We thought some of you would be interested to learn about a webinar we’re hosting next month. You’ll find the details below. See you there!

Learn how Michele Levine, Director of Global Benefits, Avon Products, Inc., met her organization’s goal of reducing administrative burden and costs while providing retirees with health care benefits of equal or better value by leveraging a Medicare insurance exchange.

During this webcast you will learn:

  1. How Avon was able to provide its retirees with more choice and better value for their health care dollars
  2. How Avon reduced OPEB liabilities, simplified administration, and made health care benefits for retirees sustainable
  3. Details of Avon’s decision making process, communication protocol and successful results

Webinar Details:
September 15th, 2011
10:00 am PST/1:00 pm EST
Register today!

Visit Extend Health — the nation’s largest private Medicare exchange.

The U.S. Department of Health and Human Services (HHS) announced a new program called the Bundled Payments for Care Improvement initiative. As part of the Affordable Care Act’s ongoing efforts to improve health care and lower costs, this new initiative will bundle “payment for services that patients receive across a single episode of care, such as heart bypass surgery or a hip replacement.” The program will incentivize health care providers (hospitals, doctors, clinicians, etc.) to work together to reduce costs and provide better care while patients are in the hospital as well as after they are discharged.

“Patients don’t get care from just one person – it takes a team, and this initiative will help ensure the team is working together,” said HHS Secretary Kathleen Sebelius. “The Bundled Payments initiative will encourage doctors, nurses and specialists to coordinate care. It is a key part of our efforts to give patients better health, better care, and lower costs.”

At this time, the program is voluntary and participants can choose from four broad approaches. This gives them the flexibility to decide which services and episodes of care they wish to bundle together. Participants will also propose a target price for an “episode of care.” Total payments will be compared to the target price and the providers will share in the savings.

The initiative is based on a previous CMS demonstration project that bundled payments for heart bypass surgery which saved the participating providers $42.3 million, and saved patients $7.9 million in coinsurance. It also improved patient care and lowered mortality.

According to CMS Administrator Donald Berwick, M.D. “All around the country, many of the leading health care institutions have already implemented these kinds of projects and seen positive results.” That may be true, but, even if the hospitals and other providers are interested, will the financial incentives be enough to get them to participate? I guess we’ll just have to wait and see.

For more information visit the CMS Innovation Center or donwload their Fact Sheet.

Visit Extend Health — the nation’s largest private Medicare exchange.

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Published August 26, 2011 by InsuranceNewsNet, here’s an excerpt from a very interesting article written by our CEO, Bryce Williams titled “Will Exchanges Empower Health Insurance Consumer?”

“As it stands right now, consumers have no guarantees regarding rate hikes. If we are serious about controlling health insurance costs in America, we need more than a regulatory watchdog; we need to empower American consumers.”

You can read the full article on insurancenewsnet.com.

Visit Extend Health — the nation’s largest private Medicare exchange.

The Washington Extension

August 26, 2011

Medicare News

CMS announced the initiation of the bundled care payment incentive program created by the Affordable Care Act (ACA). This program is designed to incentive greater cost efficiency by sharing savings that accrue to Medicare with providers. The agency is seeking requests to join the program, allowing applicants to define the “bundle” and name their own target price. Providers can bundle acute hospital stays, hospital and post-acute care, or just post-acute care. The idea of designing their own bundle appeals to hospitals but it’s too early to know whether the incentives are strong enough.

ACA Updates

On August 17, HHS proposed new rules requiring health insurers to present clear, consistent and comparable information about benefits and coverage to consumers. In tandem with the departments of Labor and Treasury, this requirement for a standardized summary of coverage will apply to health plans in the individual and group markets. Representatives from associations representing health insurers and businesses caution that this new burden could add costs to the health care system.

The ACA did not appropriate funding for the Federal government to set up a fallback exchange, if that becomes necessary. HHS can impose fees or design other methods to fund the exchange on an ongoing basis—similar to states’ authority—but the lack of an explicit allowance for funds to establish the exchange may complicate the Federal government’s initial efforts.

Although the legislature failed to establish an exchange, Mississippi’s state Insurance Commissioner authorized a nonprofit group operating in the state already to run its exchange. Mississippi recently received over $20 million in funding to help establish its exchange. Governor Haley Barbour supports establishment of a health insurance exchange, although Mississippi is part of the lawsuit suing the Federal government over the constitutionality of health reform.

