RI Rate Review:
A First Step for Affordable Health Insurance
State Coverage Initiatives National Meeting
August, 2010
Deborah Faulkner
Faulkner Consulting Group
RI Affordability Project Lead
Background:
RI Office of Health Insurance Commissioner
 History: New Cabinet-level position as of June 2004
- Response to BCBSRI misconduct
- Frustration by employers and providers over costs of health care,
reimbursement system, inability to engage health plans on larger
issues
 Statutory Responsibility: Four Areas
1.
Financial Solvency
2.
Consumer Protection
3.
Fair Treatment of Providers
4.
Direct Health Plans towards system improvement
2
Starting Point: RI Commercial Insurance Market
 By the Numbers
-
RI population: 1 Million
Commercially Insured Lives: 575,000
Small Group Market (<50): 90,000
Individual Market: 15,000
 Individual Market: Good policy, bad politics
-
Single Carrier (BCBSRI) and single pool
Annual open enrollment, Two sub-pools – low risk subsidizes high
 Small Group: Good access, recent declines in offer/takeup rates
-
Three carriers
Guaranteed issue, no pre-ex, 4-1 bands, Adjusted community rating
 Large Group: Broker driven, less public oversight
-
Three carriers
Prior approval of rate manuals and rate factors
3
What About the Costs?
Efforts in RI to Address Underlying Cost Trend
1. Health Plan Rate Review
2. OHIC Affordability Standards
4
I. Health Plan Rate Factor Review
Idea:

Health Plans in RI have unique standard: “Policies to promote affordability”

Use rate factor review to educate public, align interests of health plans to
get at underlying cost drivers.
Elements:

Annual review of large and small group rate factors.

Public disclosure of information.
Process (SmG + LgG)

45-60 Day Annual Process

Key Components
•
Preliminary Internal Review
•
Public Comment
•
Internal Actuarial and Substantive Review
•
Propose Approved, Modified or Rejected Rate Factors to Carriers
5
Office of the Health Insurance Commissioner
2011 Health Plan Rate Factor Review Template: Submissions for Large Group
Blue Cross and Blue Shield of RI
UnitedHealthCare of NE
2009 req. 2009 2010 req. 2010 2011 req 2011 2009 req. 2009 2010 req. 2010 2011 req 2011 2009 req.
apprvd
apprvd
apprvd
apprvd
apprvd
apprvd
Category: Hospital Inpatient
Annual Rate of Price Inflation (%)
8.5
7.9
7.3
10.0
10.0
8.4
7.4
1.0
1.0
1.0
5.6
4.6
3.5
1.3
9.6
9.0
8.4
16.3
15.1
12.2
8.8
Category: Hospital Outpatient
Annual Rate of Price Inflation (%)
7.8
7.4
6.8
7.8
7.8
6.8
7.5
5.2
5.5
4.5
7.5
4.2
12.4
13.8
12.6
14.8
12.0
4.8
4.8
5.4
7.3
6.6
5.7
5.7
2.6
10.1
11.9
10.8
11.4
10.1
Annual Rate of Utilization Inflation
(%)
Composite Inflation Rate (%)
Annual Rate of Utilization Inflation
(%)
5.3
5.2
Composite Inflation Rate (%)
13.6
13.0
7.5
9.9
9.5
10.5
Pharmacy
Annual Rate of Price Inflation (%)
Annual Rate of Utilization Inflation
(%)
Composite Inflation Rate (%)
See
-- www.ohic.ri.gov
-- for
full submission
--
10.8
11.0
11.0
10.8
Annual Rate of Price Inflation (%)
19.3
15.0
8.1
3.8
3.8
4.7
6.7
Annual Rate of Utilization Inflation
(%)
Composite Inflation Rate (%)
3.5
3.7
4.9
6.7
5.8
7.1
1.3
23.5
19.3
13.4
10.9
9.8
Category: Primary Care
19.3
19.3
12.1
8.1 6
Rate Factor Review: Impact?
BCBSRI
Requested
2011
2010
2009
UHCNE
Approved
Requested
Tufts HP
Approved
Requested
Approved
Small Group
12.4%
9.8%**
15.5%
12.3%**
12.4%
11.0%**
Large Group
13.2%
9.8%**
11.7%
8.4%**
11.6%
10.2%**
Small Group
13.9%
9.8%*
13.2%
6.3%*
9.7%
9.5%*
Large Group
16.3%
9.9%*
11.6%
6.0%*
9.7%
9.3%*
Small Group
9.7%
8.3%
12.6%
9.5%
NA
NA
Large Group
9.3%
7.8%
11.0%
8.0%
NA
NA
* 2010 rate requests were received with highly publicized/ front page community reaction. OHIC called on carriers to
withdraw requests. All three insurers withdrew, refiled six months later. Rates shown are for Q3/4 only.
** 2011 Rates were approved with six additional conditions, specifying hospital/health plan contract terms
7
Rate Factor Review: Assessment
Pro:
 More scrutiny of insurers
 More public education.
 Good way to get the attention of Insurers:
– Opportunity to squeeze admin costs, profits (cost shift back to self-insured)
– Opportunity to push harder on payment reform.
Con:
 Greater politicization of process.
 Potential for unpredictable, non-rational decisions.
 Low rate factors now may mean big jumps later.
 Only indirect influence on consumers and providers
 Rate review, by itself, will not address the underlying cost of care
in Rhode Island.
8
Evidence from Rate Review:
Insurance Premiums driven by delivery system costs
Overall Premium Inflation
2010 Large Group Rate Factor Request:
Cost Drivers
16.0%
Adjustment to
Prior Year
Hosp IP
14.0%
Hosp OP
12.0%
Rx
10.0%
Primary Care
8.0%
Med/Surg other
than PriCare
Admin
6.0%
4.0%
Profit &
Reserves
2.0%
0.0%
-2.0%
BCBSRI (13.4%) United (11.7%)
Tufts (11.6%)
9
2011 Conditions of Approval
All health plan/hospital contracts must:
1. Utilize efficiency based units of payment for hospital services (other than fee
for service)
2. Limit annual maximum price increase for inpatient and outpatient services to
CMS hospital price index
3. Include performance incentives based on no less than three nationally
accepted clinical quality, service quality or efficiency-based measures
4. Include mutual obligations for greater administrative efficiencies
5. Include terms that promote and measure improved clinical communication
between the hospital and other providers
6. Include terms that relinquish the right to contest the public release of these
terms by state officials
10
II. OHIC Affordability Standards
Starting Point
 Delivery system reform is needed – rate review is not enough
 Health Plans are statutorily required to have policies that promote
affordability, quality and access. Previous efforts unsatisfactory
 Carriers can do some but coordinated, multi-payor efforts are required
Process
 OHIC’s Health Insurance Advisory Council.
 Grant-funded consulting staff, expert opinion and health services research.
 Off line work with health insurers
Result : “Affordability Standards”
 Consequences tied to rate factor review -- rate factor review process as the
affordability “gate”.
 Achieve alignment between plans and priorities in the community
11
OHIC Affordability Standards

