March 28, 2016
A White Paper by Cherrill Farnsworth, President and CEO, HealthHelp
Updated March 2016
- Clearly outline the criteria and requirements of the Medical Loss Ratio regulations.
- Identify how HealthHelp’s programs fall into the health insurers’ Medical Loss Ratio requirements.
The implementation of the Patient Protection and Affordable Care Act (PPACA) is well on its way, which is prompting many questions within the health-insurance industry regarding the federal medical loss ratio (MLR) requirement. This requirement states that a health-insurance issuer must spend 85% of total premiums in the large-group market, or 80% of total premiums in the small-group or individual market, on “reimbursement for clinical services provided to enrollees” or “for activities that improve healthcare quality.”
HealthHelp offers specialty benefit management services that not only provide significant and sustained savings, but also improve healthcare quality overall through education using evidenced-based literature. This means that most of our programs qualify as activities that improve healthcare quality, thus meeting the latter MLR requirement. HealthHelp worked with NAIC and the Department of Health and Human Services (HHS) through its counsel Epstein, Becker & Green in Washington, DC to define and then document our programs and determine which qualify for the 85% portion of the Medical Loss Ratio. Our letter from Epstein, Becker & Green for your insurance company’s documentation is available upon request
The Medical Loss Ratio (MLR) is part of the Public Health Service Act (PHSA) and mandates that enrollees in a health plan “receive value for their premium payments.” MLR requires that a health insurance issuer spend 85% of total premiums in the large group market (80% of total premiums in the small group market or individual market) on “reimbursement for clinical services provided to enrollees” or “for activities that improve healthcare quality (QI).” In other words, if the total amount of “all other non-claims costs” exceeds 15% of total revenue payments in the large group market (20% of the total revenue payments in the small group or individual market), the plan must provide a pro-rata rebate of the premium payments to the enrollee or employer, as appropriate.
HHS has released the following definition of qualifying activities, stating that they must be designed to:
- Improve health quality;
- Increase the likelihood of desired health outcomes in ways that are capable of being objectively measured and of producing verifiable results and achievements;
- Be directed toward individual enrollees, incurred for the benefit of specified segments of enrollees, or provide health improvements to the population beyond those enrolled in coverage as long as no additional costs are incurred due to the non-enrollees; and
- Be grounded in evidence-based medicine, widely accepted best clinical practice, or criteria issued by recognized professional medical associations, accreditation bodies, government agencies, or other nationally recognized healthcare quality organizations.
These qualifying activities must also fall within one of five categories by being primarily designed to:
- Improve health outcomes including increasing the likelihood of desired outcomes compared to a baseline and reducing health disparities among specified populations;
- Prevent hospital readmissions through a comprehensive program for hospital discharge;
- Improve patient safety, reduce medical errors, and lower infection and mortality rates;
- Implement, promote, and increase wellness and health activities; and
- Enhance the use of healthcare data to improve quality, transparency, and outcomes and support meaningful use of health-information technology.
Exclusions apply to certain types of activities. Expenditures and activities that fall into the following categories are excluded from quality improvement activities:
- Those that are designed primarily to control or contain costs.
- The pro rata share of expenses that are for lines of business or products other than those being reported, including but not limited to, those that are for or benefit self-funded plans.
- Those which otherwise meet the definitions for quality improvement activities but which were paid for with grant money or other funding separate from premium revenue.
- Those activities that can be billed or allocated by a provider for care delivery and which are, therefore, reimbursed as clinical services.
- Establishing or maintaining a claims adjudication system, including costs directly related to upgrades in health information technology that are designed primarily or solely to improve claims payment capabilities or to meet regulatory requirements for processing claims.
- That portion of activities of healthcare professional hotlines that does not meet the definition of activities that improve healthcare quality.
- All retrospective and concurrent utilization review.
- Fraud prevention activities, other than fraud detection/recovery expenses up to the amount recovered that reduce incurred claims.
- The cost of developing and executing provider contracts and fees associated with establishing or managing a provider network.
- Provider credentialing.
- Marketing expenses.
- Costs associated with calculating and administering individual enrollee or employee incentives.
- That portion of prospective utilization that does not meet the definition of activities that improve health quality.
Health-insurance insurers will be required to submit annual reports by state showing the percentages of premiums spent on reimbursement for clinical services and activities that improve healthcare quality during a given plan year, and to provide rebates to enrollees if this spending does not meet minimum standards. Insurers will also be required to maintain supporting evidence of measurable results stemming from all quality improvement activities. At this time, HealthHelp is not aware of any additional guidance from HHS or the NAIC on what “measurable results” entails.