On the Hill

While Congress is recessed, the so-called “Super Committee” is beginning discussions about how to trim the nation’s deficit, though it may be off to a bumpy start. This 12-member panel—half Republicans, half Democrats, split evenly between the Senate and House of Representatives—is responsible for recommending $1.2 trillion in spending cuts and/or revenue increases. If it fails, across-the-board spending cuts to Medicare and defense are automatically triggered.

Reports/Other News

Preliminary results from a Towers Watson survey of almost 400 midsize to large companies indicate although employer health care costs are expected to rise more slowly in 2012 compared to 2011, almost 90% of employers are planning steps to control their costs. This may be due to the belief of 56% of employers that they will be liable for the excise tax beginning in 2018 for “high-cost” health insurance. Just over half of employers that offer retiree health insurance plan to discontinue benefits for pre- and post-65 retirees, though Towers does not report whether employers are considering alternate ways to help retirees afford health insurance (e.g. an HRA).

Thomson Reuters released an analysis of geographic variation in health care spending, finding that high Medicare spending is not necessarily correlated with high spending by employer-sponsored private insurance in the same area. The study did not adjust for demographic characteristics, pricing or health status.

Visit Extend Health — the nation’s largest private Medicare exchange.

If you were to guess where people spend the most money on health care in the U.S. where would you pick? How about a big city like New York or Los Angeles? If you did, the results of a recent study by Thomson Reuters might surprise you.

If you went against your instincts and pick Anderson, IN you’d be right. People there with employer-provided insurance spent $7,231 on health care compared to Ogden-Clearfield, Utah where they spent only $2,623. That’s a pretty big variation compared to the national average of $4,104. Here are the ten highest and lowest spending MSAs according to the study.

Ten Highest Spending MSAs:

  • Anderson, IN $7,231
  • Punta Gorda, FL $7,168
  • Racine, WI $6,528
  • Naples-Marco Island, FL $6,312
  • Ocean City, NJ $6,128
  • Barnstable Town, MA $6,123
  • Flint, MI $6,061
  • Lake Havasu City-Kingman, AZ $5,977
  • Ocala, FL $5,976
  • Carson City, NV $5,931

Ten Lowest Spending MSAs:

  • Ogden-Clearfield, UT $2,623
  • Dubuque, IA $2,719
  • Fayetteville-Springdale-Rogers, AR-MO $2,762
  • Fort Smith, AR-OK $2,916
  • Laredo, TX $2,919
  • Amarillo, TX $2,942
  • McAllen-Edinburg-Mission, TX $2,950
  • Salt Lake City, UT $2,979
  • Fargo, ND-MN $2,996
  • Sioux City, IA-NE-SD $3,029

The Thomson Reuters study, titled Geographic Variation in Spending and Utilization Among the Commercially Insured utilized the Thomson Reuters MarketScan Research Databases to “examine variation in spending for enrollees with employer-sponsored health insurance (private insurance).”

Their research focused on three age groups

  • Children (age 0-17 years)
  • Adults (age 18-64 years), and
  • Seniors (age 65 years and over)

The study analyzed 382 metropolitan statistical areas (MSAs) with at least 100 enrollees in each of the age categories. It looked at geographic variation across MSAs and age groups for spending on
Medical care

  • Inpatient medical care
  • Outpatient medical care
  • Outpatient prescription drug, and
  • Total spending

Not surprisingly, the study found that healthcare utilization and spending varied across geographic regions in the United States.

The general consensus seems to be that variations cannot be fully explained by age, gender and health status. Perhaps that is why adjustments for “demographic characteristics and health status” were not made in this study.

However, the data did show that within each MSA medical spending varied by age, which had an impact on overall spending and relative ranking compared to other MSAs. For instance, Medicare spending in Anderson, IN was lower than it was in Punta Gorda, FL. But total spending in Anderson was higher overall because more was spent on children and adults. So, while an MSA might have higher overall spending, that does not mean spending is higher for all age categories.

The study pointed out that current beliefs about the causes for geographic variation may need revising due the observed patterns for Medicare and the commercially insured. The study cites the following factors that seem to influence geographic variation:

  • Regional differences in practice, training and financial incentives, as well as the availability of physicians and specialists.
  • Basic health, health behaviors, and healthcare preferences
  • Market structure, pricing and competition
  • Fraud and abuse, such as fraudulent billing schemes.