Health plans will increase the proportion of their medical expenses spent
on primary care by five percentage points over the next five years. This
money is to be an investment in improved capacity and care coordination, rather
than a simple shift in fee schedules.

As part of the increased primary care spend, health plans will promote the
expansion of the CSI-Rhode Island project or an alternative all payer
medical home model with a chronic care focus by at least 25 physicians in
the coming year and

Health plans will promote EMR incentive programs that meet or exceed a
minimum value.

Health plans commit to participation in a broader payment reform initiative
as convened by public officials in the future.
12
(
Value of Primary Care Spend Target
Incremental Value of
Increase (beyond
inflation):
>$150 million over five
years
13
Key Challenges
1.
Defining Investment Priorities
Where do we want to spend it? How much direction to give the
carriers
2.
Monitoring Plan Investments
How best to hold carriers accountable to the targets?
3.
Evaluation: System Outcomes
Inpatient Readmissions, ER visits, Primary Care Supply and System
Costs
4.
Visibility
How to increase statewide visibility of standards?
14
Challenge # 1.
Defining Investment Priorities
Total ($)
Portion
Category
$5.0 M
46%
Patient Centered Medical Home
$1.2 M
11%
Electronic Medical Records Incentives
$0.8 M
8%
FFS Fee Improvements
$0.6 M
5%
Loan Repayment
$3.4 M
31%
Other, carrier-specific investments
$11.0 M
100%
Total Year 1 Planned Investment, 2010
15
Challenge # 2.
Monitoring Plan Investments
A Moving Target
Revised 2010 Spend Requirements to account for membership loss (Combined, both carriers)
Based on 2009 actual spend data, as reported by the carriers in April, 2010
2010 Projection (old)
2010 Projection (new)
2010 Key Assumptions
Total Medical ($M)
$
978
Primary Care Spend @
Baseline
$
Required Spend
Investment Required ($M)
2010
Key Assumptions
7.4% trend, 2009 base year
9% trend, 2008 base year
$
806
55
5.6% of total medical
$
45
5.6% of total medical
$
66
6.6% of total medical
$
53
6.6% of total medical
$
11
$
8
We estimated that achieving 6.6%
Primary Care Spend in 2010
required carriers to invest $11M in
Primary Care
After adjusting for 2009 base data,
achieving 6.6% Primary Care Spend in
2010 only required carriers to invest $8M
in Primary Care, mostly due to the
substantial, one-time decline in
enrollment
16
Challenge # 2.
Monitoring Plan Investments
Requires frequent and detailed review
2010 Carrier Investment Plans: Latest Forecast*
UHCNE
BCBSRI
Required Investment $1.5 M
Required Investment $6.5 M
Oct. 09 Fcast
Oct. 09 Fcast
Patient Centered Med.Home $ 4,535,000
(all-payor and plan specific)
Electronic Medical Records
$ 905,000
Incentives
$ 455,000
FFS Fee Improvements
$ 500,000
Loan Repayment
Other, carrier specific investments
(BH/PC integration,
Specialist/hosp delivery
$ 2,700,000
system improvements,
PforP, ACOs)
Patient Centered Medical Home
(all-payor and plan specific)
$
475,000 $
410,000
Electronic Medical Records (EMR)
Incentives
$
247,000 $
90,000
FFS Fee Improvements (e.g., vaccine
$
administation)
QTIAC requests (e.g., Loan Repayment) $
380,000 $
520,000
133,000 $
-
Other, carrier specific investments
(pay for performance, after hours
incentives, benefit changes, etc.)
665,000 $
50,000
$
425,000
$ 1,900,000 $
1,495,000
2009 Additional Primary Care Spend
Total
*
Apr 10 Fcast
$
Total
OHIC estimates based on carrier reporting and discussions. Highly preliminary estimates.
$ 9,095,000
June 2010 Forecast
$6,900,000
$320,000
$ 1,800,000
$ 0
-
$1,900,00
$10,920,00 (1)
17
Challenge # 3.
System Metrics are Key to This Effort
Process Measures
Outcome Measures
1. Primary Care Spend Percentage
-- Target vs. Actual
1.
Primary Care Physician Satisfaction
-- Annual survey
2. All-Payor Medical Home Initiative (CSI)
-- Number of sites
-- Total spend
2.
Primary Care Supply
-- Primary care provider count
-- Primary care share (PC/total providers)
3. EMR Incentive
-- Participating primary care providers
-- Bonus payments ($)
3.
System Efficiency Improvements
-- Hospital Use (Total, ACS)
-- Re-hospitalization
-- ER Use (Total, Preventable/Avoidable, ACS)
4.
Total Medical Trend
18
Affordability Standards: Current Status

