Not Peer Reviewed - HSFo · 2019. 10. 28. · –Guaranty fund assessments –Premium taxes or...

H E A LT H W E A LT H C A R E E R

OCTOBER 7, 2019

Scott Banken, CPAPrincipalJoe SchallerSenior Consultant

M E R C E R G O V E R N M E N T H U M A N S E R V I C E S C O N S U L T I N G

Not Peer Reviewed

M E D I C A L L O S S R A T I O R E P O R T I N G F R O M M E D I C A I D M C O S : C M S G U I D A N C E S O F A R

2Copyright © 2019 Mercer (US) Inc. All rights reserved.

A G E N D A

01 02

04 05

S TA N D A R D S , D E F I N I T I O N S A N D K E Y C O N S I D E R AT I O N S

K E Y R E P O R T I N G R E Q U I R E M E N T S : M C O TO S TAT E 4 2 C F R § 4 3 8 . 8 ( K )

• Credibility Adjustment• Spread Pricing• Support Act

S U B S E Q U E N T G U I D A N C E A N D S TR ATE G I E S –

K E Y R E P O R T I N G R E Q U I R E M E N T S : S TATE TO C M S 4 2 C F R § 4 3 8 . 7 4

03• Components of the

Numerator• Components of the

Denominator

TH E M LR C A L C U L AT I O N –


STANDARDS, DEFINIT IONS AND KEY CONSIDERATION


S TA N D A R D S , D E F I N I T I O N S & K E Y C O N S I D E R AT I O N4 2 C F R § 4 3 8 . 8

C O N T R A C T S S TA R T E D O N O R A F T E R J U LY 1 , 2 0 1 7

M L R M U S T B E H I G H E R T H A N O R E Q U A L T O 8 5 %

R E Q U I R E S E L F - R E P O R T E D M L R

1 2 M O N T H R E P O R T I N G P E R I O D M U S T B E A L I G N E D W I T H R AT I N G Y E A R


S TA N D A R D S , D E F I N I T I O N S & K E Y C O N S I D E R AT I O N4 2 C F R § 4 3 8 . 8

IBNR: Incurred but not reported claims expenses.Typically includes claims not yet received by thepayer from the provider.

MCOs, PIHPs or PAHPs must submit the report to the state within 12 months of the end of the MLR reporting year, defined as 12 months consistent with the rating period.

MLR: Ratio of payments to providers (claims) plus health care quality improvement activities plus fraud reduction all divided by capitation premium plus other payments from the state.

Incurred claims paid by one MCO, PIHP, or PAHP that is later assumed by another entity must be reported by the assuming MCO, PIHP, or PAHP for the entire MLR reporting year and no incurred claims for that MLR reporting year may be reported by the ceding MCO, PIHP, or PAHP.


MCO REPORTING REQUIREMENTS


• 42 CFR §438.8(k) Medical loss ratio reporting requirements– State contracts with MCOs must require submission of a report with at least the following

information for each MLR reporting year: - Total incurred claims. - Expenditures on quality improving activities. - Expenditures related to fraud reduction.- Non-claims costs. - Premium revenue. - Taxes, licensing and regulatory fees. - Methodology(ies) for allocation of expenditures. - Any credibility adjustment applied. - The calculated MLR. - Any remittance owed to the State, if applicable. - A comparison of the information reported in this paragraph with the audited financial

reports.- A description of the aggregation method used for Medicaid eligibility groups.- The number of member months.

R E P O R T I N G R E Q U I R E M E N T SM C O T O S TAT E


R E P O R T I N G R E Q U I R E M E N T SM C O T O S TAT E

• 42 CFR § 438.8(k) Medical loss ratio reporting requirements– The report must be submitted within 12

months of the end of the MLR reporting year.

– The MCO must require any third party vendor providing claims adjudication activities to provide all underlying data associated with MLR reporting within 180 days of the end of the MLR reporting year or within 30 days of being requested by the MCO, whichever comes sooner, regardless of current contractual limitations, to calculate and validate the accuracy of MLR reporting.


CALCULATING MLR


• Incurred Claims– Directly paid to providers– Paid through subcontracted providers– Unpaid claims liabilities – Withholds– Less Recoveries

- COB- Subrogation- Overpayment recoveries- Pharmacy rebates

– Lawsuit contingencies– Provider incentives/bonuses/VBP– Payments to mandated solvency funds

T H E M L R C A L C U L AT I O NN U M E R AT O R C O M P O N E N T: I N C U R R E D C L A I M S


T H E M L R C A L C U L AT I O NN U M E R AT O R C O M P O N E N T: H C Q I

• Healthcare Quality Improvement activities– An activity designed to:

- Improve health quality.- Increase the likelihood of desired

health outcomes in ways that are capable of being objectively measured and producing verifiable results and achievements.

