• Medicare’s value-based purchasing initiative yields quality improvements

• Hawaii requires equal cost sharing for oral, intravenous chemotherapy
• North Carolina health plans must cover diagnosis, treatment of lymphedema
• New Hampshire requires health insurers to cover services delivered via telemedicine
• New Jersey mandates insurance coverage for autism, developmental disabilities
• New state-by-state report examines charges billed by out-of-network physicians

• Enrollment in consumer-driven health plans surpasses enrollment In HMOs
• 2010 increases in claims costs will be four times higher than salary increases
• COBRA enrollments double since subsidy was enacted
• Group says public option, not health insurance co-ops, will save costs for small businesses

Medicare’s value-based purchasing initiative yields quality improvements

Medicare’s value-based purchasing (VBP) initiative has improved performance in targeted quality measures among participating hospitals, physician groups, and individual and small group physician practices, the Centers for Medicare and Medicaid Services (CMS) has reported. The CMS said that its VBP initiative is designed to tie Medicare payments to performance on quality and efficiency as part of the agency’s effort to transform Medicare into an active purchaser of higher quality, more efficient health care.

Hospital quality. Medicare sponsors the hospital quality incentive demonstration (HQID) together with Premier, Inc., a national hospital quality measurement organization. The demonstration, which began in 2003 with hospitals in 38 states, was designed to test whether linking Medicare payment incentives to quality would improve the safety, quality, and efficiency of inpatient services.

HQID participants raised overall quality by an average of 17 percentage points over four years, based on their performance on more than 30 nationally standardized and widely accepted care measures for patients in five clinical areas–heart attack, coronary bypass graft, heart failure, pneumonia, and hip and knee replacements.

Physician group practices. Under the physician group practice demonstration (PGPD), physician groups earn incentive payments based on the quality of care that they provide and the estimated savings they generate in Medicare expenditures for the patient population that they serve. As a result of their efforts to reduce the growth rate in Medicare expenditures, five physician groups will receive performance payments totaling $25.3 million as part of their share of $32.3 million of savings generated for the Medicare trust funds in performance year three.

All ten of the physician groups participating in the PGPD achieved benchmark performance on at least 28 of the 32 measures reported in year three of the demonstration. Two groups–Geisinger Clinic in Danville, Pa., and Park Nicollet Health Services in St. Louis Park, Minn.–achieved benchmark performance on all 32 performance measures.

Over the first three years of the demonstration, the physician groups increased their quality scores an average of ten percentage points on ten diabetes measures, 11 points on ten congestive heart failure measures, six percentage points on seven coronary artery disease measures, ten percentage points on two cancer screening measures, and one percentage point on three hypertension measures.

Small and solo practices. Small and solo physician practices participating in the Medicare care management performance demonstration (MCMPD) received incentives to promote the use of health information technology to improve the quality of care for beneficiaries with chronic conditions.

In the first year of the MCMPD, nearly all of the 610 participating small and solo physician practices are being rewarded for performance on 26 quality measures. The CMS is awarding approximately $7.5 million in incentive payments to more than 560 practices in California, Arkansas, Massachusetts, and Utah. The average payment per practice is $14,000, but some practices earned as much as $62,500. Last year, the CMS paid more than $1.5 million in incentives for reporting baseline quality measures.

For additional information on value-based purchasing demonstrations, visit the demonstrations Web site at http://www.cms.hhs.gov/DemoProjectsEvalRpts/MD/list.asp.

Hawaii requires equal cost sharing for oral, intravenous chemotherapy

A new law in Hawaii will require all accident and health or sickness insurance policies that cover cancer treatment to provide payment or reimbursement for all medically necessary chemotherapy, including orally administered chemotherapy, at the same copayment percentage or relative coinsurance amount as applied to intravenously administered chemotherapy.

HMOs also will become subject to this requirement (Ch. 168 (S. 166), L. 2009, effective January 1, 2010).

North Carolina health plans must cover diagnosis, treatment of lymphedema

A new law in North Carolina will require health benefit plans to provide coverage for the diagnosis, evaluation and treatment of lymphedema. Coverage must include benefits for equipment, supplies, complex decongestive therapy, gradient compression garments and self-management training and education, if the treatment is medically necessary and provided by a licensed occupational or physical therapist, licensed nurse with experience providing this treatment, or other licensed health care professional whose treatment of lymphedema is within the professional's scope of practice.