Primary Care Spend
2010 Investments on target – over $8 Million investment in primary care
Working thru reporting, monitoring process – should run smoothly for 2011
Need to build stronger stakeholder engagement

CSI
Began in October 2008 -- 5 primary care practices with 27 providers
Expansion in place as of April 1 adding 25 providers
Initiative is well established, with broad stakeholder support.

EMR
Health Plans have incentive programs in place.
Flat take up. No coordination between them and with RIQI. Eclipsed by REC?

Hospital Payment Reform
Legislation suggested, did not pass
Rate Review Conditions – will they work?
All payor hospital payment study planned for fall/winter
19
The Case for Payment Reform
Hospital Payment Variation is Real
Case Mix Adjusted Inpatient Med/Surg Payments, Indexed to percent of Medicare fee fpr service
BCBSRI and UHCNE Fully Insured Payments, CY 2008
180%
167%
160%
140%
120%
127%
112%
113%
126%
121%
116%
100%
100%
104%
106%
96%
79%
80%
60%
40%
20%
0%
Rhode
Island
Lifespan
Miriam Kent County St. Joseph Women & Roger
Infants Williams
Care New England
South
County
Memorial Newport
Westerly Landmark
Average
Unaffiliated
20
In Closing…
 We have an active rate review process in Rhode Island. This process holds
carriers accountable, puts pressure on admin/profits – but does not, by itself,
address the underlying cost of care
 However, the rate review process provides a critical foundation and gating
mechanism for the affordability standards. We think this combination of rate
review and affordability standards may provide a path to cost containment.

Conditions of Rate Approval

Required Investments in Primary Care Infrastructure

Multi-payor collaboration/initiatives
 We need to continue to work on:

Monitoring and measuring

Stakeholder engagement

Hospital payment reform
21
For More Information
Any Questions: Contact Deb Faulkner, dtfaulkner@gmail.com, 401-486-3700
or go to
www.ohic.ri.gov
Rate factor review:
• http://www.ohic.ri.gov/2009%20RateFactorReview.php
• Conditions:
http://www.ohic.ri.gov/documents/Insurers/Regulatory%20Actions/2010_July_Rate_Deci
sion/2_%20Conditions%20Summary.pdf
Affordability Standards:
• Documented Standards:
http://www.ohic.ri.gov/Committees_HealthInsuranceAdvisoryCouncil_%20Materials%202
009.php
• Issue Brief:
http://www.ohic.ri.gov/documents/Committees/HealthInsuranceAdvisoryCouncil/affordabil
ity%202009%20/6_Issue%20Brief.pdf
22
Additional Resources
•
The Providence Journal on rate review conditions
http://www.projo.com/news/content/CURB_HOSPITAL_COSTS_07-0810_MNJ4HCV_v21.13150d4.html
•
Press release on rate review conditions
http://www.ohic.ri.gov/documents/Insurers/Regulatory%20Actions/2010_July_Rate_Decision
/1_Press%20Release%20Rate%20Factors%202011.pdf
•
Conditions of rate approval, 2011
http://www.ohic.ri.gov/documents/Insurers/Regulatory%20Actions/2010_July_Rate_Decision
/2_%20Conditions%20Summary.pdf
•
Health Affairs article: Affordability standards
http://www.ohic.ri.gov/documents/Committees/HealthInsuranceAdvisoryCouncil/affordability
%202010/HEALTH%20AFFAIRS%20ARTICLE%20-%20May%202010.pdf
•
Issue brief: Affordability standards
http://www.ohic.ri.gov/documents/Committees/HealthInsuranceAdvisoryCouncil/affordability
%202009%20/6_Issue%20Brief.pdf