Connector Board Meeting: Creative Solutions in Tough Times

The Connector Board met today to discuss Commonwealth Care enrollment and the upcoming FY12 procurement, as well as the 2011 Affordability Schedule. Faced with a flat budget but increased CommCare membership and ongoing medical inflation for next year, the Connector didn’t take the “business as usual” route and cut benefits or eligibility. Instead, the Board challenged the managed care providers in the program to find ways to reduce costs through efficiencies and aggressive contracting. Board members agreed that this will be tough, but it’s a much better choice than the alternatives. And the affordability discussion was the easiest ever. The materials from the meeting are here, and our full report is below the fold.

Glen Shor began the meeting with enrollment figures as of February 1, 2011:

  • CommChoice: 41,000 (15% in non-group take up as of 2/1 as compared to January due to open enrollment restrictions)
  • CommCare: 158,000 (slight decrease since January)
  • CommCare Bridge: approx. 21,000 (continual decrease)

Commonwealth Care Update (Stephanie Chrobak)
Chrobak reviewed enrollment figures and plan distribution in CommCare and current Bridge enrollment (cited above). She also gave an overview of the Connector’s progress with their member web portal (health information portal, or HIP). One of the Connector’s goals is to get more members to use web-based tools to improve access to information and achieve savings. Connector staff employed several strategies to promote its web portal, with success. Currently, 28,000 CommCare members are registered web portal users, and the Connector has collected almost 15,000 email addresses for active members. Nancy Turnbull requested the distribution of plan type among web portal users, which Chrobak will look into.

Commonwealth Care FY2012 Procurement (Jean Yang)
Jay Gonzalez framed the procurement conversation with the FY2012 budget. According to Gonzalez, Governor Patrick’s budget includes several programmatic and operational reforms, which are particularly important in MassHealth and CommCare. The Administration’s approach is to level-fund health care programs. The Administration is committed to taking significant steps to live within the budget, while doing everything possible to maintain coverage. Gonzalez said, “Massachusetts is number one in coverage and we want to preserve this. It’s more than a statistic – it’s about people in Massachusetts having access to affordable coverage and people being healthy.”

Shor added that many other states are making drastic benefit cuts to deal with their budget shortfalls. He said, “We believe this doesn’t have to happen in the Commonwealth. There are opportunities to avoid these horrible cuts and this is the essence of our procurement proposal.”

Within this context, Jean Yang, the Connector’s CFO, began the presentation on the Connector’s FY2012 CommCare procurement strategy.

FY2012 Budget Context

  • FY2012 is challenging; the Commonwealth will lose $1.9 billion in one-time funding (including $1.5 billion of enhanced FMAP).
  • The Administration proposes to spend $600 million less in FY12 than FY11.
  • The Administration’s budget largely level funds health care programs.
  • CommCare is funded at $822 million in FY12, essentially level-funding from FY11.
  • Anticipated CommCare enrollment by the end of FY12 is 174,000. Much of this increase is attributed to Medical Security Program members transitioning to CommCare, and to a lesser extent, people losing coverage under the Fishing Partnership.
  • “Normal” health care cost trend plus increased enrollment would yield a 10% or $82 million increase. The Connector’s challenge is to keep their spending within their level-funded budget.

FY2012 Procurement Strategy
The Connector conducted a thorough analysis of several options, including enrollment caps, benefit cuts, and premium and co-pay increases. Added together, these options could produce $80 million in savings. The Connector is taking a different approach – no enrollment caps, no benefit reductions, and cost-neutral co-pay changes.

The essence of the procurement strategy is to leverage the Connector’s purchasing power to control health care costs. This is how they propose to do this:

  • Actuarially Sound Rate Range (ASRR): This is a CMS requirement in order to qualify Federal Financial Participation (FFP, or federal matching funds). For FY12, the Connector proposes a wider rate range than in the past: $360-$475. The new ASRR was developed by an independent actuary, based on CeltiCare Health Plan’s experience, which has a lower cost structure than other MCOs. According to Yang, CeltiCare is able to operate with lower costs due to their limited hospital network and the ability to negotiate more aggressive rates with providers. Looking at the special status legal immigrant population that transitioned from CommCare to Bridge, there was 15% lower utilization, which can also explain lower costs, but this does not necessarily mean insufficient coverage.
  • Bidding Rules
    1. The Connector will set a “capitation rate ceiling” within the Actuarially Sound Rate Range.
    2. Plan Type II and III members who do not choose the lowest-cost plan will continue to pay a higher premium than the base rate. The base enrollee premium will remain the same as in FY11, and will continue to be progressive by income. The Connector will also provide modest subsidies to limit the premium difference for members who do not choose the lowest-cost plan.
    3. Some Plan Type I members (about 25,000-30,000 cumulative by the end of the year) who do no have history with an MCO will be limited to one MCO – the lowest-cost plan in the member’s service area.
    4. If fewer than three current MCOs bid within $55 of the low end of ASRR (up to $415), there will be an active enrollment for current Plan Type I members. Members who do not affirmatively choose an MCO will be assigned to the lowest cost plan.
  • MCO Cost-Containment Opportunities: This procurement incentivizes MCOs to pursue cost-containment strategies, including: improving provider contracts; directing care to lower cost settings, strengthening medical management; and improving administrative efficiency.
  • Risk Sharing: If actual expenses are much higher or much lower than the capitation rate, the state and the plans share in the loss or the gain 50-50. This provides an incentive for the plans to bid realistically. The Connector proposes to expand the plan full-risk corridor from plus or minus 2% to plus or minus 4%.
  • Risk Adjustment: Risk adjustment modifies capitation payments to MCOs according to the plan’s population risk. The Connector proposes to update their risk adjustment model for FY12.
  • Co-pay Changes: The Connector proposes cost-neutral co-pay changes including: eliminating co-pays for preventive services; increasing co-pays for Plan Type I members to align with MassHealth; and increasing co-pays for Plan Types II and II members for high-cost imaging. Shor reminded the Board that out-of-pocket maximums will not increase, so these members will have a safeguard to protect from accruing medical debt.
  • Payment Reform: MCOs will be required to work with the Connector and other state agencies on payment reform initiatives, including participation in pilot programs.

The Connector aims to release the Commonwealth Care RFP to MCOs as soon as possible (possible next week). This procurement also requires changes to the CommCare regulations, which will be presented at the next Board meeting. The Board is expected to vote on the final MCO contracts in April.

Yang also provided the Board with updates on two other procurements:

  • Commonwealth Care Bridge: The Administration’s FY12 budget funds Bridge at $50 million. Administration and Finance, EOHHS, and the Connector will conduct a competitive procurement.
  • Medical Security Program (MSP): The Division of Unemployment Assistance, which administers MSP, and the Connector, will conduct a competitive procurement for the MSP Direct Coverage Program. They are looking to restructure MSP to mirror the CommCare coverage and cost structure. Procurement will happen in Spring 2011.

Affordability Schedule (Kaitlyn Kenney)
Each year, the Connector Board updates the Affordability Schedule, which is used to determine application of the individual mandate. In March 2010, Secretary Gonzalez appointed four Board members to an Affordability Workgroup to develop a proposal for the 2011 Affordability Schedule and consider the intersection of the state and national affordability standards. The workgroup recommended no change to the Affordability Schedule for calendar year 2011. This proposal was unanimously accepted by the Board. Next steps include releasing the schedule for public comment and a Board vote on the final schedule in March. The workgroup will continue to meet to discuss the interaction between state and federal affordability standards.

The next Connector Board meeting is on February 24th from 9:00-11:00am at One Ashburton Place, 21st floor, Boston.
-Suzanne Curry

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