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RI Rate Review: A First Step for Affordable Health Insurance. State Coverage Initiatives National Meeting August, 2010 Deborah Faulkner Faulkner Consulting Group RI Affordability Project Lead. Background: RI Office of Health Insurance Commissioner.

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ri rate review a first step for affordable health insurance

RI Rate Review: A First Step for Affordable Health Insurance

State Coverage Initiatives National Meeting

August, 2010

Deborah Faulkner

Faulkner Consulting GroupRI Affordability Project Lead

background ri office of health insurance commissioner
Background: RI Office of Health Insurance Commissioner

History: New Cabinet-level position as of June 2004

Response to BCBSRI misconduct

Frustration by employers and providers over costs of health care, reimbursement system, inability to engage health plans on larger issues

Statutory Responsibility: Four Areas

Financial Solvency

Consumer Protection

Fair Treatment of Providers

Direct Health Plans towards system improvement


starting point ri commercial insurance market
Starting Point: RI Commercial Insurance Market
  • By the Numbers
    • RI population: 1 Million
    • Commercially Insured Lives: 575,000
    • Small Group Market (<50): 90,000
    • Individual Market: 15,000
  • Individual Market: Good policy, bad politics
    • Single Carrier (BCBSRI) and single pool
    • Annual open enrollment, Two sub-pools – low risk subsidizes high
  • Small Group: Good access, recent declines in offer/takeup rates
    • Three carriers
    • Guaranteed issue, no pre-ex, 4-1 bands, Adjusted community rating
  • Large Group: Broker driven, less public oversight
    • Three carriers
    • Prior approval of rate manuals and rate factors


what about the costs
What About the Costs?

Efforts in RI to Address Underlying Cost Trend

1. Health Plan Rate Review

2. OHIC Affordability Standards


i health plan rate factor review
I. Health Plan Rate Factor Review


Health Plans in RI have unique standard: “Policies to promote affordability”

Use rate factor review to educate public, align interests of health plans to get at underlying cost drivers.


Annual review of large and small group rate factors.

Public disclosure of information.

Process (SmG + LgG)

45-60 Day Annual Process

Key Components

Preliminary Internal Review

Public Comment

Internal Actuarial and Substantive Review

Propose Approved, Modified or Rejected Rate Factors to Carriers


rate factor review impact
Rate Factor Review: Impact?

* 2010 rate requests were received with highly publicized/ front page community reaction. OHIC called on carriers to withdraw requests. All three insurers withdrew, refiled six months later. Rates shown are for Q3/4 only.

** 2011 Rates were approved with six additional conditions, specifying hospital/health plan contract terms


rate factor review assessment
Rate Factor Review: Assessment


More scrutiny of insurers

More public education.

Good way to get the attention of Insurers:

Opportunity to squeeze admin costs, profits (cost shift back to self-insured)

Opportunity to push harder on payment reform.


Greater politicization of process.

Potential for unpredictable, non-rational decisions.

Low rate factors now may mean big jumps later.

Only indirect influence on consumers and providers

Rate review, by itself, will not address the underlying cost of care in Rhode Island.


2011 conditions of approval
2011 Conditions of Approval

All health plan/hospital contracts must:

Utilize efficiency based units of payment for hospital services (other than fee for service)

Limit annual maximum price increase for inpatient and outpatient services to CMS hospital price index

Include performance incentives based on no less than three nationally accepted clinical quality, service quality or efficiency-based measures

Include mutual obligations for greater administrative efficiencies

Include terms that promote and measure improved clinical communication between the hospital and other providers

Include terms that relinquish the right to contest the public release of these terms by state officials


ii ohic affordability standards
II. OHIC Affordability Standards

Starting Point

Delivery system reform is needed – rate review is not enough

Health Plans are statutorily required to have policies that promote affordability, quality and access. Previous efforts unsatisfactory

Carriers can do some but coordinated, multi-payor efforts are required


OHIC’s Health Insurance Advisory Council.

Grant-funded consulting staff, expert opinion and health services research.

Off line work with health insurers

Result : “Affordability Standards”

Consequences tied to rate factor review -- rate factor review process as the affordability “gate”.

Achieve alignment between plans and priorities in the community


ohic affordability standards
OHIC Affordability Standards

Health plans will increase the proportion of their medical expenses spent on primary care by five percentage points over the next five years. This money is to be an investment in improved capacity and care coordination, rather than a simple shift in fee schedules.

As part of the increased primary care spend, health plans will promote the expansion of the CSI-Rhode Island project or an alternative all payer medical home model with a chronic care focus by at least 25 physicians in the coming yearand

Health plans will promote EMR incentive programs that meet or exceed a minimum value.

Health plans commit to participation in a broader payment reform initiative as convened by public officials in the future.



value of primary care spend target
Value of Primary Care Spend Target

Incremental Value of Increase (beyond inflation): >$150 million over five years


key challenges
Key Challenges

Defining Investment PrioritiesWhere do we want to spend it? How much direction to give the carriers

Monitoring Plan InvestmentsHow best to hold carriers accountable to the targets?

