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.

Q. How do you get a medical leave of absence?

A. If you work for a company with fifty or more employees you may qualify for the Family Medical Leave Act, which typically allows up to twelve weeks for unpaid leave, or more if you are in the military. Also, your state may have its own laws that complement FMLA or add to this leave. Check with the Department of Labor in your state.

Q. What are the basic maternity leave laws?

A. This depends on the state, but the Family Medical Leave Act typically allows up to twelve weeks for unpaid leave. Also, your state may have its own laws that complement FMLA or add to this leave. Check with the Department of Labor in your state.

Q. What is the difference between claims-made & occurrence malpractice?

A. Claims-made covers you for claims submitted while the policy is in force, and also for a tort that occurred from the retro date through the date of the current policy. Occurrence policy covers claims that occurred during the policy period, and the policy does not have to be in force.

Q. Do IPA’s need medical malpractice insurance?

A. No, but they do need industry specific errors and omissions, and directors and omissions insurance that include vicarious malpractice, which cover the IPA’s risk for malpractice.

Q. What’s the difference between medical malpractice and errors and omissions?

A. They both cover errors; but, Medical Malpractice covers physicians for direct medical care and Errors and Omissions cover a business if it makes an error.

Q. What do statutory limits mean on a worker’s comp policy?

A. In many states you cannot sue an employer for more than $1 million by law, excepting gross negligence; therefore, it is a law, so the insurance policy models the statute’s limits.

Q. What is an excess worker’s comp policy?

A. It is for employers who self insure their worker’s comp. They buy excess or stop loss insurance. This insurance limits the employer’s exposure to unexpected total claims, or the specific claims of one person.

Q. What is excess of limit losses in workers compensation?

A. This can refer to an excess policy, which you can buy over a fully insured policy. Normally, workers compensation is limited to the statute, but if gross negligence can be proven then a claimant can sue for more than the limits of statute. If this happens, and the employer has an Umbrella policy, it may respond to the claim that exceeds the limit of the workers compensation policy.

Q. What is worker’s compensation aggregate retention?

A. This is the total amount of claims that you, the employer, pays until the insurer starts paying.

Q. How do you account for workers compensation aggregate stop loss deductible?

A. When you purchase aggregate stop loss for your self-insured workers compensation, the insurer will define upfront what the aggregate is. Your TPA, or third party administrator, should give you periodic aggregate reports showing the total amount of claims paid as they accumulate toward meeting the aggregate stop loss deductible.

Q. What are reinsurance triggers in healthcare?

A. It depends. Health insurers can have a defined dollar amount where they are laying risk off to a reinsurer. For example, a health insurer may buy a $100K of specific reinsurance coverage; thus, if one patient hits a $100K, then every dollar above that amount will be reimbursed by the insurer.
Q. What are the two types of stop loss in hospitals?

A. 1.Specific stop loss covers the hospital for claims that exceed a defined dollar amount for a patient. For example, the hospital for its self insured health plan, or its capitated members, can buy a $100K of specific stop loss deductible, which means the insurer will pay all claims that exceed $100K.

2. The other is aggregate stop loss which covers the hospital for all the claims it pays out in its self insured plan. For example, the insurer will cover you if your total claims paid in the year exceed $5 million. The insurer will reimburse the amounts that exceed that amount.

Q. Does a third party FMLA administrator have the right to contact your healthcare provider?

A. Yes, they have the right to ask for a second opinion, and/or have your doctor complete a form. But contacting them directly, I doubt, would be effective because the MD cannot talk with them due to HIPAA.

Q. What does it mean if your HMO sent a letter saying you have reached the catastrophic portion of your policy?

A. This can possibly mean that you have reached the maximum out of pocket limit.

Q. Can my employer stop my health care when on workers compensation?

A. Yes, they need to put you on COBRA. Health insurance requires that you are to actively working full time. When you are out on a worker’s compensation claim, you cannot meet this requirement.

Q. How can a company process employees’ medical claims?

A. The employer, if it is big enough, can take their claims in house and act as a TPA. Most companies do not do this anymore due to HIPAA concerns; most outsource this to an independent TPA.

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.

By William D. Dyer

Q: What is EPLI Insurance?
A: EPLI Insurance or Employment Practices Liability Insurance covers the employer for exposures relating to employment (i.e. discrimination, wrongful termination et al).

Q: What’s the difference between term life insurance and whole life insurance?
A: Term insurance is for people who do not want life insurance to be paid when they die of old age. It is normally purchased to cover a ten or twenty year period, like when someone with young children wants coverage in case they die prematurely. The premiums are cheap, but they skyrocket at the end of the term, so most people cancel the coverage. It seldom results in a claim, since most people who buy term buy it when they are young and healthy. If there is a term life death claim, it is usually the result of an accident or a premature death due to an unexpected disease.
Whole Life insurance is as the name implies, it covers your entire life. This insurance is for someone who wants coverage for their entire lifetime. Since this has a greater coverage period, it is more expensive. But on a net basis, whole life is cheaper than term life. When you pay your premiums, a small portion goes to the cost of the life insurance and most goes toward an investment. As you pay your premiums after twenty or thirty years, you likely will have double what you paid in premiums in the investment portion of the policy, called cash value. You can use the cash by borrowing it, or you can leave the cash alone, and it will likely (depending on the design) pay for your premiums for the rest of your life.

