending higher in 2018 at 7.0%, up from last year’s increase of 3.7%.

For Medicare-focused plans, they found “High cost Medicare Advantage grew at a median rate of 4.1%, Medicare SNP grew at a median rate of 5.7%, while low cost Medicaid increased at a median rate of 1.1%. The Commercial Insured product membership fell by a median rate of 2.1%, while Commercial ASO grew at a median rate of 3.5%. Overall, commercial membership decreased by 1.9%. Comprehensive membership in continuous plans fell by a median rate of 1.5%.

Friday
Aug022019

Two Papers on the Health Plan Medicare Opportunity

By Clive Riddle, August 2, 2019 

Oracle has released an Executive Insight paper on the Opportunity Ahead for Agile and Efficient Medicare Advantage Plans,  cautioning that “While the opportunity is great, MA plans are not automatically a wise or profitable business decision for all health insurers. There is growing competition as new players enter the market, and cost and margin pressures continue unabated. To make the most of this opportunity, MA plans must look to accelerate innovation while optimizing costs across their enterprises— from marketing and enrollment to plan configuration, claims processing, compliance, and renewal.”

They report on three development plans should consider now:

  1. It is “Time to flex strength with expanded flex benefits. In 2019, MA plans were cleared to offer new flex benefits, designed to move plans toward expanded population health capabilities.”
  2. “MA plans look to differentiate on other fronts and deliver high levels of service—without placing profitability and stability in peril.”
  3. Payers are eager to bring new urgency and focus to improving claims accuracy and delivering innovative provider payment models.

HealthEdge has just released results of its Voice of the Market Survey, a study of 201 health insurance executives directly involved in Medicare lines of business. 92% responded that they are trying to grow their Medicare Advantage book of business faster than their traditional Medicare Supplement business.

 

Here’s some key findings from their survey:

  • 53.2% said the value-based model of Medicare Advantage significantly factors into a desire to grow the business, while 42.8% said it moderately factor in.
  • Expanding to new service areas ranked first in level of importance as the steps being taken to attract new Medicare and Medicare Advantage members, followed by (2) Appealing to tech-savvy digital consumers; (3) Providing incentives for healthy behaviors; (4) Addressing social determinants of health; and (5) Marketing/advertising to prospective members
  • Applicable steps above get re-ordered somewhat when ranking importance to retain current Medicare and Medicare Advantage members: (1) Appealing to tech-savvy digital consumers; (2) Addressing social determinants of health; (3) Providing cost transparency; (and 4) Providing incentives for healthy behaviors; (5) Providing education services to members about their benefits
  • There is not consensus on what is the biggest challenge to acquiring new members in the Medicare or Medicare Advantage (MA) line of business.  29.4% said it was funding/executing marketing outreach to  attract new members; 23.8% said competitors who  dominate the market; 22.4% said offering the variety of  plans necessary to satisfy members; and  19.9% answered differentiating  between MA and  traditional Medicare.
  • When asked “what is the biggest external challenge your organization faces in the Medicare and Medicare Advantage line of business.” Competitors seem top of mind, with 34.3% responding “competition”; and another 29.9% stating “members unwilling to switch plans from a competitor. Other responses were 19.9% replying “regulations” and 15.9% saying “member demands.”

 

Thursday
Jul112019

Our Dunning-Kruger Healthcare System

By Kim Bellard, July 11, 2019

Psychologist David Dunning, originator of the eponymous Dunning-Kruger effect, recently gave an interview to Vox’s Brian Resnick. For those of you not familiar with the Dunning-Kruger effect, it refers to the cognitive bias that leads people to overestimate their knowledge or expertise. More importantly, those with low knowledge/ability are mostlikely to overestimate it.

Dr. Dunning believes that we tend to think that this effect only applies to others, or only to “stupid people,” when, in fact, it is something that impacts each of us As Dr. Dunning told Mr. Resnick, “The first rule of the Dunning-Kruger club is you don’t know you’re a member of the Dunning-Kruger club. People miss that.”

So, how does this relate to our healthcare system?

We brag about our excellent care, our great hospitals and doctors, and all those healthcare jobs powering local economies. Yet we have by far the most expensive healthcare system in the world, which is expensive not because it delivers better care or to more of its population than health systems in other countries, but because it feels it is justified in charging much higher prices. Our actual outcomes, quality of care, and equity are all woefully mediocre on a number of measures.

How many of you live in an area that has at least one hospital system claiming to be one of the “best” hospitals in the country? Similarly, how many of us like to believe that our doctors are “the best”? Perhaps they even have “best doctors” plaques in their offices to support this claim.

