ACA Reinsurance & High Risk Pool March 2014

© 2014 DST Systems, Inc. All rights reserved.© 2014 DST Systems, Inc. All rights reserved.
March 19, 2014
ACA Transitional Reinsurance:
Identifying and Assessing High Cost Patients

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2
DISCLAIMER

DST▪ Trusted global provider of
technology-based service
solutions since 1969 that help
our clients grow their business
& provide exceptional customer
experiences
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DSTHS
▪ Solutions to health payers and
providers since 1976
▪ Servicing Commercial, Medicaid,
Marketplace, MA/MAPD, & Duals
health benefit plans
▪ Core systems used to support
22+ M members / 270 M claims
▪ 41+ M medical claims processed
annuallyin BPO
▪ 25+ M pharmacy members
supported
DSTHS At A Glance

© 2014 DST Systems, Inc. All rights reserved.4
Richard Popper
Director, Medicaid & Duals Strategy, DST Health Solutions
Group Director, Insurance Programs, CCIIO-CMS 2010-13
Center for Consumer Information & Insurance Oversight
Managed team that implemented & administered:
 $5 billion Early Retiree Reinsurance Program
 Pre-Existing Condition Insurance Plan
 CO-OP Loan Program
Executive Director, Maryland Health Insurance Plan 2002-10
Implemented & administered fastest growing state high risk pool in U.S, with
10% of national HRP enrollment
Assistant Director, California Managed Risk Medical Insurance Plan 2000-02
Responsible for MRMIP & AIM programs for high risk uninsured

 No medical underwriting
 No pre-existing condition exclusion riders
or waiting periods
 Few benefit limits and standardized OOP limits
 Reduced member cost sharing for those
with limited income
 Low initial enrollment penalty
 Many “qualifying events” that allow enrollment “churn”:
 Newly eligible for APTC
 Had website enrollment problems
 employer coverage not affordable
 “Exceptional circumstances as the exchange may provide.”
5
Marketplace a significantly different product

Overall structure of transitional reinsurance program
Congress included transitional reinsurance program in ACA to improve affordability
 Subsidize plan costs of high-risk enrollees to improve premium stability
 $10 billion available in 2014, $6 billion in 2015, & $4 billion in 2016
 Reinsurance funds generated from assessment of state licensed insurance
companies, services or organizations:
 $63 & $ 0.11 per capita contribution for 2014; $44 per capita projected for 2015
 Reinsurance funds are available for non-grandfathered individual market plans to
offset any substantial individual member costs:
 2014: HHS will pay 80% of plan per member costs between $45,000 “attachment
point” and $250,000 reinsurance cap ($164,000 max per member)
 2015: Estimated 50% of plan per member costs between $70,000 attachment point
and $250,000 reinsurance cap ($90,000 max per member).

Structure of transitional reinsurance program
Allocation of covered cost for individual as expenses rise
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
$0 $24,000 $48,000 $72,000 $96,000 $120,000 $144,000 $168,000 $192,000 $216,000 $240,000 $264,000
Share of Plan
Covered Costs
An Individual Member's Covered Costs
Member
OOP Costs Plan Costs
HHS Transitional
Reinsurance

Since initial Covered California enrollment is:
 Lower than expected
 Contains adverse selection from
long term uninsured, and
 Made up of approximately 20,000
high risk individuals from California
Managed Risk Medical Insurance Plan,
and Federal Pre-Existing Condition
Insurance Plan.
8
High cost composition of initial Covered California enrollment
High risk individuals will make up disproportionate share of plan membership

Plan cost exposure & average PMPY costs of high risk enrollees
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
$- $10,000 $20,000 $30,000 $40,000 $50,000 $60,000
HHS
Transitional
Reinsurance
Member
OOP Costs
Plan
Costs
High Risk Pool
average $12,471
Calif Duals
average $13,625
Fed PCIP
average
$32,108

Stratified cost comparison of 18,000 member state high risk pool
Significant plan expenses for costs not subsidized by transitional reinsurance
Source: MHIP CareEssentials Report 2009
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
$- $10,000 $20,000 $30,000 $40,000 $50,000 $60,000
ShareofPlanCoveredCosts
HHS
Transitional
Reinsurance
Member
OOP Costs
Plan
Costs
22% of costs for
84% of members
38% of costs for
93% of members
50.6% of costs for
95.4% of members
58% of costs for
97% of members
62.3% of costs for
98% of members