- Be directed toward individual enrollees.

- Be grounded in evidence-based medicine.

- An activity related to any EQR-related activity.

- Expenditures related to HIT and meaningful use.


T H E M L R C A L C U L AT I O NN U M E R AT O R C O M P O N E N T: H C Q I

• Healthcare Quality Improvement activities– Excluded activates:

- Those designed primarily to control and contain costs.- The pro rata shares of expenses for other lines of business.- Activities paid for with grant money or other funding separate

from premium revenue.- Items that can be reimbursed as clinical services.- Costs related to the claims adjudication system.- Retrospective and concurrent utilization review.- Fraud prevention activities- Network Development- Credentialing- Marketing


T H E M L R C A L C U L AT I O NN U M E R AT O R C O M P O N E N T: F R A U D R E D U C T I O N• The lesser of

– Fraud reduction costs– Fraud reduction recoveries


• Non-Claims Costs– (1) Amounts paid to third party vendors for secondary

network savings. – (2) Amounts paid to third party vendors for network

development, administrative fees, claims processing and utilization management.

– (3) Amounts paid, including amounts paid to a provider, for professional or administrative services that do not represent compensation or reimbursement for State plan services or services meeting the definition in 42 CFR § 438.3(e) and provided to an enrollee.

– (4) Fines and penalties assessed by regulatory authorities.

• MLR rebate remittances

• Pass-through payments

T H E M L R C A L C U L AT I O NE X C L U S I O N S


• Premium revenue– State capitation payments.– State-development one time payments for specific life

events of enrollees.– Other payments.– Unpaid cost-sharing amounts.– All changes to unearned premium reserves.– Net payments related to risk sharing mechanisms.

• Less any Taxes and Fees:– Any state, local or federal income tax– Guaranty fund assessments– Premium taxes or examination fees– HIPF

T H E M L R C A L C U L AT I O ND E N O M I N AT O R C O M P O N E N T S


• (g)Allocation of expense —– (1)General requirements

- (i) Each expense must be included under only one type of expense, unless a portion of the expense fits under the definition of, or criteria for, one type of expense and the remainder fits into a different type of expense, in which case the expense must be pro-rated between types of expenses.

- (ii) Expenditures that benefit multiple contracts or populations, or contracts other than those being reported, must be reported on a pro rata basis.

– (2)Methods used to allocate expenses. - (i) Allocation to each category must be based on a generally accepted accounting method

that is expected to yield the most accurate results. - (ii) Shared expenses, including expenses under the terms of a management contract,

must be apportioned pro rata to the contract incurring the expense. - (iii) Expenses that relate solely to the operation of a reporting entity, such as personnel

costs associated with the adjusting and paying of claims, must be borne solely by the reporting entity and are not to be apportioned to the other entities.

T H E M L R C A L C U L AT I O NA L L O C AT I O N S


SUBSEQUENT GUIDANCE


• Credibility adjustment– An entity may add a credibility adjustment if the reporting year is partially credible.– Credibility factors:

S U B S E Q U E N T G U I D A N C EC R E D I B I L I T Y A D J U S T M E N T

STANDARD PLANS MEMBER MONTHS IN

MLR REPORTING YEAR

STANDARD PLANS CREDIBILITY ADJUSTMENT

LTSS ONLY PLANS MEMBER MONTHS IN

MLR REPORTING YEAR

LTSS ONLY PLANS CREDIBILITY ADJUSTMENT

0 100% 0 100%

5,400 8.40% 630 8.40%

12,000 5.70% 1,000 6.70%

24,000 4.00% 2,000 4.70%

48,000 2.90% 4,000 3.40%

96,000 2.00% 8,000 2.40%

192,000 1.50% 16,000 1.70%

380,000 1.00% 32,000 1.20%

380,001 0.00% 45,000 1.00%

45,001 0.00%


S U B S E Q U E N T G U I D A N C ED I R E C T E D PAY M E N T S

1Directing managed care plans to implement specific value-based purchasing models. Examples of value-based purchasing could include bundled payments, episode-based payments, accountable care organizations (ACOs), or other alternative payment models intended to recognize value or outcomes over the volume of services.

2Directing managed care plans to implement multi-payer or Medicaid-specific delivery system reform or performance improvement initiatives. Examples of delivery system reform or performance improvement initiatives could include pay for performance arrangements, quality-based payments, or population-based payment models.

3Directing managed care plans to adopt specific types of parameters for provider payments for providers of a particular service under the contract, including minimum fee schedules, a uniform dollar or percentage increase, or maximum fee schedules.


S U B S E Q U E N T G U I D A N C ES U B C O N T R A C T E D A R R A N G E M E N T S

• Spread Pricing Rule– What is spread pricing?– Only payments made to the

providers actually providing the service to the beneficiary is medical expense.