However, under the regulations, HHS has the ability to audit issuers or to accept the findings of an audit conducted by a state. HealthHelp can facilitate its clients’ compliance with the MLR analysis and reporting requirements by providing relevant factual information about its programs.
HealthHelp’s MLR-Qualifying Programs
HealthHelp’s programs are designed to ensure that patients receive the right tests and treatments at the right time in order to improve the quality of the care, reduce the incidence of improper treatment, and lessen exposure to radiation. In order to achieve this outcome, each HealthHelp program is grounded in evidence-based medicine and widely accepted best clinical practice. The goal is to encourage physician use and adoption of evidence-based medicine. Through published results in peer reviewed journals, it has been documented that HealthHelp’s programs, using education and peer-reviewed literature, change physician behavior and bring about substantial savings.
While our programs can reduce costs, HealthHelp was formed under the premise of improving quality and safety. However, having a program primarily designed to improve healthcare quality is only one element for qualifying as QI activities.
As outlined above, to classify as a QI activity each HealthHelp program must (1) meet all four components of the general definition for QI activities, (2) meet one or more of the five Categories, and (3) not fall into the list of activities excluded from QI activities. Summaries of HealthHelp’s relevant programs, along with details on how each program could comply with MLR’s QI requirements, are outlined below.
Consultative Utilization Management
Builds physician knowledge through traditional prior authorization.
Collaborative Benefit Management
Improves care quality by putting the latest medical evidence at physicians’ fingertips, and peer experts a phone call away.
Based on the details listed above, HealthHelp’s Consult and Cert programs could meet all of the four components of the general definition for QI activities, meet Categories 1 and 3, and not fall within any of the activities excluded from QI activities.
In particular, the first and fourth components of the general definition for QI activities require that qualifying QI activities “be designed to . . . [i]mprove health quality” and be an activity “grounded in evidence-based medicine, [and] widely accepted best clinical practice.” Consult and Cert satisfy both of these components because they are designed to improve healthcare outcomes by educating physicians on evidence-based medicine and clinical best practices. To this end, the clinical review criteria are continuously updated by a team of nationally recognized radiologists with input from practicing physicians and specialists in order to improve healthcare outcomes. These experts base the Consult and Cert criteria on current peer-reviewed medical literature, regionally accepted practice protocols, and guidelines established by relevant medical associations. This is further supported by the fact that the Consult and Cert programs are NCQA and URAC accredited.
The second component of the general definition of QI activities requires that the activities be designed to “[i]ncrease the likelihood of desired health outcomes in ways that are capable of being objectively measured and of producing verifiable results and achievements.” Ionized radiation exposure, as used in imaging tests, has been linked to cancer and the prevention of cancer is certainly a desired health outcome. Thus, the results of the Consult and Cert programs could be verified and measured as the amount of radiation avoided on a patient-by-patient basis every time an unnecessary test is not performed because of adherence to the evidence-based protocol after utilizing the reference materials or consultations provided by the programs.
The third component of the general definition of QI activities requires that the activities “[b]e directed toward the individual enrollees or incurred for the benefit of specified segments of enrollees.” Consult and Cert could satisfy this criterion because the programs’ focus is individual enrollee specific. Every time certain radiation oncology and imaging procedures are ordered, the program reviews the appropriateness of the order as it pertains to that specific enrollee.
In order to qualify as QI activities, Consult and Cert also must fall within the definition of one of the five Categories of QI activities identified by the MLR. Both programs could fall within the definition of Categories 1 and 3 as described below.
The definition for the Category 1 activities that “[i]mprove health outcomes” specifically includes “[e]ffective case management.” While this term is not explained in the regulations, the NAIC’s Final Model Regulation specifies that “effective case management” includes, among other things:
- Providing coaching or other support to encourage compliance with evidence based medicine.
- Activities to identify and encourage evidence-based medicine.
Consult and Cert can be viewed as “effective case management” activity because: (1) the programs identify evidence-based medicine through the use of the review criteria that is based on evidence-based medicine and regularly updated with new evidence-based medicine principles; and (2) the programs are designed to encourage physician use and adoption of evidence-based medicine. If a physician orders a procedure that is not appropriate based on the evidence-based protocol, then there are several steps that seek to educate and encourage the physician to utilize the proper evidence-based treatments. Thus, HealthHelp’s Consult and Cert programs meet the definition for Category 1.
