The current provider contract between Cigna-HealthSpring and Crozer-Keystone Health System (CKHS) is set to expire on April 30th, 2014 and it appears that the sides are fairly far apart in their negotiations.  It’s not uncommon, however, for these contract disputes to run right up to the last minute, however, CKSH has posted a message on their website.

CKSH has provided services to a relatively small percentage of Cigna-HealthSpring members in the past 12 months, roughly 4,300 of their 70,000 members.  Cigna-HealthSpring payments represent about 4% of CKSH’s revenues.

Cigna-HealthSpring commented that they are keeping lines of communication open with CKSH.

It’s not 100% clear to me if this impacts primary care doctors and specialists, or only the CKSH facilities.  In the letter to Cigna-HealthSpring members, CKSH seems to indicate that the doctors are part of the termination (“our physician practices’ participation with Cigna HealthSpring is also terminated effective April 30, 2014.”), however, Cigna-HealthSpring’s perspective was that the PCP’s and specialists were not a part of the contract ending 4/30/14.

The story is also being followed by www.philly.com (Philadelphia Inquirer) and by the Delaware County Daily Times.


MedPac issued it’s 2014 report to Congress (click link to view entire report) on the state of the Medicare system along with it’s recommendations.  MedPac is the Medicare Payment Advisory Commission which is a non-partisan commission which offers Congress updates and recommendations on the Medicare program.  Generally, I focus on the Medicare Advantage Program report which is in Chapter 13.  The entire document is almost 400 pages long, but I recommend agents take a little time to at least read chapter 13 (it’s about 25 pages with a number of graphs).

Here is a brief summary of my notes from Chapter 13:

1.  Enrollment states.  You will find the enrollment stats on page 324.  MedPac looks at the growth of the MA program from November of one year to the next.  From 11/12 through 11/13, the overall MA program grew by 9% to 14.5 million.  This includes both individual and group MA plans.  All types of plans grew in excess of 9% (HMO, Local PPO, Regional PPO, SNP, Employer Group) with the exception of Private Fee for Service, which shrank by about 26%.

2.  Payments to MA relative to Medicare Traditional FFS.  In 2014, MedPac estimates MA will be paid approximately 106% of traditional Fee for Service Medicare.  This is the same as they projected for 2013, however, they believe their estimate for 2013 was too low due to them overestimating the cost of FFS Medicare.  Medicare costs for traditional Medicare came in lower than expected.  The entire table that breaks out the payments can be found on page 331.  The most efficient plans continue to be the HMO’s with an average bid of 95% of FFS Medicare.  The least efficient continue to be PFFS plans with an average bid of 110% of FFS Medicare.

HMO’s received the smallest payments at 105% of FFS Medicare.  PFFS receive the highest payments at 111% of FFS Medicare.  Interestingly, Local PPO’s and Employer Groups were not far behind at 110% and 109%, respectively.  Of note, a good portion of MedPac’s comments were about changing the bidding process for Employer Group MA (more on that later).

3.  Overall Payments.  MA plans were paid about $146 billion to cover A and B services.

4.  MA Availability.  About 84% of Medicare beneficiaries had access to a zero premium plan which included prescription drugs.  This is down slightly from the peak of 90% in 2011.  This percentage has been dropping by 2% every year since 2011.  The availability of Coordinated Care Plans (HMO’s or PPO’s, or CCP’s for short) has increased every year as MA is trying to get more efficient.  In 2005, on about 67% of Medicare beneficiaries had access to a CCP.  In 2014, that percentage grew to 95% (the same as 2013).

5.  Growth Relative to Overall Medicare.  The growth of MA outpaced the total Medicare system.  The entire Medicare system grew by 4% relative to the 9% growth in MA.  Therefore, the percentage of Medicare beneficiaries in MA plans increased from 27% to 28%.

6.  Breakout of Star Bonus Demonstration Program.  I don’t recall seeing the impact of CMS’ Demonstration Program for Star Ratings, however, MedPac provided a little insight on page 333.  In 2014, CMS will pay out $4.5 billion in bonus payments, but 2/3 of this total is related to the Demonstration program which ends in 2015.  Therefore, there is approximately $3 billion in bonuses paid in 2014 which will cease in 2015 (as far as we know today).

7.  Recommendation on Employer Group Plans.  MedPac explains the bidding process on pages 333 through 335 which highlights how Employer Group plans are bid.  Looking at historical data, Employer Group plans bid at 95% of the benchmark while individual plans bid at about 86% of the benchmark.  The rationale is that Individual plans need to bid lower in order to provide additional benefits to attract Medicare beneficiaries to their plans.  The Employer groups essentially have a “captive audience” so they attempt to bid in a way to maximize revenue (as close as possible to the benchmark while still providing actuarial evidence to support such a high bid).  MedPac is recommending that Congress should direct CMS to determine payment options for Employer Group Medicare Advantage plans in a manner more consistent with individual (nonemployer) Medicare advantage.  This likely would result in reduced reimbursements for Employer plans, if enacted.

8.  Notes on Star Ratings.  MedPac noted that almost 1/3 of an MA plans star rating is attributable to the Part D benefit included in MAPD plans, however, the Part D reimbursement is only about 1/9th of the total.  This means that star ratings give three times the weight to the Prescription Drug component of an MAPD plan based on reimbursement.  There wasn’t a clear recommendation here, but MedPac mused that it might make sense to give more weight to areas that impact member health that aren’t Prescription drug specific.

9.  Inclusion of Hospice in Medicare advantage.  MedPac is recommending that Hospice be included in the Medicare advantage benefit package beginning in 2016.  Currently, Hospice is carved out of Medicare advantage whereas if an MA member goes on Hospice, the Hospice benefit is covered under original Medicare.