Evaluation: System OutcomesInpatient Readmissions, ER visits, Primary Care Supply and System Costs

VisibilityHow to increase statewide visibility of standards?


challenge 1 defining investment priorities
Challenge # 1. Defining Investment Priorities

Total ($) Portion Category

$5.0 M 46% Patient Centered Medical Home

$1.2 M 11% Electronic Medical Records Incentives

$0.8 M 8% FFS Fee Improvements

$0.6 M 5% Loan Repayment

$3.4 M 31% Other, carrier-specific investments

$11.0 M 100% Total Year 1 Planned Investment, 2010



Challenge # 2. Monitoring Plan Investments

A Moving TargetRevised 2010 Spend Requirements to account for membership loss (Combined, both carriers)

Based on 2009 actual spend data, as reported by the carriers in April, 2010

We estimated that achieving 6.6% Primary Care Spend in 2010 required carriers to invest $11M in Primary Care

After adjusting for 2009 base data, achieving 6.6% Primary Care Spend in 2010 only required carriers to invest $8M in Primary Care, mostly due to the substantial, one-time decline in enrollment



requires frequent and detailed review 2010 carrier investment plans latest forecast
Requires frequent and detailed review2010 Carrier Investment Plans: Latest Forecast*

Challenge # 2. Monitoring Plan Investments

UHCNERequired Investment $1.5 M

BCBSRI Required Investment $6.5 M

Oct. 09 Fcast

June 2010 Forecast

Patient Centered Med.Home




(all-payor and plan specific)

Electronic Medical Records







FFS Fee Improvements


$ 1,800,000



$ 0

Loan Repayment

Other, carrier specific investments

(BH/PC integration,

Specialist/hosp delivery




system improvements,

PforP, ACOs)




$10,920,00 (1)

* OHIC estimates based on carrier reporting and discussions. Highly preliminary estimates.


challenge 3 system metrics are key to this effort
Challenge # 3. System Metrics are Key to This Effort

Process Measures

Outcome Measures

  • Primary Care Spend Percentage -- Target vs. Actual
  • All-Payor Medical Home Initiative (CSI)-- Number of sites-- Total spend
  • EMR Incentive-- Participating primary care providers-- Bonus payments ($)
  • Primary Care Physician Satisfaction-- Annual survey
  • Primary Care Supply-- Primary care provider count-- Primary care share (PC/total providers)
  • System Efficiency Improvements-- Hospital Use (Total, ACS)-- Re-hospitalization-- ER Use (Total, Preventable/Avoidable, ACS)
  • Total Medical Trend


affordability standards current status
Affordability Standards: Current Status
  • Primary Care Spend2010 Investments on target – over $8 Million investment in primary careWorking thru reporting, monitoring process – should run smoothly for 2011Need to build stronger stakeholder engagement
  • CSIBegan in October 2008 -- 5 primary care practices with 27 providers Expansion in place as of April 1 adding 25 providersInitiative is well established, with broad stakeholder support.
  • EMRHealth Plans have incentive programs in place. Flat take up. No coordination between them and with RIQI. Eclipsed by REC?
  • Hospital Payment ReformLegislation suggested, did not pass Rate Review Conditions – will they work? All payor hospital payment study planned for fall/winter



The Case for Payment ReformHospital Payment Variation is Real

Case Mix Adjusted Inpatient Med/Surg Payments, Indexed to percent of Medicare fee fpr service BCBSRI and UHCNE Fully Insured Payments, CY 2008

Lifespan Care New England Unaffiliated


in closing
In Closing…
  • We have an active rate review process in Rhode Island. This process holds carriers accountable, puts pressure on admin/profits – but does not, by itself, address the underlying cost of care
  • However, the rate review process provides a critical foundation and gating mechanism for the affordability standards. We think this combination of rate review and affordability standards may provide a path to cost containment.
    • Conditions of Rate Approval
    • Required Investments in Primary Care Infrastructure
    • Multi-payor collaboration/initiatives
  • We need to continue to work on:
    • Monitoring and measuring
    • Stakeholder engagement
    • Hospital payment reform


for more information
For More Information

Any Questions: Contact Deb Faulkner, dtfaulkner@gmail.com, 401-486-3700

or go to


Rate factor review:


Conditions: http://www.ohic.ri.gov/documents/Insurers/Regulatory%20Actions/2010_July_Rate_Decision/2_%20Conditions%20Summary.pdf

Affordability Standards:

Documented Standards: http://www.ohic.ri.gov/Committees_HealthInsuranceAdvisoryCouncil_%20Materials%202009.php

Issue Brief: http://www.ohic.ri.gov/documents/Committees/HealthInsuranceAdvisoryCouncil/affordability%202009%20/6_Issue%20Brief.pdf


additional resources
Additional Resources

The Providence Journal on rate review conditionshttp://www.projo.com/news/content/CURB_HOSPITAL_COSTS_07-08-10_MNJ4HCV_v21.13150d4.html

Press release on rate review conditionshttp://www.ohic.ri.gov/documents/Insurers/Regulatory%20Actions/2010_July_Rate_Decision/1_Press%20Release%20Rate%20Factors%202011.pdf

Conditions of rate approval, 2011http://www.ohic.ri.gov/documents/Insurers/Regulatory%20Actions/2010_July_Rate_Decision/2_%20Conditions%20Summary.pdf

Health Affairs article:  Affordability standardshttp://www.ohic.ri.gov/documents/Committees/HealthInsuranceAdvisoryCouncil/affordability%202010/HEALTH%20AFFAIRS%20ARTICLE%20-%20May%202010.pdf

Issue brief:  Affordability standardshttp://www.ohic.ri.gov/documents/Committees/HealthInsuranceAdvisoryCouncil/affordability%202009%20/6_Issue%20Brief.pdf