“And Now for Something Completely Different” – Connector Board Report 2/11/10

Secretary Jay Gonzalez opened yesterday’s Board meeting by offering congratulations to Joe Murphy, who was named Commissioner of Division of Insurance. Jon Kingsdale announced Roni Mansur as the new Director of Operations for CommChoice. The new Director of CommCare will be announced in March.

Kingsdale also gave a short update on the collaborative efforts of the Connector (including Board member Nancy Turnbull), DHCFP, and the Dept. of Higher Education to address Student Health Plans. An RFP is out and the bidder conference was Thursday morning; Kingsdale will report back to the Board on future progress.

Kingsdale also mentioned Celia Wcislo’s heartfelt plea for a provision in the hardship waiver for families affected by Haiti earthquake. Wcislo said, “When we give a donation we get tax deduction, when people give money to their families to help rebuild after the earthquake, they don’t get anything and are living on less.” The Board agreed that hardship considerations should apply in these cases (see Sacha Pfeiffer’s WBUR’s report on this decision).

The meeting focused on CommCare reprocurment, old arguments were rehashed on affordability, and there was an update on small business coverage. Materials from the meeting are posted here; our full report is after the jump.

CommCare FY11 Procurement
Patrick Holland and James Woolman presented the context and timeline of the FY11 Commonwealth Care procurement. The Board engaged in discussion and will vote on the RFP documents at the next meeting, February 25th.

FY11 Budget
Woolman gave context of current budget situation. Current tax revenues are less than they were in 2007, and there have been average annual decreases in tax revenues since FY09, even with the implementation of sales tax. All the while, demand for state services – including health care – is increasing. To meet this demand, the Governor proposed funding the CommCare program at $839 million in FY11, an increase from FY10’s budget of $723 million.

This appropriation will:

• Maintain eligibility
• Fund additional enrollment
• Minimize additional cost-sharing
• Maintain existing benefits
• Assume appropriate MCO rate increases

MCO Financial Performance
According to the Connector, the MCOs saw a cumulative positive margin on medical costs between FY07-09, though this varied for the plans individually. Nancy Turnbull asked why there had been such disparate performance between the plans; Holland explained that at the beginning of the CommCare program (FY07), some plans had a larger number of enrollees through auto-assignment. That started to “smooth over” between 2009-2010. However, in the second half of FY09, claims costs increased, making it a rough year overall for the MCOs. After a continual climb, MCO prescription drug costs are also beginning to moderate. Demographic acuity may be leveling off – meaning the CommCare population is seeing younger, healthier enrollees.

CommCare enrollment – not including “special status” legal immigrants – grew by 7% between March and June 2009, and by 2.6% in the first half of FY10. Enrollment appears to be leveling now. Connector staff plan to continue assessing the impact of enrollment growth and programmatic changes – suspending auto-assignment and removing “special status” legal immigrants from the program – on MCO financial performance. According to their data, four of the five MCOs had negative margins in the first quarter of FY10.

Rick Lord asked if the extended unemployment benefits enacted by the federal government has reduced CommCare enrollment growth. Holland said it helped on the growth side; then again, some people move from MSP to CommCare. Wcislo requested a more detailed report on the total impact of removing AWSS and discontinuing auto-assignment on the program. Holland and Woolman agreed to provide this information.

FY11 Procurement
With this background, Woolman and Holland presented the proposed process and timeline for the FY11 CommCare procurement. The Connector will issue an RFP with financial terms, elements of the program, and a base capitation rate. There will be no MCO bidding. As Wcislo said, “It’s a take it or leave it” arrangement. The cap rate Connector staff have calculated is at the bottom of the “actuarially sound rate range,” about $425 per month (it was $399 last year). This rate takes into account base medical claims, medical trends, and the $32 administrative fee (which is being held constant). The rate is fully adjusted for the non-“special status” legal immigrant population and assumes an increase in enrollment and reinstating auto-assignment in some way. Gruber commented that the RFP as presented gives no way for new health plan entrants to grow; one cap rate for all plans gives new plans no ability to bid lower in order to attract new enrollees.

Enrollee Premiums: Woolman and Holland explained that the Connector cannot raise premiums because of federal maintenance of effort requirements under ARRA. They are looking to streamline premiums so that all CommCare enrollees pay the base rate (lowest cost) for any plan. They plan to institute minimal increases in cost-sharing ($2 to $3 for prescription drugs) for Plan Type 1 enrollees, in order for CommCare to align with proposed MassHeatlh changes.

Jon Gruber stated that the Board did not increase co-pays last year and should look to increase cost-sharing this year. He asked how CommCare enrollee contributions compare to typical small business plans. Holland responded that they took private market trends into account when making these decisions and CommCare is a little lower.

Risk Sharing: The Connector is looking to reduce MCOs’ contribution to the stop loss reinsurance pool. MCOs can also expect a narrower risk share corridor, meaning the health plans will assume full risk for more of the loss if costs exceed the amount paid by the Connector. Wcislo commented, “Are we saying that MCOs should have no or negative margins?” Holland responded that they are not requiring MCOs lose money; it’s a balance. He acknowledged that the capitation rate is tight, and stated that Connector staff will evaluate these proposals and come back to Board.

Geographic Areas: For CommCare, Massachusetts is divided into five Major Regional Areas (MRA), which are further split into 38 service areas. As in past years, for the FY11 procurement, plans will not have to be state-wide, and are not required to cover all service areas within an MRA. Terry Dougherty asked what happens if there is no MCO that chooses to cover certain service areas. Kingsdale responded that this hasn’t happened yet, but the Connector will monitor and reassess if it does. According to Kingsdale, many MCOs seek to expand their networks, giving providers more leverage to negotiate. He thinks MCOs should look at the competitiveness of provider rates in relation to their networks.