As Consult’s and Cert’s primary focus is to avoid harm through the reduction of errors in medical imaging, both programs also could meet the definition for Category 3 dedicated to activities that “[i]mprove patient safety, reduce medical errors, and lower infection and mortality rates” through “the appropriate identification and use of best clinical practices to avoid harm.” The programs utilize a comprehensive program to identify the best clinical practices in imaging and radiation oncology.
Finally, in order for all of Consult’s and Cert’s activities to qualify as QI activities, none of the programs’ activities can be of the type excluded from QI by the MLR. Consult and Cert activities do not appear to be in any of the excluded activities.
Facility Assessment and Data Warehousing
Helps establish and enforce technical standards that ensure safety and quality among contracted providers.
Site could potentially meet all of the four components of the general definition of QI activities, satisfy Category 3, and not fall within any of the activities excluded from QI activities.
HealthHelp’s Site program could meet the first and fourth components of the general definition of QI activities by allowing an insurer to establish and enforce outpatient-imaging standards that are based upon evidence-based medicine. Site collects more than 100 fields of data that measure, among other things, the safety and quality performance of a facility. These performance measures are based upon HealthHelp’s clinical review criteria that are based upon current peer-reviewed medical literature, regionally accepted practice protocols, and guidelines established by relevant medical associations.
When a facility does not meet the safety and quality criteria they are, by definition, not bringing about desired health outcomes. Site is designed to make recommendations to underperforming facilities in order to improve the quality and safety of the care they deliver. In most cases, facilities voluntarily make the recommended changes to adhere to the Site safety and quality protocol. However, if a facility does not implement the Site recommendations, in most cases, the issuer client will exclude that facility from its network. By increasing the safety and quality of the facilities in an issuer client’s network, either through adherence with the Site criteria or through exclusions of underperforming facilities, the Site program increases the likelihood of desired health outcomes, thus satisfying the second component of the general definition.
The results of the Site program can be objectively verified and measured. Site is an on-going process where the safety and quality measures of the various facilities are updated constantly. When a facility is underperforming on a particular measure, the Site program provides recommendations to the facility to bring performance based on that measure in line with HealthHelp’s safety and quality criteria. As the quality and safety measures are tracked, the results can be both measured and verified by comparing the quality and safety data over time.
The third component of the general definition of QI activities requires that activities “[b]e directed toward the individual enrollees or incurred for the benefit of specified segments of enrollees.” The MLR provides guidance on the scope of this requirement by specifying that an activity must be directed toward “identified segments of issuer’s enrollees” in order for “population directed” activities to meet this component. As a result, in order to meet this component, the Site program would need to be directed toward “identified segments of the issuer’s enrollees.” The program activities are directed toward an identifiable group of enrollees, namely those enrollees who have been prescribed radiation treatments. Issuer clients use the Site program to ensure that the facilities performing imaging and radiation oncology procedures on the issuer client’s enrollees meet specified quality and patient safety standards. Therefore, Site’s activities could be characterized as being directed toward an issuer client’s enrollees who receive radiation treatments.
Site’s primary focus is to avoid harm by ensuring facilities are meeting quality and safety standards and, therefore, the program could potentially meet the definition for Category 3: dedicated to “activities that improve patient safety and reduce medical errors” through the “appropriate identification and use of best clinical practices to avoid harm.”
Furthermore, the program is based upon best clinical practices through its utilization of a comprehensive data set of more than 100 data fields to determine whether a facility is meeting safety and quality standards. The Site quality and safety criteria is continually updated by a team of nationally recognized specialists and based upon relevant sources of peer-reviewed medical literature and major medical association guidelines.
Finally, in order for all of the Site program activities to qualify as QI activities, none of Site’s activities can be of the type excluded from QI activities. The IFR excludes “provider credentialing” activities from activities that qualify as QI activities for purposes of the MLR. However, Site typically is not incorporated as part of the issuer client’s larger provider credentialing program. In recent correspondence, NAIC regulators confirmed that, if Site is merely a component of the underlying provider-credentialing program, then it is excluded from the definition of QI activities. However, according to the NAIC, if Site is utilized in a way that is independent of the provider-credentialing program, it may be included as QI activities. In such instances, Site could potentially avoid exclusion as a provider- credentialing activity.
Steers services to high quality, less expensive, accessible, and convenient in-network providers.
