ACO Reinsurance is Available For Medicare Shared Savings Programs Track 2- Two Sided Model

The approach of spring signals new things; in the ACO world on April 1 those who have been selected to participate in track 2 Medicare Shared Savings Programs will be selected. Those who selected the Track 2 will be assigned a patient group. ACO’s can share in up to 60% of the savings, and conversely they can also share in the losses after a 2% minimum is achieved.

CMS will give a per year per member, or PYPM, factor which is based on past payment per member. This has been adjusted for trend, and there has been adjustment for the chronically ill hopefully assuring that the ACO does not get an inordinate amount of patients with known morbid diagnosis.

The math will look like this:

5000 ACO patients x $13,000 (cost that CMS feels it will pay this year per patient) = $65,000,000.

The $65 million will be the target budget, which the ACO will manage, and through coordination of care, EMR, preventative medicine, and other services the cost will be driven down and will improve patient morbidity. The ACO will share in the savings. If they blow the budget then they have to pay CMS a penalty based on a small percentage of the losses.

The ACO must post cash, bond, LOC, or reinsurance to assure there will be some security, so that if there are losses the ACO’s part is secured. ACO reinsurance presents some challenges since there are no off the shelf solutions. The ACO reinsurance company will have multiple risks to access. However it is not outside of the lexicon of provider stop loss; it is also called Managed Care Excess, provider stop loss reinsurance, or capitated stop loss.

Our company was an early pioneer of provider stop loss; over 20 years ago, we created many of its applications along with some bold reinsurance companies. Provider Stop Loss was designed to provide per patient protection for a capitated provider. There is a deductible per patient and once it is met, the reinsurer reimburses the provider. The ACO reinsurance policy will need this type of outlier protection so that if the patients that are assigned have significant shock loss there needs to be protection for the ACO. If they have a fair number, this could cause the ACO to exceed its budget and the reinsurance will be there as an outlier to reimburse the provider, who now owes its penalty for exceeding the budget. There is also an aggregate need, which would basically take the total budget and use this as the aggregate deductible and once it is exceeded by X% the ACO reinsurer pays the ACO the claim.

We at HCP National have been working with our reinsurance companies for some time to create an ACO reinsurance product which we have achieved. We also provide stop loss insurance, provider Stop loss, HMO reinsurance, ACO stop loss and malpractice insurance in CA, Malpractice insurance in Co, and Malpractice insurance in NY.

It’s April, so it’s time for another round of health insurance Q&A.

Q: Can my employer stop my health care when on comp?
A: Yes, unless you are on FMLA, CFRA or (CA Only; FEHL/PDL). The health insurer contract will often state that to be eligible for health insurance you must work full time and be actively at work. This may change with the healthcare reform, so stay tuned.

Q: Do FMLA and CFRA run concurrently in cases for pregnancy?
A: Yes they do, and if you are disabled from pregnancy and you are in CA you also have FEHA, which if combined with FMLA and CFRA can get you greater time off.

Q: Does the company need to retro FMLA when a manager did not tell an employee he/she may be eligible for FMLA?
A: This is a legal question, so we cannot respond. Contact a labor attorney because you may have a case.

Q: What does capitation mean in provider excess loss?
A: Capitation is where an HMO pays a group of providers a defined amount of money to provide healthcare. If the money they collect is not enough due to a catastrophic patient, then the group will hopefully have in place a provider excess loss insurance policy (AKA Provider Stop Loss, Managed Care Excess and Capitated Stop loss, or Stop Loss Reinsurance). The policy allows the group to submit any claims they have usually after $15K or $20K is paid by the group for reimbursement.

Q: What happens when my employer denies my FMLA in California?
A: He/she may be in big trouble if he/she were wrong to deny it. Call a labor law attorney. The employer and any manager or supervisor, who is involved, is liable if they were wrong to deny your leave.

Q: What is the difference between Standard versus Nonstandard Malpractice Insurance?
A: Standard insurance companies provide insurance for a certain risk profile: minimal claims, no medical board issues, and typical practice patterns. These insurers charge the least for coverage. The standard insurers have their rates filed with the department of insurance and they cannot charge more or less than those rates without COI approval. If a doctor does not fit the standard insurers underwriting requirements, then they are rejected in the standard market since the insurers cannot charge more than their filed rates.

Example: Dr. A is a general surgeon and a doctor who meets the standard underwriting. He would be charged $45K a year for his premium. However, Dr. B, another general surgeon, has lots of claims thus the standard insurer calculates that it should charge him $80K a year. But the standard insurer cannot charge $80K since the most it can charge is $45K, because these are the rates it has filed with the department of insurance. Thus it cannot accept Dr. B since he is a non standard risk. Now the non standard malpractice insurer does not want to be limited to filed rates so it does not file and does not have the oversight of the insurance department. It charges Dr. B $80K to insure him. The non standard market is the place for doctors, who cannot be accepted by the standard market. At HCP National we work to get all our clients into the standard medical malpractice insurers. While a doctor is stuck in the non standard market, we shop them every year to find them the best deal possible.

Q: How does stop loss insurance work and best practices?
A: One needs to analyze your past shock loss claims. If you have a group that has a 1000 or more employees, your experience should be somewhat predictable. Also, you should have past claims experience to set your specific level. In addition, see if you can reduce the stop loss premium by sharing some of the defined risk with the insurer (aggregating specific or retro).

Same for your aggregate, take your ECC (expected cash claims) plus trend, add 120%, 125% or 130% and compare it to what the insurer wants to charge. Also, hire a broker who has done millions of stop loss deals. Your broker’s job is to find the best deal on stop loss insurance for you and advise you on which stop loss levels to purchase.

HCP National Insurance is a provider of Stop Loss Reinsurance and Professional Liability Insurance. We are experts in small business insurance, health care insurance, D and O and E and O insurance, medical malpractice insurance, and all other insurance coverage. Our home office is located in Aliso Viejo, CA.

NOTE THE ABOVE IS A GENERAL DISCUSSION ABOUT HOW COVERAGES MAY WORK. YOUR INSURANCE POLICY AND ALL ADDENDA ARE THE ONLY AUTHORITY OF HOW YOUR COVERAGE WORKS. DO NOT RELY ON THIS ARTICLE AS AN EXPLANATION OF YOUR COVERAGE. HAVE YOUR ATTORNEY REVIEW YOUR ENTIRE POLICY WITH YOU TO DETERMINE WHAT IS AND IS NOT COVERED.