I copied this headline from the Washington Post, but I’m not sure that it’s entirely accurate!  The basis for the article is the 2015 CMS Advance Notice and Draft Call Letter.  The section the Washington Post is referencing is found on pages 118 through 121.  To me, it seems like CMS is contemplating proposing new rules as opposed to actually proposing anything concrete right now.

Mid-year changes to a provider network is a sticky issue and it seems that narrowing networks is a likely response to reduced funding in Medicare advantage, so I’m not sure this issue is going away anytime soon.  It’s very hard for an MA company to notify a Medicare beneficiary of possible cancellations since the very nature of these contract negotiations is that they often run right up to the last minute and, sometimes, into the “grace” period of contract terminations.  Certainly, there is brinksmanship on both sides of the table.  Too much transparency might cause undo concern for many Medicare beneficiaries.

On the other hand, an increase in the notification time from 30 days to 60 days when a termination does occur and communications on how to find an in-network provider might prove helpful.  I’ll continue to follow this as this will be an ongoing issue with Medicare advatnage.

Here is a link to the story from Politico.com.

I blogged about the changes that CMS was proposing last week.  Here is a link to that blog post.

CMS administrator Marilyn Tavenner sent a letter to Congress which acknowledged the concerns of all the stakeholders that argued against the changes to Medicare Part D and announced that CMS would not be moving forward with the proposed changes.

The two primary changes that CMS proposed that they will not be pursuing were the removal of immunosuppressives and antidepressives from protected class status and the requirement for Part D plans to allow pharmacies who agree to terms and conditions to be considered preferred pharmacies.

I filed my comments with CMS regarding their proposed rulemaking which would reduce the renewal commissions from 50% of initial commissions to 35%.  I have comments on the rulemaking with regard to agent’s commissions here and here and comments on the changes to the Part D drug benefit here.

Here is my comment:

These comments are in response to the Proposed Rule Making regarding compensation to external agents and brokers, specifically, the calculation of “Fair Market Value” of Medicare Advantage and Medicare Part D broker compensation.  As noted in the proposed rulemaking, Section 103(b)(1)(B) of MIPPA charges the Secretary with establishing guidelines to “ensure that the use of compensation creates incentives for agents and brokers to enroll individuals in the MA plan that is intended to best meet their health care needs.”  My understanding of CMS’ three primary goals of agent and broker compensation rules are (1) to ensure agents and brokers receive Fair Market Value compensation for the services they provide, (2) to ensure that there are not financial motivations for an agent or broker to “churn” their Medicare beneficiary clients and (3) to simplify the compensation structure to reduce the administrative and regulatory cost of implementing and monitoring the system to provide the maximum value to the Medicare beneficiary.  I appreciate the opportunity to give my comments to assist CMS in achieving these goals.

CMS is proposing to set the replacement and renewal compensation for all years at 35% of the initial compensation rate.  This would change the system from a 3-tiered system to a 2-tiered system which would simplify the administration of commission payment.  Additionally, this would ensure that there are not financial motivations to churn business.  However, the 35% rate for replacement and renewal compensation relative to initial commission rates does not reflect Fair Market Value.  In fact, there is empirical evidence to prove that the 35% rate is below FMV.

By definition, Fair Market Value is the price that a buyer of services is willing to pay (MCO’s) and what sellers of services (agents and brokers) are willing to accept for their services in an efficiently functioning market.  Given the size of the Medicare advantage market with over 100 entities acting as MCO’s and tens of thousands of insurance agents offering services, this market has sufficient competition to believe that the market is efficient and neither the buyer nor seller has monopolistic pricing power.

As noted in the proposed rulemaking, when CMS issued its 2014 Final Call Letter on April 1st, 2013, it addressed broker compensation for years 7+ by giving MCO’s the temporary option to pay renewal amounts for years 7 and beyond.  This action created a window into the Fair Market pricing of agents services.  Of the 15 MCO’s that my organization represents, 13 of the 15 companies set their renewal compensation for years 7+ at 50% of the initial rate.  The other 2 companies set broker compensation at 50% of the initial rate for years 7-10, so even in this minority of cases, the actuarial value would be higher than the 35% CMS is proposing.  For those minority companies that don’t feel it maximizes their efficiency to pay brokers at CMS maximum rates, they, of course, have the option to set their initial compensation at lower rates and even not to use brokers at all.

Additionally, the Affordable Care Act put into effect a Minimum Medical Loss Ratio (MLR) for MCO’s of 85%.  Given the fact that MCO’s are mandated to spend at least 85% of their revenue on the cost of care for Medicare beneficiaries, reducing the compensation to agents would have little or no benefit to the Medicare beneficiary.  In fact, Medicare beneficiaries could be harmed by setting agent compensation too low as agents would have less incentive to service their existing policyholder’s needs as Medicare advantage plans change benefits from one year to the next.

In summary, reducing the agent’s compensation from 50% to 35% does nothing to create incentives for agents and brokers to enroll individuals in the MA plan that is intended to best meet their health care needs.  It is less than the Fair Market Value that the Fair Market of MCO’s and agents dictated as Fair compensation for external agents.  It does nothing to improve the value proposition for Medicare beneficiaries (due to minimum MRL).  It may harm beneficiaries in reducing their access to agents who can assist them in finding plans to meet their needs.  For all of these reasons, I respectfully ask CMS to reconsider reducing broker compensation on renewals to 35% and instead allow MCO’s to pay brokers 50% of their Initial Rates for all years.

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The administration announced another delay in the ACA today.  This is from The Hill.  This will allow avoid the cancellation of health insurance policies until after the mid-term elections.


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