HealthHelp’s Direct program could potentially meet all of the four components of the general definition of QI activities, satisfy Category 1, and not fall within any of the activities excluded from QI activities.
The Direct program could satisfy the first and fourth components of the general definition of QI activities. Research shows that, especially with cancers, the earlier they are detected and treated, the greater the chance of survivability. Imaging procedures are one of the most common ways in which cancer is diagnosed definitively. Direct promotes the early diagnosis and treatment of disease by increasing the likelihood that a patient will undergo a diagnostic procedure. Research suggests that when appointments are scheduled for an individual enrollee, the likelihood that the enrollee will undergo the diagnostic imaging procedure recommended increases.
Further, in some instances, Direct is augmented by directing patients to accredited facilities that meet certain quality and safety standards. Although the accreditation does not have to be from HealthHelp in order for the Direct program to make a referral, the accreditation must be by an organization that employs quality and safety standards. If the accreditation is through the Site program, then it is based upon more than 100 fields of data that measure, among other things, the safety and quality performance of a facility. These quality and safety performance measures are based upon HealthHelp’s clinical review criteria that are based upon current peer-reviewed medical literature, regionally accepted practice protocols, and guidelines established by relevant medical associations.
The second component of the general definition of QI activities requires that the activities “[b]e designed to improve healthcare quality and increase the likelihood of desired health outcomes in ways that are capable of being objectively measured and of producing verifiable results and achievements.” Currently, the Direct program, standing alone, does not track measurable results. If Direct were implemented as one component of Consult or Cert, it is possible that the measurable results of the Consult or Cert program could become the data to support the Direct program as well.
Furthermore, facilities that meet safety and quality standards are by definition more likely to produce desired health outcomes than facilities that do not meet evidence-based quality and safety standards. Thus, in instances where the Direct program includes referrals to facilities that meet certain safety performance and quality based standards, the results of the program also could be measured by tracking the number of enrollees that receive procedures from accredited facilities.
Direct clients purchase the program in order to ensure that individual enrollees are directed toward quality facilities and that the scheduling of appointments is done for individual enrollees to increase the likelihood that the enrollee receives the procedure recommended. As the individual enrollees are the beneficiaries of the services provided by Direct, expenditures on the Direct program could meet the “directed toward the individual enrollees” criterion of the third component.
In order to qualify, the Direct program also must fall within one of the five Categories. Category 1 is defined as activities that “[i]mprove health outcomes” lists “[e]ffective case management.” While the MLR does not explain the meaning of the term “[e]ffective case management,” the NAIC’s Final Model Regulation specifies that it includes “patient centered interventions such as . . . [m]aking/verifying appointments.” The Direct program could satisfy this criterion because a primary activity of the program is to schedule imaging and radiation oncology appointments for enrollees.
Finally, Direct program activities do not appear to be included in any of the excluded activities.
The paper aims to assist our clients with their MLR analysis and reporting by identifying HealthHelp programs that could qualify as an activity that improves healthcare quality, as defined by HHS. In order to confirm whether HealthHelp’s program activities meet the definition of QI activities, health issuers may want to seek guidance from the NAIC and/or HHS. HealthHelp is available to assist clients with these inquiries. We hope this information answers your questions about MLR requirement and how our programs can add even greater value.
About the Author
Cherrill Farnsworth, President and Chief Executive Officer of HealthHelp, is an influential national expert on changing healthcare regulations and regularly advocates radiology management and reform before the Centers for Medicare and Medicaid Services and other congressional and regulatory bodies. She sits on several boards, including that of the American Association of PPOs. She also serves on the faculties of the Radiological Society of North America and American Healthcare Radiology Administrators and on the editorial advisory boards of Imaging Economics and Advanced Imaging. Ms. Farnsworth led HealthHelp to listing by Inc. as one of the nation’s 500 fastest growing private companies. She has also received entrepreneur of the year awards from KPMG Peat Marwick and Ernst & Young.
HealthHelp, a leader in specialty benefits management, increases quality of care, reduces unnecessary radiation exposure, and generates significant savings and return on investment for healthcare payers by enhancing physician knowledge. Each of its programs addresses a different aspect of radiation oncology, medical oncology, and cardiology, along with diagnostic imaging and interventional radiology. The clients of Houston-based HealthHelp administer local, statewide, and national healthcare plans across the country. More information about HealthHelp and its programs can be found at www.healthhelp.clients.10ben.io.