Coverage may be subject to the same deductibles, coinsurance and other limitations applicable to similar services under the plan (Sec. 58-3-280, as added by Ch. 313 (H. 535), L. 2009, effective January 1, 2010).

New Hampshire requires health insurers to cover services delivered via telemedicine

New Hampshire has enacted a law that recognizes the delivery of medical care through telemedicine. Under the law, insurers offering health plans in the state may not deny coverage for health care services solely because they are delivered through telemedicine, if those services would be covered if provided through in-person consultation between the covered person and a health care provider.

"Telemedicine" means the use of audio, video or other electronic media for the purpose of diagnosis, consultation or treatment, but does not include the use of audio-only telephone or facsimile (Sec.415-J:3, as added by Ch. 259 (S. 138) L. 2009, effective October 14, 2009).

New Jersey mandates insurance coverage for autism, developmental disabilities

New Jersey Governor Jon S. Corzine has signed legislation requiring health insurers to provide diagnostic coverage for autism and developmental disabilities screening. The measure also mandates coverage of therapeutic services, including medically necessary occupational, physical and speech therapy. "We have made the diagnosis and treatment of autism spectrum disorders a top priority in New Jersey," Governor Corzine said.

When an insured or covered individual is under age 21 with the primary diagnosis of autism, additional coverage is required for medically necessary behavioral interventions based on the principles of applied behavioral analysis and related structured behavioral programs. Behavioral intervention coverage must be provided to the same extent as other medical conditions under the policy or contract, but may not be subject to limits on the number of visits and may not be denied because the treatment is not restorative. Through 2011, the maximum required benefit for behavioral intervention coverage will be $36,000 per year. Beginning on January 1, 2012, this amount will be subject to annual adjustments based on the Consumer Price Index.

According to the CDC, one in 150 children is diagnosed with an autism spectrum disorder. In New Jersey, it is about 1 in 94, the highest rate in the nation.

The law is scheduled to take effect 180 days after enactment, which is February 9, 2010 (Ch. 115 (A. 2238), L. 2008, NJ Governor's Office Press Release, August 13, 2009).

New state-by-state report examines charges billed by out-of-network physicians

America's Health Insurance Plans (AHIP) has released a report outlining the charges billed by out-of-network physicians in the 30 largest states by population. The report, The Value of Provider Networks and the Role of Out-of-Network Provider Charges in Rising Health Care Costs, is "designed to illustrate the value of provider networks and a growing problem faced by consumers who want affordable, meaningful access to out-of-network providers," according to AHIP.

For example, the report lists fees billed and Medicare-allowed charges for lower-back spinal fusion in a variety of states, including these:

• In New York, out-of-network physicians billed $46,250, or 2,669% of the $1,732.36 allowed Medicare charge;
• In California, out-of-network physicians billed $36,000, or 2,143% of the $1,680.24 allowed Medicare charge;
• In Connecticut, out-of-network physicians billed $26,881, or 1,709% of the $1,572.95 allowed Medicare charge;
• In Illinois, out-of-network physicians billed $19,065, or 1,329% of the $1,434.08 allowed Medicare charge; and
• In North Carolina, out-of-network physicians billed $13,957, or 1,025% of the $1,361.47 allowed Medicare charge.

According to the report, "Consumers who are charged exorbitant fees by out-of-network providers incur additional costs because the protection against balance billing generally does not extend to services provided out-of-network. This detracts from the ability of health plans to offer affordable access to out-of-network providers for those consumers who want the advantages of a network, but also maintain the option to go out-of-network if they choose."

Insurers typically reimburse for services from out-of-network providers at a significantly lower rate than they reimburse network providers. In addition, out-of-network providers are not bound by contract to accept an insurer's reimbursement as payment in full.

"As policymakers pursue health care reform, we encourage them to look at how much is being charged for services, particularly since higher charges don't mean high quality of care," said AHIP President and CEO Karen Ignagni. "With the nation facing the crushing burden of rising medical costs, all stakeholders should be focusing on constructive ways to bring costs under control."

The survey was conducted for AHIP by Dyckman & Associates, a Washington, D.C.-based firm specializing in health care consulting and litigation support services for the health care industry. For more information, visit http://www.ahipresearch.org/ValueofProviderNetworksSurvey.html.

