New MA Rules Benefit Provider-Sponsored Plans

Provider-sponsored MA plans are more successful if they first learned care coordination through lesser risk arrangements, such as Medicare shared-savings ACOs, one researcher says.

April 18—Recently announced Medicare Advantage (MA) rates and rule changes could help sometimes-struggling provider-sponsored plans improve their performance.

The Centers for Medicare & Medicaid Services (CMS) recently issued a final rule and call letter for MA and Part D plans, which will increase CY19 average revenue by 3.4 percent excluding an expected 3.1 percent from changes to risk scores.

Among the rule changes for MA plans was an expanded definition of supplemental benefits to include services that are used to diagnose, prevent, or treat an illness or injury; compensate for physical impairments; ameliorate the functional or psychological impact of injuries or health conditions; or reduce avoidable emergency and healthcare utilization.

Glen Champlin, a principal at Premier, said health systems thinking about launching provider-sponsored plans viewed the new policy–and the rate increase—very positively.

Andrew Kadar, managing director in L.E.K.’s healthcare services practice, said his MA plan clients are excited about the ability to start offering innovative “supplemental benefits” to members, such as non-skilled in-home support or home meal delivery.

“The new interpretation should allow MA plans to address more of their members’ social determinants of health with interventions or support that are effective in keeping members healthy and out of the hospital,” Kadar said.

It’s an approach others also expect plans to embrace.

“To the extent that home modifications or other things like that offer an opportunity to reduce inpatient hospitalizations and emergency room visits, combined with better care coordination, yes that does create better opportunities for these provider-sponsored Medicare Advantage plans—if they can do that,” said Allan Baumgarten, who researches provider-sponsored plan results.   

His caveat stems from the experience of provider-sponsored plans that have run into financial challenges because they lacked care coordination experience and thought they could learn after launching.

“The trick is to learn that and be good at that and then take on the risk,” Baumgarten said in an interview.

More successful provider-sponsored plans have been operated by health systems that first learned care coordination through lesser risk arrangements, such as Medicare shared-savings ACOs. 

Those health systems can say, “And then we’ll see if we’re able to do a better job of managing care or coordinating care such that we earn shared savings under that; maybe then we’ll be ready to take on more significant risk through owning our own insurance company,” Baumgarten said.

MA Challenges

The challenge for provider-sponsored plans was illustrated in 2017 researchthat Baumgarten conducted for the Robert Wood Johnson Foundation, in which he found that among 37 health insurance companies launched by providers and five health plans acquired by providers, only four were profitable in 2015, five had gone out of business, and two were in the process of being sold.

Similar challenges were found in a 2017 survey of more than 30 health plans, with respondents split between provider-sponsored plans and non-provider plans. Only 30 percent of provider-sponsored plans reported success in their cost and quality outcomes, compared with 60 percent of non-provider plans, according to the Health Plan Alliance survey.

Despite the challenges, provider interest in such plans is increasing, Baumgarten said.

Among newer provider plans is an MA plan that was jointly launched by UnityPoint Health (formerly the Iowa Health System) and HealthPartners, a Minnesota-based insurer, with coverage in Iowa and Illinois. Their early progress was bolstered by identifying Iowa and Illinois as states that were “underpenetrated by Medicare Advantage,” Baumgarten said.

“I think they see potential there and are still continuing,” Baumgarten said.

Overall Impacts

In addition to the rate increase, several major provisions of the new MA rules will impact all plans. One is the CY19 changes to the risk adjustment model for aged and disabled beneficiaries, as required by the 21st Century Cures Act. To account for high-cost patients, an updated risk adjustment model will incorporate most proposed changes, such as adding mental health, substance use disorder, and chronic kidney disease conditions.

Another change permits MA plans to vary benefit designs by reducing cost sharing for certain covered benefits, offering supplemental benefits, and reducing deductibles for enrollees who meet certain medical criteria.

MA plans also will be able to vary supplemental benefits by county and do the same with premiums and cost-sharing requirements.

CMS also eliminated the meaningful-difference requirement starting in 2019. That rule required MA insurers that offer multiple plans within the same area to ensure that the plans were substantially different from one another as assessed in an annual CMS evaluation.

MA Part D prescription drug plan changes include limiting initial opioid prescriptions to no more than seven days.

Not included was any formal proposal to require manufacturers’ rebates to be shared with beneficiaries at the point of sale. However, CMS said it will take up the issue in future rulemaking.

One area where MA plans’ hopes did not get fulfilled was in changes to the assignment of star ratings to merging MA plans. Effective in 2020, CMS will switch from assigning the star rating that the contract would have earned as a new plan to assigning star ratings based on the performance of all contracts involved in the consolidation.

“On the whole, we expect this adjustment to help MA plans that have strong systems, partnerships, and incentives in place throughout their network to sustain high star ratings (e.g., Kaiser Permanente),” said Kadar. However, “this adjustment will make it one step harder for MA plans with subpar quality infrastructure to maintain highly competitive offerings.”

Taken together, the new rate and policy changes are expected to benefit plans and help to continue to attract new MA plans, said Champlin.

“The rate increase, along with the new plan design pilots CMMI [the Center for Medicare & Medicaid Innovation] is testing with MA plans, and the socioeconomic factors around the issues that impact new Medicare beneficiaries’ buying decisions regarding how they will finance their health care (fee for service or MA), all point to MA growing considerably in the next five to 10 years,” he said in an email.

Meg Murray, CEO of the Association for Community Affiliated Plans, which represents Medicare Special Needs Plans (SNPs), hailed the inclusion of passive enrollment and seamless conversion policies in the call letter.

“We support policies that streamline enrollment while preserving choice for dual-eligibles,” Murray said in an email. “These policies do both.”

But Murray was disappointed that CMS did not address how enrollment mix affects dual-eligible plans’ (D-SNPs’) quality measurement through star ratings and benchmarking.

“We laud the objectives of measurement and accountability, but without changes to the way that D-SNPs are evaluated and compared against other plans, an unintended consequence of the rating system could be incenting plans to select healthier populations by leaving the dual-eligible market rather than improving care,” Murray said.

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Rich Daly is a senior writer/editor in HFMA’s Washington, D.C., office. Follow Rich on Twitter: @rdalyhealthcare