The study concludes that more research needs to be done to fully understand the reasons for the variation. Future health care policy changes will need to take into account these causes if they are to be effective.

The Thomson Reuters study offers the following five main findings:

  • There was significant geographic variation in healthcare spending by age
  • Location of the highest & lowest spending MSAs varied considerably by age group, and the type of spending was different from past results for Medicare.
  • Not including seniors with supplemental insurance, variation in drug spending was greater than variation in medical care spending
  • There was a strong positive correlation between inpatient and outpatient spending, and a weak correlation between medical and outpatient drug spending.
  • There was a weak correlation on medical spending between age groups, but a stronger correlation with drug spending.

In conclusion, the study found that the variation in spending by commercially-insured populations is significant, but the spending for seniors differed from previous results for Medicare. While the differences may be due to causes such as market structure, pricing and competition, more research is needed to determine if these variations would still be found after adjusting for demographic characteristics and health status.

If you would like to read the Thomson Reuters whitepaper you can find it here.

Additional Reading: The Cost Conundrum, by The New Yorker.

Visit Extend Health — the nation’s largest private Medicare exchange.

On Friday, August 12, 2011, the Department of Health and Human Services (HHS) released proposed regulations implementing the Affordable Care Act (ACA). Here is a brief summary and highlights of the “Exchange Functions in the Individual Market: Eligibility Determinations; Exchange Standards for Employers.”


(HHS) proposes the process for exchanges to make eligibility determinations for enrollment in QHPs, premium tax credits and cost-sharing reductions, qualified employer-sponsored coverage, Medicaid, CHIP and other insurance affordability programs. Significant effort is made to align the standards and processes for Medicaid/CHIP and premium tax credit eligibility determinations. HHS suggests alternatives for data reporting of employer-sponsored coverage and proposes policy for SHOP exchanges not addressed in a previously released NPRM.


Eligibility for Enrollment in QHPs and Premium Tax Credits
The ACA requires that individuals eligible for exchange enrollment be lawfully present, not incarcerated, and reside in the state in which the exchange is established. HHS proposes to align exchange requirements for lawful presence and residency with that of Medicaid. An individual must reside in the state that established the exchange he seeks enrollment in; a dependent of the primary tax filer who lives in a different state can enroll either where he resides or where the primary taxpayer resides.

Exchanges will make eligibility determinations for the exchange, as well as Medicaid and CHIP.

Premium tax credit eligibility is based on modified adjusted gross income and is determined by the filing of the primary taxpayer—either for himself or for his entire family. The determination is made based on expected individual or family income for the upcoming year, not based on income at a current point in time (as for Medicaid). All individuals enrolled in QHPs must file a tax return, regardless of income, or become ineligible for tax credits in subsequent years. A year-end reconciliation adjusts for over or underpayments.

HHS proposes various methods for employers to submit information regarding qualified employer-sponsored insurance (ESI) to the exchange, including creation of a template for plan- and employee-level information, or a centralized database that employers could voluntarily populate as a resource for the verification process. Individuals without access to affordable, qualified ESI are eligible for premium tax credits; employers are assessed a penalty for employees who access premium tax credits.

Process for Eligibility Determinations
In general, HHS is proposing policies that aim to minimize the administrative burden for individuals and exchanges.

  • Exchanges should first seek to verify eligibility information through electronic data sources, including state data and communication with HHS. Documentation should be sought from individuals only if information (e.g. regarding enrollment in an employer-sponsored plan, citizenship, incarceration, etc.) provided by an applicant is not “reasonably compatible” with the electronic data source. Applicants have 90 days to resolve inconsistencies.
  • Notably, while the ACA requires an applicant to provide his income (modified adjusted gross income) to the exchange, HHS believes this is unduly burdensome and is requiring submission instead of name, Social Security number and relationship to tax filer. Income information would be supplied in real-time through Treasury and an individual could either affirm it or provide alternate information.
  • The exchange would conduct annual redeterminations of eligibility, but HHS proposes that mid-year redeterminations occur only when an individual proactively supplies information regarding changes in tax status or coverage, with limited exceptions. This is intended to relieve exchange’s administrative burdens, but the NPRM includes a provision for state flexibility with regard to this proposal (i.e. allowing states to initiate data matching mid-year).
  • If state Medicaid agencies enter into agreements with exchanges, eligible individuals could apply for and enroll in Medicaid coverage through the exchange. This integration would reduce the two-step process of application and enrollment. Individuals not referred by the exchange to the state Medicaid agency for enrollment can request a full Medicaid eligibility determination directly from the state and that the exchange transmit any relevant information.