Enrollment in consumer-driven health plans surpasses enrollment In HMOs

Enrollment in consumer-driven health plans (CDHPs) has surpassed enrollment in HMOs, according to the United Benefit Advisors’ (UBA) 2009 UBA Health Plan Survey. The survey includes information for 17,655 plans from 12,316 employers. UBA is a network of 140 independent employee benefits advisors. UBA said that its survey focuses on reporting results that are applicable to the small to midsize companies that represent the overwhelming majority of the nation’s 5 million-plus employers, with a mix of larger companies in proportion to their prevalence nationally.

CDHPs grew at a rate of 33.9% this past year and now cover more employees (15.4%) than HMO plans (13.6%).The largest concentration of CDHPs (23%) was in the Northeast region, followed by the North Central region (20.1%).

The average cost increase for all CDHPs at 6.3% was lower than the 7.3% average cost increase for all plan types. The average employer contribution to health reimbursement arrangements (HRAs) that typically accompany participating employees’ CDHPs was $1,310 in 2009 (up from $1,209 in 2008) for a single employee and $2,502 for a family (up from $2,274 in 2008).

The 2009 UBA Health Plan Survey will be available after November 1. More information can be found at http://www.UBAbenefits.com.

2010 increases in claims costs will be four times higher than salary increases

The medical plan cost trend for 2010 is projected to average more than 10%, more than four times greater than the annual increase in average hourly earnings, according to the 2010 Segal Health Plan Cost Trend Survey. For high-deductible health plans, the projected cost trend is nearly 12%. The Segal survey, conducted during May and June, received 80 responses from managed care organizations, health insurers, pharmacy benefit managers and third party administrators.

Segal defined “trend” as the forecast of per-person claims costs, considering factors such as price inflation; utilization; government-required benefits; and new treatments, therapies, and technologies. The trend can be affected by demographics and changes in plan design and employee contributions.

The trend for PPOs and point-of-service HMOs was lowest in the Midwest (9.5%) and highest in the Northeast (10.9%). For PPOs, 64% of respondents expected trend rates ranging from 10% to 14.9%, while 32% anticipated rates of less than 10%. More than three-fourths (77%) of respondents anticipated the effect on trend rates of compliance with the Mental Health Parity Act of 2008 at 1% or less. The dental PPO trend was projected at 5.5%.

The trend for prescription drugs is expected to continue to decline to 9.1%. The trend rate for specialty/biotechnology drugs is expected to be 17.8%. For Medicare Advantage plans, the trend was projected at 9.8% for fee-for-service plans and 7.7% for HMOs.

Segal observed that the primary driver of trend rates is price inflation—6.1% for PPOs, 5.8% for HMOs, and 6.4% for prescription drug plans. In contrast, utilization is the primary driver of trend rates for physician services (4.6%).

A comparison of projected and actual trend rates for 2008 revealed a nearly one percentage point higher projection for PPOs and HMOs.

For more information, visit http://www.segalco.com.

COBRA enrollments double since subsidy was enacted

A new analysis from Hewitt Associates indicates that COBRA enrollments have doubled since the government enacted a new subsidy to make health insurance more affordable to millions of laid-off Americans).

According to Hewitt, more than 14 million workers are now eligible for the COBRA subsidy under the American Recovery and Reinvestment Act of 2009 (ARRA). Hewitt examined the COBRA enrollment activity for 200 large U.S. companies representing 8 million employees and found that from March 2009 to June 2009, monthly COBRA enrollment rates for Americans eligible for the subsidy averaged 38%, up from 19% for the period from September 2008 through February 2009.

Under the original COBRA legislation, involuntarily terminated workers were required to pay up to 102% of the health care premium to extend coverage. According to Hewitt data, this translates to approximately $8,800 a year in COBRA health care costs for the average worker. Under ARRA, eligible workers receive a nine-month subsidy that leaves them responsible for paying only 35% of the COBRA premium, or about $3,000 a year. Hewitt’s research shows that on average, active workers with employer-sponsored health coverage pay 22%of the premium cost, or $1,900 a year.

“The COBRA subsidy significantly reduces the cost of health care coverage for workers who were laid off. However, the average American may still find it difficult to pay for this benefit when they have less income coming in, which is perhaps why enrollment numbers didn’t jump higher,” said Karen Frost, Hewitt’s health and welfare outsourcing leader. “It’s possible these laid off workers are simply seeking coverage with a new employer or through their spouse’s employer. Unfortunately, it’s also likely that some are just foregoing health insurance altogether.”

For more information, go to http://www.hewittassociates.com.