– Net of rebates: ALL rebates.

• The spread plus any retained rebates must be recorded as administrative expense.


S U B S E Q U E N T G U I D A N C ES U B C O N T R A C T E D A R R A N G E M E N T S

• Pharmacy Spread

• Dental subcontracts


• CMS intends to use our enforcement discretion to focus on working with states to achieve compliance with the managed care regulations when states are unable to implement new and potentially burdensome requirements of the final rule by the required compliance date, particularly provisions with a compliance deadline of contracts beginning on or after July 1, 2017. This use of enforcement discretion will be applied based on state-specific facts and circumstances and focused on states’ specific needs.

• Notwithstanding this guidance, CMS is unable to permit flexibility for all provisions of the final rule for which compliance is required for contracts beginning on or after July 1, 2017. Specifically, we cannot permit flexibility for: – 1. The actuarial soundness and payment provisions found in 42 CFR §§ 438.4,

438.5, 438.6 and 438.7; – 2. The pass-through payment provisions found in 42 CFR § 438.6(d); and – 3. The MLR provisions found in 42 CFR §§ 438.8 and 438.74.

S U B S E Q U E N T G U I D A N C EE N F O R C E M E N T D I S C R E T I O N


• Corrected technical errors on EPSDT.

• Clarified timing of contract revisions between states and MCOs.

• Reiterated that MCOs may not have more than one level for appeals and state’s can not bypass the appeal process to go right to a fair hearing.

• Allows for rating periods other than 12 months during implementation but the MLR report is still for 12 months.

• GAAP audits are actually GAAP audits — meaning any accepted accounting method, such as statutory reporting is allowed.

• Lays out rules for getting the 75% match on EQRO activities.

S U B S E Q U E N T G U I D A N C EF A Q S


S U B S E Q U E N T G U I D A N C EI M P L E M E N TAT I O N D AT E S

• Laid out the due dates for each section of the final rule.

• For MLR, no later than contract periods starting July 1, 2019 require actuarial soundness with rates reasonably achieving at least 85% MLR.

• At this point, the final rule is fully implemented.


• Lays out requirements for state websites– Enrollee handbook, provider directory,

drug formulary, network adequacy– Annual managed care program report– MCO quality ratings– State quality strategy– EQR technical reports– PI

- Managed care plan contract- Plan compliance with network

adequacy- Plan ownership and control- Results of periodic audits of financials

and encounter data

S U B S E Q U E N T G U I D A N C ET R A N S PA R E N C Y R E Q U I R E M E N T S


S U B S E Q U E N T G U I D A N C ES U P P O R T A C T

CMS has not issued any guidance on this yet.

The Support Act is a bi-partisan bill aimed at fixing the Opioid crisis.

There is a provision deep in the act that permits states receiving MLR rebate remittances for Medicaid expansion to

only pay back the feds at the state’s standard FMAP

rate, not the enhanced match rate.

.


STATE REPORTING REQUIREMENTS


• 42 CFR § 438.74 State oversight of the minimum MLR requirement.– (a) State reporting requirement.

- (1) The State must annually submit to CMS a summary description of the report(s) received from the MCO(s), PIHP(s), and PAHP(s) under contract with the State, according to 42 CFR §438.8 (k), with the rate certification required in 42 CFR § 438.7.

- (2) The summary description must include, at a minimum, the amount of the numerator, the amount of the denominator, the MLR percentage achieved, the number of member months, and any remittances owed by each MCO, PIHP, or PAHP for that MLR reporting year.

R E P O R T I N G R E Q U I R E M E N T SS TAT E T O C M S


• 42 CFR § 438.74 State oversight of the minimum MLR requirement.– (b) Repayment of Federal share of remittances.

- (1) If a State requires a MCO, PIHP, or PAHP to pay remittances through the contract for not meeting the minimum MLR required by the State, the State must reimburse CMS for an amount equal to the Federal share of the remittance, taking into account applicable differences in the Federal matching rate.

- (2) If a remittance is owed according to paragraph (b)(1) of this section, the State must submit a separate report describing the methodology used to determine the State and Federal share of the remittance with the report required in paragraph (a) of this section.

R E P O R T I N G R E Q U I R E M E N T SS TAT E T O C M S


Scott M. Banken, CPA Principal333 S 7th Street, Ste 1400 Minneapolis MN 55402O: +1 612 642 8722M: +1 651 202 [email protected]

Joe SchallerSenior Consultant2425 E. Camelback.Rd, Ste 600 Phoenix, AZ 85016 O: +1 602 522 6493M: +1 602 245 [email protected]

Not Peer Reviewed - HSFo · 2019. 10. 28. · –Guaranty fund assessments –Premium taxes or...

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