 For large state high risk pool, with income subsidies and benefits
comparable to Covered California plans, and 215% MLR:
 Only 31% of 2009 net plan costs would have been eligible for 80%
subsidy under HHS Transitional Reinsurance
 Reinsurance subsidies would have been provided for 3% of
members with qualifying catastrophic plan costs over $45,000.
 63% of 2009 net plan costs would not have been subsidized by HHS
Transitional Reinsurance
 39% of 2009 net plan costs were for members who incurred PM costs
between $10,000 to $45,000, ineligible for HHS Reinsurance in 2014
 20% of net plan costs would be in “100% plan cost phase.”
11
Significant portion of plan costs not covered under
HHS transitional reinsurance

Stratified 2011 costs of 20,000 member
Federal Pre-Existing Condition Insurance Plan (PCIP)
Source: Federal PCIP Claims Incurred 2011, paid thru 1/2012
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
$- $10,000 $20,000 $30,000 $40,000 $50,000 $60,000
ShareofPlanCoveredCosts
HHS
Transitional
Reinsurance
Member
OOP Costs
Plan
Costs
6% of costs for
47% of members
15% of costs for
87% of members
20% of costs for
90% of members
25% of costs for
91% of members
29% of costs for
93% of members

 For Federal Pre-Existing Condition Insurance Plan
370% MLR and no income subsidies:
 74% of 2011 Federal PCIP net plan costs would have been eligible to
receive 80% HHS Transitional Reinsurance subsidies
 Reinsurance subsidies would have been provided for 8% of
members with qualifying catastrophic net plan costs over $45,000.
 25% of 2011 net plan costs would not have been subsidized by HHS
 15% of costs would be in “100% plan cost phase”
 Issue for Covered California plans:
 Will initial plan cost exposure have wide distribution, like state high risk
pools, where majority of high costs are not subsidized by HHS reinsurance
 Or will plans have more catastrophic cost exposure, like PCIP, with
significant amount of costs covered by transitional reinsurance.
13

Comparison of sample cost exposure below HHS transitional reinsurance
0%
10%
20%
30%
40%
50%
60%
70%
$5,000 $10,000 $15,000 $20,000 $25,000 $30,000 $35,000 $40,000 $45,000
Cumulative
Percent of
Plan Cost
Individual Member Total Annual Plan Cost
Federal PCIP 2011
State High Risk Pool 2009
$45,000 HHS
Attachment Point

Common diagnosis cost drivers below reinsurance
attachment point for state high risk pool
Diagnosis % of plan costs Average 2009 PMPY cost
HIV/AIDS 11.1% $12,127
Osteoarthritis 4.4% $6,420
Coronary Artery 3.1% $4,511
Leukemia 2% $38,318
Breast Cancer 1.9% $8,907
Colon Cancer 1.9% $31,618
Bipolar Disorder 1.8% $5,074
Crohn’s Disease 1.4% $15,844
Cerebrovascular
Disease
1.3% $4,713
MS 1.3% $20,049
Cirrhosis of Liver 1.2% $24,121
Source: MHIP CareEssentials Report 2009

Common diagnosis cost drivers for Federal Pre-existing Health Insurance Plan
Diagnosis % of plan costs /2
Cancer 19.8%
Maintenance Chemotherapy, radiation 8.8%
Osteoarthritis 6.3%
Spondylosis / disc disorders 6.2%
Coronary Artery & other heart disease 4.7%
High risk behavioral health & substance abuse admissions more prevalent in
individual market
Diagnosis % of plan inpatient admissions /1
Psychosis 6%
Vaginal Labor & Delivery 4.6%
Alcohol/Drug Abuse & Rehab 2%
1 – MHIP CareEssentials Report 2009
2 – 2012 & 2013 Federal PCIP reports, cms.gov

Rx claims are early warning indicators - should be monitored closely
to identify high cost enrollees
Drug Cost per fill Treatment
Thalomid, Revlimid, Tasigna,
Sprycel, Gleevec
$13,439 - $6,434 Myeloma/Leukemia
Saizen, Serostim, Nutropin $10,128 - $7,801 Human Growth Hormone
Enbrel $8,880 Rheumatoid Arthritis
Humira $8,880 Rheumatoid Arthritis, Crohn’s Disease
Copaxone, Rebif $7,228 - $6,661 MS
Tracleer $4,993 Pulmonary Arterial Hypertension
Atripla, Trizivir $4,353 - $3,348 HIV/AIDS
Tarceva $3,617 Lung Cancer
Zyprexa $3,389 Bipolar Disorder / Schizophrenia
Ondansetron $3,017 Nausea from Chemotherapy, Radiation
Novolog $2,816 Diabetes
Source: MHIP monthly Rx report March 2010

