8/12/20201Chapter 6: Sales, Governance and AdministrationLearning Objectives•Understand the basic structure of governance and management in payer organizations•Understand the basic elements of the internal operations of payer organizations, including:•Information technology (IT)•Marketing and sales, including insurance exchanges•Underwriting and premium rate development•Eligibility, enrollment and billing•Claims and benefits administration•Member services, including appeal rights•Statutory accounting and statutory net worth•Financial management2Board of Directors •May be specific to a plan, may be pro-forma for a subsidiary of a larger company, etc.•Responsibilities:•Final approval of corporate bylaws•General oversight of the profitability or reserve status•Oversight and approval of significant fiscal events•Review of reports and document signing•Setting and approving policy•Oversight of the quality management program•In for-profit plans, responsibility to protect shareholders’ interests•In free-standing plans, hiring the CEO and reviewing CEO’s performance © P. R. Kongstvedt3123
8/12/20202Typical Key Management Positions•Chief Executive Officer/Executive Director•Chief Operating Officer/Operations Director•May be a separate position from CEO in large companies•If separate from CEO, the COO may also be the President•Chief Medical Officer/Medical Director•Vice President (or SVP or EVP) of Network Management•Chief Financial Officer/Finance Director•Treasurer•Chief Marketing Officer/Marketing Director•Chief Underwriting Officer•Chief Information Officer/Director of Information Systems•Corporate Compliance Officer4Typical Key Operational Committees•Quality Management Committee•Credentialing Committee•Utilization Review Committee•Pharmacy and Therapeutics Committee•Medical Grievance Review and Appeals Committee5Foundational Information Technology (IT) Systems•Key software functionality includes:•Benefit configuration•Employer group and member enrollment •Premium management•Provider enrollment, contracting and credentialing •Claims payment •Document Imaging and Workflow•Customer Servicing •Medical Management •Ability for two-way EDI with insurance exchanges, employers, state and federal government, members, providers, etc.6456
8/12/20203HIPAA Mandated Electronic Transaction Standards•HIPAA requires covered entities that conduct certain electronic transactions to use only ANSI X12N 5010 defined standards•ACA is creating new standards and requiring more standardization of implementation7TransactionStandardProvider Claims submissionANSI X12–837 (different versions exist for institutional, professional, and dental)Pharmacy claimsNCPDPEligibilityANSI X12-270 (inquiry)ANSI X12-271 (response)Claim statusANSI X12-276 (inquiry)ANSI X12-277 (response)Provider Referral certification and authorizationANSI X12-278Health care payment to provider, with remittance advice ANSI X12-835Enrollment and Disenrollment in health plan*ANSI X12-834Claims attachment (additional clinical information from provider to health plan, used for claims adjudication)ANSI X12-275 (not finalized at the time of publication), and HL7 CDAPremium payment to health plan*ANSI X12-820First report of injuryANSI X12-148 (not yet issued)* These are for voluntarily but not mandatory use by employers, unions, or associations that pay premiums to the health plan on behalf of members.Source: Compiled by author based on 45 CFR §160.920 and other sources at the Center for Medicare and Medicaid Services (CMS);Accessible at http://www.cms.govHIPAA Mandated Privacy and Security Requirements•HIPAA requires high levels of privacy and security for electronic information, to:•ensure the confidentiality, integrity, and availability of electronic PHI; •protect against any reasonably anticipated threats or hazards to the security and integrity of electronic PHI; •protect against any reasonably anticipated uses or disclosures of electronic PHI not permitted by the HIPAA privacy rules; and •ensure compliance with the above by its workforce (Source: Federal Register, 45 CFR §164.308)•There are eighteen standards for HIPAA security rules:8Security Management Process Assigned Security ResponsibilityWorkforce SecurityInformation Access Management Security Awareness and Training Security Incident ProceduresContingency PlanEvaluationBusiness Associate ContractsFacility Access ControlsWorkstation UseWorkstation SecurityDevice and Media ControlsAccess ControlAudit ControlsIntegrityPerson or Identity AuthenticationTransmission SecuritySource: Federal Register, 45 CFR §164.308(a & b), 45 CFR §164.310(a-d); 45 CFR §164.312(a-e)Standardized SBC/SOC•ACA requires all health plans, including self-funded, must provide a standardized Summary of Benefits and Coverage (SBC), also called a Summary of Coverage (SOC) to all current and prospective enrollees •The SBC/SOC to be done in a uniform and common format that defines the number of pages, the exact information that must be provided, and even the size of the font •The SBC does not replace the far more detailed Evidence of Coverage (EOC), sometimes called a Certificate of Coverage or Certificate of Insurance9789