Group says public option, not health insurance co-ops, will save costs for small businesses

Consumer Watchdog (CW) points out that the health insurance purchasing co-ops proposed by Sen. Kent Conrad (D-ND) and several Senate conservatives have been tested and largely failed throughout the United States. "History shows they would not have the market clout to leverage discounts and good policy choices with health insurers," advises the nonpartisan consumer advocacy organization in a statement on August 18, 2009. "Such co-ops could even become a path to gutting state consumer protection laws."

It's a matter of clout. Because they were unable to amass enough purchasing power to leverage better prices from the health insurance industry, co-ops have largely failed to provide health care savings for small businesses and the self-employed, CW explains (citing Elliot K. Wicks, Health Insurance Purchasing Cooperatives, Issue Brief, The Commonwealth Fund, November 2002). Health insurers are hostile to co-ops and have been free to ignore to them and refuse to sell them coverage, according to CW. This hostility and neglect has also prevented co-ops from offering an adequate variety of plans with good benefits to attract a sufficiently large group of members.

The state-based or regional co-op health plans, as described by Conrad, "would remain beholden to for-profit insurance companies for provision of coverage," CW says. On the other hand, the proposed "public option" would permit business and individuals and small businesses "to bypass the private insurance market altogether, if they chose, and avoid wasteful administrative costs and profits that are ten times greater than administrative costs of public health plans like Medicare," according to CW (citing Jacob S. Hacker, Ph.D., Case for Public Plan Choice in National Health Reform, Institute for America's Future & U.C. Berkeley School of Law, December 2008).

A health co-op would need 25,000 members to be financially viable, and at least 500,000 members to negotiate effectively with health care providers, according to proponents (Robert Pear and Gardiner Harris, Alternate Plan as Health Option Muddies Debate, New York Times, August 17, 2009). But CW notes that, as described in the 2002 Commonwealth Fund report, earlier co-op experiments failed for various reasons that were all related to lack of clout:

• The Florida Community Health Purchasing Alliances enrolled 92,000 people when enrollment peaked in 1998, had increasing difficulty attracting any but the smallest employers and gradually found themselves losing health insurers. As a consequence, enrollment also fell, and the purchasing alliance ceased operations in 2000.
• The Texas Insurance Purchasing Alliance, begun in 1994, never reached the enrollment levels of the Florida effort, covering only about 1,000 firms and 13,000 people at its height. Difficulty in attracting employers led to the withdrawal of insurers, and the Alliance governing board ultimately decided that the operation was not viable and closed it down.
• The Alliance in Colorado was the most recent failure. Established in 1995, the Alliance closed in the summer of 2002 after one of its three health plans withdrew from the state small-group market, a second capped enrollment, and the last decided to stop participating.

CW also points out that a Government Accountability Office report in 2000 reached similar conclusions (Cooperatives Offer Small Employers Plan Choice and Market Prices, Government Accountability Office, March 2000, http://www.gao.gov/archive/2000/he00049.pdf).

Eliminating state insurance regulation. Some lawmakers, led by Sen. Mike Enzi (R-Wyo), view co-ops as not just a weak pseudo-reform, but as a "top prize" for insurance companies - "a vehicle to avoid state insurance regulation," according to the consumer advocacy organization. State co-ops would have been exempted from state consumer protection laws under similar plan authored by Enzi in 2006, CW says. "As a result, consumers would lose benefits such as a woman's right to visit an OB/GYN, screenings for cervical and prostate cancers, newborn care, bans on 'drive thru' deliveries, and guarantees of independent medical review if an insurer denies coverage for a medically necessary treatment," CW warns. Enzi's bill (S.1955), like Conrad's co-ops, "was touted as a way to insure more people but would in fact have eroded existing coverage for those who already had health insurance," CW says.

Burden shifted to middle class. All of the bills being considered by considering require Americans to buy private insurance policies, the consumer advocacy organization notes. "The fragmented co-ops, with a few possible large-state exceptions like California, would not be capable of protecting their customers from the worst insurance company abuses, including double-digit premium increases and other steady cost-shifting onto the middle class," CW opines. "Any effort by states to band together in regional alliances would raise a demand by insurers to be exempted from any state patient protections or controls."

According to the consumer advocacy organization, only a national public option would possess the clout required to bargain with providers and bypass insurance companies altogether. Consumer Watchdog's fact sheet on health insurance co-ops is available at http://www.ConsumerWatchdog.org/resources/Co-Op_Factsheet.pdf.