Pharmacy Carve-out: The Governor proposed carving out prescription drug programs from the MCOs to MassHealth in order to take advantage of the rebate savings. The Connector will also consider this.

Terry Dougherty said that MassHealth is considering:

• National health reform: if this passes, MCOs will be able to get the state rebate, and there will be no need for the carve-out.
• Designating the MCOs ASOs (administrative services only) for the prescription drug benefit.
• Carving-out prescription drugs to MassHealth, and managing the program through their POPS system.

Turnbull expressed concern with the pharmacy carve-out. She stated that the Connector needs to implement this in a way so as not to hinder the ability of the plans to manage care and receive timely data. Wcislo asked the staff to consider the financial impact on the MCOs and their purchasing power.

Turnbull directed the conversation back to the enrollee contributions. She cited the need to educate members on how enrollee contributions will change. Kingsdale commented that enrollees experienced a more dramatic decrease in 2010; he will get the Board additional information on change between 2010-2011.

Lou Malzone requested more information on auto-assignment for the next meeting, and commented that reinstating auto-assignment does not make sense: why pay for unidentified people? Wcislo clarified that these folks are not identified, but people enrolled in the program who have not yet chosen a plan. Turnbull said that research exists about the extent to which low- and moderate-income people don’t sign up for plans (there are many people in Medicaid, for example). Auto-assignment is an approach to make sure people get enrolled. Gonzalez asked Holland to provide options and details on what the new auto-assignment policy could be ahead of next meeting.

Affordability Schedule

Kaitlyn Kenney presented options for changing the affordability schedule for 2010:

1. No change
2. 3.5% increase across the board
3. No change below 300% of federal poverty level (fpl); 3.5% increase above
4. 7% increase across the board
5. No increase below 300% fpl; 7% change above

Factors considered in developing the 2010 affordability schedule options:

• Federal maintenance of effort requirement preclude changes to CommCare enrollee contributions.
• FPL guidelines will remain unchanged until at least March 1, 2010.
• Nationally, the Consumer Price Index (CPI) declined slightly from 2008-2009.
• Premiums in Massachusetts are projected to increase 7%-12% from 2009-2010.

Proposals 2 and 4 would de-link CommCare premiums from the affordability schedule for the first time. In all 3 options, several age/income groups from the Cape & Islands region are projected to become newly subject to the mandate; several age/income groups from several regions will also be newly exempt populations from the mandate in each option.

Dolores Mitchell asked if the Connector has information on how many people who are eligible for an exemption from mandate don’t ask for waiver. Kingsdale said they don’t have that information, but it is hard to tell since there were a high number of people in Massachusetts insured before the mandate, some of whom may have bought unaffordable plans.

Turnbull commented that she doesn’t favor de-linking CommCare premiums from the Affordability Schedule, especially in this economic climate. “It is the wrong time to ask low- and moderate-income people to pay more. Yes, we have common goal to insure as many people as possible, but we have differing opinions on the value of different tradeoff. Some who prioritize maintaining the scope of the mandate, would increase the Affordability Scheduled base on increasing premiums. My priority is looking to the statutory language that says affordability is based on the percentage of income people should be expected to pay. It doesn’t make sense to link affordability to rising premiums; it is conceptually wrong. It also sends a bad policy message: “If premiums go up, we’ll just pass it on in the affordability schedule.” We need to take on controlling premiums. If we can’t, the mandate will and should erode.”

Gruber disagreed, joking, “And now for something completely different! The purpose of the Affordability Schedule is to implement Chapter 58. The central goal is to enforce the mandate, subject to affordability. There is a tradeoff between making sure people are insured and affordability, and you need to look at both. It is not obvious that we should go to one extreme; we need to evaluate trade-off. In federal reform, for example, the legislation goes a different way – requiring people to buy insurance if it is 8% of less of their income. There is no reason to link CommCare premium to the Affordability Schedule. CommCare premiums are only how much the state thinks we can subsidize; there is no reason CommCare premium can’t be below what is required by the Affordability Schedule.”

Wcislo commented that she is also concerned with de-linking CommCare premiums and the Affordability Schedule. She sees it as an incentive for small business to drop coverage so employees can enroll in CommCare. She wouldn’t want to punish employers who are trying to do the right thing. Gruber responded that crowd out is not caused by the mandate or the Affordability Schedule: “It’s got to do with attractiveness of alternative options. If CommCare is an attractive option relative to small business insurance, that leads to crowd-out. As we have seen, it’s not the mandate that leads to crowd-out.”

Wcislo also cited the potential for political backlash if Affordability Schedule increases, stating that it is not fair to treat different sets of people in the same economic situation differently. Mitchell explained that the GIC increased copays and deductibles for state employees, some of whom are in the same economic brackets as CommCare enrollees. She plans to take that into consideration when making her decision about the Affordability Schedule. Mitchell also commented that if income doesn’t increase, the issue is to do something about income.

The Board voted unanimously to release all five options for public comment. Gonzalez reiterated that these options do not represent the preferences of the Board, and nothing they did in today’s meeting is final – the final Affordability Schedule could be different from the options released for comment.

Small Business Transition Opportunity
Rosemary Day and Bob Nevins gave an update on the mini-employer initiative. The website is up, and will offer all CommChoice Seal of Approval plans, not just those being converted from SBSB. The goal is to convert at least 80% of SBSB accounts to the Connector (20% is normal turnover). Nevins demonstrated how website works. So far they have about 13 new employers with about 29 subscribers (in addition to the conversions from SBSB).

The next Board meeting will be February 25th.
-Suzanne Curry