Implementing Health Reform. On March 18, 2016, the Government Accountability Office (GAO) released a report on Federal Oversight, Premiums, and Enrollment for Consumer Operated and Oriented Plans (CO-OP) in 2015. The CO-OP program was created by the Affordable Care Act to establish non-profit consumer governed health insurance plans to increase competition and consumer choice in state health insurance markets. The ACA appropriated $6 billion in start up and solvency loans to establish the CO-OPs. Congress cut this amount several times, however, and in the end only $2.4 billion was available for loans and program administration.
For 2014 and 2015, 22 CO-OPs offered health coverage. As of January 4, 2016, 11 CO-OPs continued to offer coverage in 13 states. One CO-OP ceased to offer coverage during 2015 and eleven more did not offer coverage for 2016. Eight of the remaining CO-OPs are operating under corrective action and enhanced oversight plans.
The GAO report does not attempt to assign blame for failures in the CO-OP program. Indeed, it makes no recommendations to the Centers for Medicare and Medicaid Services (CMS) with respect to the program. Rather it describes in detail how CMS has overseen the CO-OP program and analyses CO-OP premium and enrollment data.
Oversight responsibility for the CO-OPs is divided between CMS and state insurance regulators. CMS was responsible for establishing program eligibility standards, loan terms, and policies; soliciting, negotiating, approving, and disbursing CO-OP loans; and monitoring CO-OP financial controls and compliance with statutory and regulatory requirements, loan agreements, and CO-OP policy and guidance. State regulators have been primarily responsible for licensing, monitoring financial solvency and market conduct, and approving premium rates and contract forms. CO-OPs are responsible for reporting to CMS issues that arose with state regulators and CMS has coordinated oversight activities with the states.
CMS oversight of the CO-OPs has evolved over the life of the program. Initially CMS assigned account managers to the CO-OPs and monitored the CO-OPs through bi-weekly teleconferences with key CO-OP stakeholders. CMS also required monthly, quarterly, and semi-annual reports on implementation progress and financial conditions. When problems were identified CMS imposed corrective action or enhanced oversight plans and offered technical assistance or withhold loan disbursements where appropriate.
As CO-OPs began enrolling members, CMS developed direct analysis tools to analyze various aspects of performance, including enrollment, net income, premium revenues, claims and administrative expenses, and financial information related to the risk mitigation programs and reserves. CMS also developed a risk assessment tool to assess risk considering seven factors: long-term sustainability, working capital, profitability, compliance with state requirements, compliance with CO-OP program requirements, CO-OP management, and CO-OP infrastructure issues. CMS enhanced reporting requirements to ensure that it was working with current data for its monitoring activities.
In November of 2014 CMS established a four step escalation plan for evaluating and responding to concerns raised by the CO-OPs. The four steps were issue identification, issue assessment, enforcement actions, and resolution. Four categories of enforcement actions were also identified:
- Minor, involving communication of concerns to the CO-OP;
- Moderate, involving written warning letters for more serious issues;
- Elevated, involving a corrective action or enhanced oversight plan; or,
- Greatest concern, where termination or withholding loan funds becomes a concern.
As of November 9, 2015, CMS had issued warning letters to 11 CO-OPs, taken elevated actions against 15 CO-OPs, and identified issues of greatest concern with respect to two CO-OPs. Eight of the CO-OPs for which CMS issued corrective action plans continue to operate.
CMS has also formed a committee to review the CO-OP program as a whole and is using an independent auditor to conduct another review of the CO-OPs focusing on market conduct issues such as claims handling, policy holder services, provider credentialing, consumer complaints, and marketing. The independent auditor will conduct focused reviews of CO-OPs where particular problems are identified.
When CO-OPs close, state regulators are primarily responsible for winding down operations. CMS works with the states to minimize negative effects on enrollees and recover program loan funding to the extent possible. In general member claims take priority to claims CMS may have against remaining CO-OP assets.