8/12/20204Marketing vs. Sales•Marketing and sales are related but distinct activities•Marketing•Focus is on overall growth goals, strategies and tactics, management of the process•Compensation combination of salary and overall growth goals•Role in Insurance Exchange as well as outside exchange•Sales•The actual process of selling the plan’s offerings in the marketplace through any distribution channel•Compensation usually heavily weighted towards achievement of sales goals•No real role in the insurance exchange10© P.R. KongstvedtFundamental Elements of Marketing•Brand Management•External Communications and Public Relations•Advertising•Employer versus consumer advertising•Collateral texts: outdoor, direct •Market Research•Lead Generation•Sales Campaign Support•Heavily regulated for individual and small group market through the Exchange11Distribution Channels by Market Segment12101112
8/12/20205Health Insurance Exchanges…•ACA created state-based American Health Benefit Exchanges and Small Business Health Options Program (SHOP) Exchanges, administered by a governmental agency or non-profit organization, through which small businesses with up to 100 employees can purchase qualified coverage•Separate exchanges for individuals to access coverage•Permit states to allow businesses with more than 100 employees to purchase coverage in the SHOP Exchange beginning in 2017•States may form regional Exchanges or allow more than one Exchange to operate in a state•Feds operate exchanges in states that refused to build them•Office of Personnel Management to contract with insurers to offer at least two multi-state plans in each Exchange. At least one plan must be offered by a non-profit entity•Creation of plan rating systems similar to that used in Medicare Advantage13Health Insurance Exchanges (cont.)•Brokers still allowed to operate in this market segment for health•Exchanges do not prohibit a non-Exchange market for individual and group coverage, but rates must be the same if sold both in and outside of the Exchange•Require the Office of Personnel Management to contract with insurers to offer at least two multi-state plans in each Exchange. At least one plan must be offered by a non-profit entity•Each multi-state plan must be licensed in each state and must meet the qualifications of a qualified health plan•Members of Congress and congressional staff may only enroll in either plans created under ACA (e.g., CO-OPs) or in plans offered in Exchange –but this also required a “fix” because ACA as written did not allow of an employer contribution to coverage purchased through the individual exchanges•Two-way data exchange requirements are huge14© P.R. KongstvedtActuarial Services•Actuaries analyze the data and predict costs, adjusted for•Trend•Utilization•Costs•Benefits design•Behavioral shift •Distribution amongst different providers with different cost profiles•Actuaries generally do not create the rates, but only model costs•Large payers have their own, smaller and mid-sized plans use actuarial consulting firms15131415
8/12/20206Rating and Underwriting•Underwriting has had two distinct but related meanings:•Medical underwriting referred to using an individual’s or small group’s medical history to determine whether to offer coverage at all•General underwriting includes gathering of information to assist in the development of premium rates•Underwriters use the actuarial data and other factors to calculate rates•Three types of premium rating:•Community rating•Experience rating•Premium equivalent or imputed premium rates•Type of rating only affects the calculation of the base rate, not the mechanics of creating actual premium rates•Community rating requires the same base rate for all, though may be different for all individuals vs. all small groups•Experience rating uses base rate from actual costs of the group•Premium equivalent is calculated just like experience rating for the base rate16Rating and Underwriting in the Individual and Small Group Markets under the ACA•Extension of dependent coverage to age 26•Prohibition on rescissions except in cases of outright fraud•Prohibition of preexisting condition exclusions and coverage rescissions•Lifetime and annual policy coverage limits prohibited•Require first-dollar coverage for preventive services•Minimum medical loss ratio (MLR) of 85% for large group and 80% for individuals and small groups –applies only to insured business, not self-funded (no premiums)•Insurers required to guarantee availability and renewability to individuals and groups.