Statistically speaking, most of us receive average care, and some of us receive sub-standard care. We don’t live in Lake Wobegon. We can’t all be getting the best care, or even above-average care. Just look at how few hospitals earn high ratings from The Leapfrog Group.

In The Atlantic, Olga Khazan reported on a new study that suggests that, despite all their supposed superior knowledge, doctors don’t really make better patients than the rest of us. They get C-sections about as often, and about as unnecessarily as we do, they get about the same amount of unnecessary/low value tests, they’re not better at taking needed prescriptions.

As Michael Frakes, one of the authors told Ms. Khazan, the doctors “went through internships, residencies, fellowships. They’re super informed. And even then, they’re not doing that much better.” Professor Frakes speculated that even physicians tended to be “super deferential” to their own physicians, despite their own training and experience.

It is widely accepted that as much as a third of our healthcare services are unnecessary or inappropriate — even physicians admit that — but, of course, it is other physicians doing all that. No one likes to believe it is their doctor, and few doctors will admit that they are the problem.

Dunning-Kruger, indeed.

Much as they’d like us to, it is not enough for us to always assume that our healthcare professionals and institutions are qualified, much less “the best.” It is not enough for us to trust that their opinions are enough to base our care recommendations on. It is not enough to believe that local practice patterns are right for our care, even when they are at variance with national norms or best practices.

“Trust” is seen as essential to the patient-physician relationship, the supposed cornerstone of our healthcare system, but trust needs to be earned. We need facts. We need data. We need empirically-validated care. We need accountability.

Otherwise, we just fall victim to healthcare’s Dunning-Kruger effect.

 

This post is an abridged version of the posting in Kim Bellard’s blogsite. Click here to read the full posting.

Thursday
Jun132019

Analyzing Blue Cross Blue Shield Plan Administrative Costs

By Clive Riddle, June 13, 2019

Sherlock Company in the June issue of their Plan Management Navigator examines administrative cost trends for Blue Cross Blue Shield Plans, analyzing year end 2018 vs 2017 data.  They found that costs “increased by 5.5% per member, up from an increase of 5.1% for 2017. Reweighting to eliminate the effects of product mix differences between the years, per member costs increased by 6.7% as compared with 5.9% in 2017. ASO/ASC increased as commercial insured membership declined. Medicare Advantage continued to grow rapidly.”

 Their key findings included:

  • Most clusters of expenses grew at rates less than last year.
  • Uniquely, Account and Membership Administration’s growth rate increased.
  • Growth in Information Systems was the single most important reason for administrative expense increase in 2018.
  • The shift in favor of products and market segments that are lower cost to administer muted the real growth.

 

Sherlock’s benchmarking study “analyzes in-depth surveys of 14 Blue Licensees serving 37 million members. Surveyed Plans comprise 52% of the members of Blue Cross Blue Shield Plans not served by publicly-traded companies.” 

Why does this benchmarking matter? Because the non-publicly traded BCBS plans provide a meaningful universe to benchmark, and plan administrative expenses are highly scrutinized, and certainly more controllable than medical expenses. As Doug Sherlock states, “in the current environment, optimizing administrative expenses is a high priority for health plan managers. Plans have completed their adaptation to the Affordable Care Act and the bulge in Exchange and Medicaid members. Plus, administrative expense visibility has been heightened by the rhetoric of presidential candidates.”

Here’s some key specific data from their report:

 

  • For the universe as a whole, the median total costs were $38.51 per member per month, higher than last year’s $34.99. 
  • By functional area, median pmpm costs were: Sales & Marketing $9.21; Medical & Provider Management $5.03; Account and Membership Administration $16.10 and Corporate Services $5.92
  • Median pmpm costs by product categories included: Commercial insured $49.84; Commercial ASO $28.32; Medicare Advantage $112.08; and Medicaid $46.08.
  • The median administrative expense ratio was 9.0% compared with 8.9% last year.
  • The median administrative expense ratio by product categories included: Commercial insured 10.8%; Commercial ASO 7.1%; Medicare Advantage 12.5%; and Medicaid 9.3%.
  • Staffing ratios increased by 6.8%, especially in Information Systems. 
  • Approximately 19 FTEs serve every 10,000 members in the commercial products. 
  • Compensation, including all benefits except OPEB, increased at a median rate of 3.8%. 
  • The median proportions of FTEs that were outsourced was 11.0%.
  • After the effect of the Miscellaneous Business Taxes, total administrative expense PMPM increased by 17.9% compared with a decline of 2.3% in the prior year