GAO also reviewed CO-OP premiums and enrollment in some detail. It found that in general CO-OP premiums were lower than average premiums in 2014 and 2015 in most markets. Enrollment in the 22 CO-OPs that offered health plans in 2015 was over 1 million, more than double the enrollment of a year earlier. Six of the 11 CO-OPs that failed in 2015 had failed to meet their enrollment projections and four of the CO-OPs that are continuing have not yet reached a program benchmark of enrolling at least 25,000 members.
The failure of over half the CO-OPs has been one of the major disappointments of ACA implementation. While CMS must surely share some of the blame for the these failures, the GAO report demonstrates that CMS did in fact have program oversight controls in place and did take action where it seemed warranted to address problems that developed over the course of the program.
CMS Releases Final Manual For Reconciliation Of Cost-Sharing Reduction Payments
On March 16, 2016, the Centers for Medicare and Medicaid (CMS) released at the REGTAP.info website (registration required) its final Manual for Reconciliation of the Cost-Sharing Reduction Component of Advance Payments for Benefit Years 2014 and 2015. The Affordable Care Act (ACA) requires insurers to reduce cost-sharing parameters such as deductibles, coinsurance, co-payments, and out-of-pocket limits for marketplace enrollees with incomes below 250 percent of the federal poverty level.
As demonstrated in a recent Commonwealth Fund Report these reductions make a substantial difference in the affordability of health care for low-income enrollees. The ACA requires the federal government to reimburse insurers that reduce cost sharing for the costs they incur in doing so.
During 2014 and 2015 cost-sharing reduction (CSR) reimbursements were made to insurers monthly on an estimated basis. Insurers that offered cost-sharing reductions during 2014 and 2015 must reconcile the CSR payments they received with those they should have received by April 30, 2016.
Insurers may reconcile using the “standard methodology,” which they will be required to use for 2017 and future years. Under the standard methodology, issuers re-adjudicate the actual complete set of claims for essential health benefits (EHB) incurred by enrollees who received CSRs as if those enrollees had been enrolled in the corresponding standard plan to determine the amount the enrollee would have paid in deductible payments, copays, coinsurance, and other out-of-pocket expenses (other than premiums and balance billing) in the standard plan.
The difference in the amounts actually paid by the plan for reduced cost sharing and the amount that it would have been paid under the standard plan equals the amount of cost-sharing reductions provided by the insurers, which must be reconciled with the cost-sharing reduction payments the insurer actually received.
In response to insurer claims that they did not yet have the technology to accomplish actual adjudication of claims, insurers are also allowed only for the years 2014, 2015, and 2016 to use simplified methodologies. Under these methodologies, insurers first calculate estimated or effective cost-sharing parameters for their standard plans and then apply these to total EHB claims to determine the value of cost-sharing reductions. Separate simplified methodologies are provided for health maintenance organization (HMO)-like and non-HMO-like plans. These methodologies can only be applied, however, for plans that have sufficiently large enrollments to make the determination credible. Smaller plans can apply a simplified methodology based on a plan’s actuarial value and annual limits on cost-sharing.
The cost-sharing reduction methodologies are explained in more detail in my post on the draft of the manual, posted in January. Although some changes were made in the final manual, the basic methodologies appear to not have significantly changed. The final manual also includes provisions addressing reporting, payment, and appeals.
The program for reimbursing insurers for cost-sharing reductions is currently being challenged in House v. Burwell, in which the House of Representatives claims that cost-sharing reduction payments cannot be made to insurers without a specific appropriation. A decision by the district court in this case is expected imminently. Should the court rule, however, that cost-sharing reduction payments cannot be made to insurers without a new appropriation, it is likely that the administration would immediately seek a stay of the court’s order to the district court and the court of appeals. It is unlikely that a court decision against the administration would stop the reconciliation process, although it could inject substantial uncertainty into the cost-sharing reduction program until the issue is sorted out by a higher court.