Q: What is the average cost of malpractice insurance?
A: We get this question all the time, and it depends on which state, specialty, the year of the retro date and the doctor’s claims. If you want a ballpark, in CA, a non invasive specialty, fully mature, with no claims is $10K a year, and an invasive specialty is $45K. If it is NY, multiply those numbers by three or four.

Q: How much is the most basic professional liability insurance for a small business?
A: It’s tough to say because it depends on what they do for a living, but a ballpark small business is $5K to $10K a year.

Q: What is Personal Injury Medical Malpractice?
A: This is a new insurance that allows the patient to buy life, and a product similar to AD&D for claims arising from complications related to a recent surgery. For example, if you die from complications of a surgery, then your family will get a death benefit. If you lose your limb(s) or other functions, then you get a benefit. This new insurance may lower the chances of claims against the surgeon. First, if a family or patient suffers a loss and they get paid under this policy they may be less likely to sue the doctor since they received compensation. Also, this may help negate a patient or family’s lawsuit claim alleging that the doctor did not provide adequate information regarding the surgical risk, and therefore never obtained informed consent. How would a patient claim that he/she did not know the risks if he/she buys insurance to protect himself/herself from the surgical risk?

Q: FMLA versus workers comp?
A: FMLA is the Family Medical Leave Act. This provides job protected leave for non job related illness or leave to care for an immediate family member. Workers Comp provides benefits for job related injury disability or death.

Q: Are most ASO also stop loss?
A: ASO is administrative service only. These are the services that the employer needs to self-insure its health insurance; the business that performs this is called TPA, or third party administrator. ASO includes claims processing, utilization review, case management, PBM-pharmacy benefit manager, and PPO.
Stop Loss is the insurance that the employer buys to cover himself/herself for catastrophic claims that exceed a defined dollar amount (i.e. $50K or $100K). He/she would also purchase Aggregate Stop Loss Insurance. This covers the employer if his/her total annual claims exceed a defined amount of money. So do all ASO plans have stop loss? Not always. There are large employers who have thousands of covered employees that may feel they do not want to purchase stop loss, since their risk is very predictable. When it is not predictable, they have the necessary funds to cover bad years.

Q: Why do you have to issue a broker of record to a broker?
A: This is done when you want to hire a new broker to handle your insurance. Perhaps you currently have the best deal on your insurance, but you find another broker who provides more services than your current broker, and you want to change. You simply sign a letter addressed to all your insurers with your policy number which states, “I am appointing broker X as my new broker and please pay him/her the normal commissions that are being paid in relation to my insurance.” You should think about why you are changing brokers. Some clients sign this without knowing what it means or they think it is no big deal. It means the person who is handling your insurance now is going to be fired. It is similar to firing an employee. You would not do this for any particular reason. Also, do not do this midway into the policy if it is for group benefits. Inform your current broker, and make the change thirty days prior to renewal. Since the current broker did the work of shopping for all your coverage for free, and he/she is paid a monthly commission throughout the year, if you fire him/her midway into his/her policy then that money goes to the new broker for doing nothing. For all other insurance coverage you can make the change anytime after the renewal, since the broker gets paid the entire commission at the time of binding your renewal.

Q: What are reinsurance triggers in healthcare?
A: Not sure, but reinsurance can trigger on a specific basis, meaning a defined deductible amount or it can be a quota share where the reinsurer takes a percentage of risk over a certain dollar amount.

Q: What does D and O insurance mean?
A: Directors and Officers Insurance protects the current and former officers, directors, managers, and employees for claims arising from the operations of the company (not professional liability).
Example: an anti-trust claim or misuse of corporate assets or business interference.

Q: What does a statutory limit mean on a worker’s comp policy?
A: Workers Compensation covers all employees for work related injuries at 100% of the medical bills. It has a disability benefit and life insurance. In return for these free benefits, the worker cannot sue the employer for more than what the statute says. In California, this is $1 million. The only way to get more than this limit is if the worker can prove gross negligence.
Example: an employer knew he had a faulty machine and let an employee use it and he/she is severely injured or killed. This is why all employers, especially those who can have a big worker’s comp claim should buy umbrella liability insurance, since this is the coverage that may respond if you have a claim that exceeds the workers compensation statutory limit. General Liability will not respond.

HCP National Insurance is a provider of Errors and Omissions, Professional Liability, and General Liability Insurance for small businesses. 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 ISN’T COVERED.