Initial average plan costs for high risk pool members will
decrease over time, but often remains above premium
Source: Mercer analysis of high risk pool plans 2009
$13.910
$20.398
$10.065 $9.433
$0.000
$5.000
$10.000
$15.000
$20.000
$25.000
FY08 FY09
Short Term Subscribers Long Term Subscribers
Plan cost comparison among subscribers not subject to preexisting condition exclusion

 Third Party Payers, such as:
 Hospitals and other providers
 AIDS Drug Assistance Program
 Disease Advocacy Organizations
(American Cancer, Hemophilia
Societies)
 Provider networks
 Plan benefit structure and
authorization requirements.
19
Monitoring drivers of high cost enrollment

Recommendations

 Interface directly with plans claim and Rx systems, to
quickly enable care managers to identify patients at
high risk for hospitalization or costly complications, and
determine proactive interventions
 Evaluate gaps in care through review of member’s
overall clinical profile
 Measure and report HEDIS compliance status
 Evaluate performance of providers, including
prescribing patterns, medication screenings,
diagnosis testing, preventive visits and
benchmarking with peer providers
 Have predictive modeling to stratify claims diagnosis,
often prior to high cost claims, for early interventions
and care coordination.
21
Utilize effective data analytics software

 Receipt of reinsurance and risk adjustment payments dependent
on plan establishing a “distributed data collection approach”
 Plans must establish an “edge server”
 Secure, dedicated, electronic server environments to house medical
and pharmacy claims, encounter data, and enrollment information
 Issuers directed to make data accessible to HHS to install, update, and
operate common software to monitor plan costs
 Plans expected to load claims and enrollment data to edge
server monthly
 Offers plans an opportunity to actively monitor claims expenses and identify
high cost member for interventions.
22
HHS Edge Server
Month submission a useful opportunity to monitor high cost members

 All diagnoses – most high risk members suffer from
multiple conditions (cancer and depression), and the
most acute often masks additional care needs
 Medication inventory and adherence
 Condition severity
 Recent and major surgeries and procedures
 Nursing and rehabilitation therapies
 High risk factors (weight, tobacco, substance abuse)
 Supportive assistance (family, caregivers)
 Language, education, cognitive, locomotion
capabilities and needs.
23
Utilize effective member assessment tools

 Complete, record and update health risk assessments
 Create patient-centered care plans to monitor and
close existing care gaps and engage members
 Integrate care for comorbidities, including both
medical and behavioral health conditions
 Track quality of care issues
 Maintain a complete history of all member activity
for those enrolled in a care plan
 Real-time interface with core claims systems for
up to date eligibility, benefits, and claims history
 View member profiles, medical claims, and
pharmacy data.
24
Utilize effective care management systems

 Apply medication therapy management
and reconciliation
 Process utilization management referrals
and authorizations
 Complete discharge planning surveys
 Assist with transitional care plans and
schedule necessary appointments
and equipment use
 Integrate with care analysis software for
stratification and identification of members
needing outreach and intervention.
25
Effective care management systems, cont’d

Develop specialized care management teams
 Medical staff focus on standard care management and utilization
management practices is not enough
 Must move beyond pregnancy, diabetes and asthma
 Prevalence of significant, multiple chronic disease in initial
Covered California population far exceeds standard Medi-Cal
and commercial enrollment
 Core staff needed to focus on intensive care management
 Lower member to case manager ratios necessary during 2014 and 2015
 Enrollment of high cost cases will continue after open enrollment ends
 Due to significant SEP options for those newly diagnoses with
high cost conditions
 Don’t neglect young members - 23% of high risk pool enrollee were under
age 30, with frequent behavioral health & substance abuse conditions.

Questions
Richard Popper
Director, Duals & Medicaid Strategy
rapopper@dsthealthsolutions.com
410.294.8215
Jill Singletary
Senior Sales Executive
jjsingletary@dsthealthsolutions.com
214.695.8372
www.dsthealthsolutions.com

ACA Reinsurance & High Risk Pool March 2014

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