Proposed policies also seek to give individuals flexibility in how they interact with the exchange.

  • Exchanges must permit an individual to decline an eligibility determination, or accept less than the full premium tax credit for which he is eligible (if, for instance, he expects his annual income to decline and wants to avoid a year-end tax liability).
  • Exchanges must accept applications and make eligibility determinations at any point during the year, even if the individual isn’t eligible to enroll in a QHP at that point in time.

Exchanges must provide a single written notice with all eligibility determination information as well as an annual redetermination notice.

Administration of Premium Tax Credit & Cost-sharing Reductions
HHS will be a single point of contact for exchanges within the Federal government, coordinating data transmittals with other relevant Federal agencies (e.g. Treasury, Labor, Homeland Security, Social Security, etc.).

When an exchange determines that an individual is eligible for premium tax credits, HHS notifies Treasury of such eligibility, and Treasury makes advance payments directly to the QHP selected by the individual. The exchange simultaneously provides information to the QHP and employer, if relevant.

A reconciliation process will be held annually after tax filings are submitted. See below for detail.

SHOP Exchanges
HHS proposed various policies regarding SHOP exchanges in its previous NPRM and includes additional information at this time.

Here, HHS clarifies that if a qualified employer has employees enrolling in SHOP exchanges across multiple states, it is still the total number of employees—regardless of how many states they reside in—that qualifies an employer for participation in a SHOP exchange.

An employer participating in a SHOP exchange must provide its employees with information about the methods for selecting and enrolling in a QHP. The SHOP exchange will provide a uniform application and enrollment timeline, a website and toll-free hotline, but will not initially have contact information for employees to disseminate this information.

Employers participating in a SHOP exchange are also responsible for providing information to the exchange about changes to an employee’s eligibility to purchase coverage through the employer.

Visit Extend Health — the nation’s largest private Medicare exchange.

A U.S. appeals court in Atlanta ruled today that the “individual mandate” in the Affordable Care Act that requires Americans to purchase health insurance or face penalties is unconstitutional. The decision stated that the individual mandate “exceeds Congress’s enumerated commerce power.”

The three judge panel of the 11th Circuit Court of Appeals was divided 2 to 1 in their ruling. While the court struck down the individual mandate, it overturned an earlier decision that voided the entire health-care law, stating that remaining provisions are “legally operative.”

Seen as a victory for the 26 states that challenged the law, some are calling this a big defeat for the Obama administration’s battle over health care. However, losing the individual mandate may not be critical to the success of the ACA. See this post from our CEO Bryce Williams on his blog: “The Individual Mandate Doesn’t Matter” where he makes the case that there are other effective ways to incentivize people to buy health insurance; for example, he argues that an annual enrollment period like that used for Medicare would be very effective.

So what’s next? Today’s ruling conflicts with the June decision by the appeals court in Cincinnati that upheld the law. A third appeals court ruling is due soon from the 4th Circuit Appeals Court in Richmond, VA. Despite the outcome in Atlanta today, it’s clear that this issue will end up going to the U.S. Supreme Court for a final decision. Whichever side of the debate you’re on, there’s plenty of excitement ahead. Stay tuned!

Visit Extend Health — the nation’s largest private Medicare exchange.

Governor Sam Brownback of Kansas announced on Tuesday that his state would return a $31.5 million “Early Innovator” grant received in February to “design and implement the Information Technology (IT) infrastructure needed to operate Health Insurance Exchanges” as mandated by the ACA.

The U.S. Department of Health and Human Services (HHS) awarded grants to seven states, including Kansas, so they could lead the way on, “building a better health insurance marketplace, one that allows individuals and small-business owners to pool their purchasing power to negotiate lower rates. Using these new funds, the Early Innovator states will develop Exchange IT models that can be adopted and tailored by other states.” Of the seven states that received a grant, Kansas is the second to reject it. Oklahoma returned its $54 million grant in April.