•Insurers not allowed to use health status as a rating variable•Only the following will be allowed:•Age related pricing variations are limited to a maximum of 3 to 1.•The number of people covered under the policy (e.g., “single” vs. “family” coverage).•Tobacco use (except rates may not vary by more than a ratio of 1.5 to 1)•Other provisions such as out-of-pocket cost limitations based on income, etc.•Requirement to include Essential Health Benefits at one of four different coverage levels•Premium risk-adjustment mechanism for individual and small group markets•Beginning in 2018, impose an excise tax of plans with premiums that exceed a certain level17© P.R. KongstvedtThe ACA’s Four Coverage TiersWhat’s in YourWallet?•Allows for 40% swing in cost sharing between Platinum and Bronze plan designs•Coverage levels based on in-networkcosts for all but emergency care (defined via “prudent layperson), not billed charges•Coverage based on actuarial equivalency, so may be spread around benefits, except cannot have different cost-sharing for MH/BH than for Med/Surg.•Room to futz with benefits as long as cost sharing ends up where it’s supposed to18•High deductible plan with preventive services and limited office visit coverage for the under-30s161718
8/12/20207Eligibility in the Commercial Market•Eligibility in the commercial (non-Medicare/Medicaid) market may be thought of in four categories:•Eligibility in Employer Sponsored Group Benefits Plans•Eligibility changes based on life events•Individual eligibility•Eligibility for subsidized coverage•Employer sponsored coverage•Must be full time•Dependent coverage through employee•Must first enroll during defined periods such as upon employment following a defined number of days after they start working19Life Events and Eligibility Options[Put Table 6 –2 here]© P.R. Kongstvedt20Life Events and Eligibility Options (cont’d)[Put Table 6 –2 here]21192021
8/12/20208Elements of Claims Complexity•Multiple Lines of Business•Provider Payment Rules•Sophiscated Px& DxCoding•Unbundled Claims•Referral/Authorization Rules•Government Mandates•Medicare/Medicaid Standards•Other Party Liability•Cost Sharing Features•Benefit Plan Variations•Multiple Lines of Business•Rules and Regulations of Exchange•Tracking MLR for Groups and Individuals •Value Based Benefits•New Payment Models22Claims Operational FunctionsThe modern claims capability is the set of operational functions within the payer organization that together process claims from receipt to issuance of payment and/or Explanation of Benefits (EOB). 23© PR Kongstvedt•Determination of Eligibility & Liability•Benefit plan in force on the date of service •Provider network and/or PCP on date of service•Coordination of Benefits (COB), Other Party Liability (OPL), and Subrogation•Benefits Administration•Applying the applicable schedule of benefits in force on the date of service•Requires CPT codes, Hospital Revenue Codes, HCPCS codes, ICD-10•Computation of cost sharing amounts•Application of appropriate medical policies•Application of appropriate provider payment schedules based on specific network at time of service, in vs. out of network, etc.•Management of pended claims, resubmissions, and duplicate claims•Adjustments and appeals•Detection of fraud and abuse24Core Claims Determinations in the Adjudication Process 222324
8/12/20209Role of Member Services and Consumer Affairs •Help members understand how to use the plan•Help resolve members’ problems or questions•Measure and monitor member satisfaction, administer surveys•Monitor and track the nature of member contacts•Allow members to express dissatisfaction with their care•Help members seek review of claims that have been denied or covered at a lower than expected level of benefits•Manage member problems with payments•Help address routine business issues •State health insurance exchanges may play a similar function, but unclear at this point25Formal Internal Appeals Process Requirements[Put Table 6 –3 here]26Formal External Appeals Process Requirements[Put Table 6 –4 here]© P.R. Kongstvedt27252627
8/12/202010Financial Management•Four primary responsibilities •Operational finance•Budgeting•Treasury function (managing cash and investments)•Reporting•Key concepts•Accrual accounting•Statutory Accounting Principles (SAP) vs. Generally Accepted Accounting Principles (GAAP)•Only cash and cash equivalents can be counted as assets, not things like IT systems, buildings, long-term investments, etc.•Statutory Net Worth requirements, using SAP•Calculation and management of claims reserves, including Incurred But No