cognizant 20-20 insights
MAPD plans must meet a retrospective 85/15 medical loss ratio (MLR).
CMS requires plans to return any reimbursement amounts exceeding the 15% limit on administrative spending and proﬁt levels. CMS can prohibit plans failing to meet MLR requirements in multiple years from enrolling new members and potentially disqualify them from participat-ing in the MAPD market.
Rate/Pricing Risks are Growing
CMS generally releases regulatory informa-tion in the spring and requires ﬁlings by June.
This results in payers ﬁling premium rates and beneﬁts designs for the coming plan year many months ahead of plans’ autumn open enrollment periods. Payers are then locked into the rates, regardless of the health conditions of newly enrolled members. This makes managing risk scores critical. Plans essentially rely on historical data to make population health and rate predictions. Medical costs are notorious-ly difﬁcult to predict, and the margin of error rapidly grows wider the farther into the future the predictions must go.
Federal desk reviews are also becoming more comprehensive and sophisticated.
CMS requires payers to respond quickly to audit issues. It’s crucial that payers support their rates, or make rate corrections swiftly and with accurate data. Otherwise, they risk quoting insufﬁcient rates, resulting in an underfunded plan.
The ﬁnancial consequences of an inaccurate bid are substantial.
The bottom line is that plan reimbursements are likely to decrease while the health demographics of MAPD members indicate they will need additional services. Controlling the costs of service delivery while ensuring the highest quality member experience will be a challenging balancing act. Failing to accurately forecast these expenses will negate a plan’s earning potential, even with increased membership (see Figure 4, next page).
Quality Ratings’ Effect on Plan Benchmarks and Financial Performance
The CMS Five-Star Rating system for MAPD enables plans to achieve bonus payments when scoring a “4” or greater (see Figure 5, next page).
These scores are based on a wide range of criteria, from chronic condition management to member satisfaction, to customer service. In 2013 and beyond, quality scores also determine what portion of plan savings may be returned as rebates to plan members. These rebates are now set at 50% of the difference between a county benchmark and a plan’s bid (down from 75%). Plans with high-quality scores can receive greater rebates.
CMS is reducing its benchmark payment rates so that MAPD reimbursement rates will be close to — and sometimes under — Medicare fee–for-service reimbursement rates in many service areas.
Source: Based on CMS.gov data.
Fee-for-Service Reimbursement Rates
Fee for Service (FFS) Reimbursement Rates by Year