In his statement justifying the return, Governor Brownback said, “There is much uncertainty surrounding the ability of the federal government to meet its already budgeted future spending obligations. Every state should be preparing for fewer federal resources, not more. To deal with that reality Kansas needs to maintain maximum flexibility. That requires freeing Kansas from the strings attached to the Early Innovator Grant. The early innovator grant does not address the most important issue in health reform, which is slowing the rate of cost growth in health care.” Others have indicated that the decision may be due, at least in part, to political pressure from special interest groups.

Note that Governor Brownback does not provide any suggestions for how health care growth costs might be slowed, although it does say Kansas will search for solutions that will work for the state. Extend Health would argue that state exchanges will play a critical role in cost containment by introducing consumer empowerment and carrier competition to the market – helping consumers to find and pay for health care plans that cover only their specific needs at a cost they can afford.

The governor’s statement is available here.
You can read the HHS press release announcing the “Early Innovator” grants here.

Visit Extend Health — the nation’s largest private Medicare exchange.

Medicare News

CMS announced that 900,000 Medicare beneficiaries received a discount on their prescription drugs in the Part D donut hole this year. The savings for seniors amount to more than $460 million, including over $200m in June alone.

ACA Updates

Joel Ario is stepping down as head of the exchange group in HHS’ Center for Consumer Information and Insurance Oversight at the end of September (CCIIO runs health reform implementation within CMS). For now, exchange implementation will be led by Steve Larsen, CCIIO’s current director, and Tim Hill, who has held a variety of roles within CMS, including CFO for the agency, Deputy Director for the center running Medicare, and most recently, deputy director of CCIIO.

The Federal government announced that it is taking over health insurance rate review in 10 states that do not adequately regulate premiums. The ACA requires oversight and justification of health insurance premium increases over 10% in the individual and small group markets, beginning September 1, 2011.

The Feds also issued a preliminary determination of states’ readiness for meeting minimum criteria for external appeals review processes. According to this ruling, 17 states do not meet the minimum criteria and therefore the process could be taken over by the Federal government.

New Hampshire has enacted a law that allows for continued implementation of the ACA and simultaneously rejects exchange planning grant money from the Federal government. Governor Lynch (D) allowed the bill to become law but opposes the rejection of funds.

On the Hill

The House and the Senate have recessed until after Labor Day….

…but before they left, legislation was enacted on August 2nd to raise the Federal debt ceiling and cut Federal spending by $917 billion over 10 years. Although changes to Medicare were not part of the spending cuts, the program likely won’t escape scrutiny for long. The second round of deficit reductions, required to be $1.2 trillion over 10 years, will be made by a group of 12 lawmakers, knows as the “super committee”. Committee recommendations must be made by September 23rd and enacted by Congress by December 23rd. Otherwise, a series of automatic spending cuts—implicating entitlement and defense programs—will kick in. Payments to all Medicare providers would be automatically trimmed by 2%. The entire budget, including Medicare, is on the table for super committee recommendations, as well as revenue raised through the tax code.

Reports/Other News

A Mercer survey of employers finds that only 2% are “very” likely to drop employer-sponsored insurance and 6% are “likely” to, once health insurance exchanges are operational. This is virtually unchanged from one year ago, according to a similar survey conducted by Mercer just after the ACA was passed. Approximately one-third of employers are considering a defined contribution approach; within that, most consider making a fixed employer contribution for all plans offered and letting employees buy up for more generous coverage.

CMS actuaries’ annual report on national health spending projects that growth from 2010 to 2020 will be 5.8% per year, 1.1 percentage points faster than the average rise in GDP. Spending is projected to spike to 8.3% when health reform coverage provisions take effect in 2014. Growth in health spending over the past few years has been historically low due to the effects of the recession and slowed growth in payments to Medicare Advantage plans. Due to the makeup of the newly insured population (relatively young and healthy), CMS expects spending for prescription drugs and physician services to grow more quickly than hospital, or other more intensive, services.

The Government Accountability Office (GAO) testified before a committee in the US House of Representatives that the federal government wasted almost $48 billion in improper payments in Medicare last year, including for improper documentation, medically unnecessary services, coding and billing errors and payment calculation errors. Medicare’s improper payments amount to 38% of total improper payments made by the Federal government. It is not an estimate of fraud.

Visit Extend Health — the nation’s largest private Medicare exchange.

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