This week’s chapter discusses the various market segments and distribution channels for the MCOs. Outline the market segments and identify the most successful distribution channels for those markets. Use some outside research to support your statements. Why do you believe each distribution channel successfully reaches the targeted market?

Discussion Board Requirements: 250 word count One original post and two reply posts, APA Format, please include references

Chapter 6: Sales, Governance and Administration

Learning Objectives

Understand the basic structure of governance and management in payer organizations

Understand the basic elements of the internal operations of payer organizations, including:

Information technology (IT)

Marketing and sales, including insurance exchanges

Underwriting and premium rate development

Eligibility, enrollment and billing

Claims and benefits administration

Member services, including appeal rights

Statutory accounting and statutory net worth

Financial management

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Board of Directors

May be specific to a plan, may be pro-forma for a subsidiary of a larger company, etc.

Responsibilities:

Final approval of corporate bylaws

General oversight of the profitability or reserve status

Oversight and approval of significant fiscal events

Review of reports and document signing

Setting and approving policy

Oversight of the quality management program

In for-profit plans, responsibility to protect shareholders’ interests

In free-standing plans, hiring the CEO and reviewing CEO’s performance

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© P. R. Kongstvedt

Typical Key Management Positions

Chief Executive Officer/Executive Director

Chief Operating Officer/Operations Director

May be a separate position from CEO in large companies

If separate from CEO, the COO may also be the President

Chief Medical Officer/Medical Director

Vice President (or SVP or EVP) of Network Management

Chief Financial Officer/Finance Director

Treasurer

Chief Marketing Officer/Marketing Director

Chief Underwriting Officer

Chief Information Officer/Director of Information Systems

Corporate Compliance Officer

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Typical Key Operational Committees

Quality Management Committee

Credentialing Committee

Utilization Review Committee

Pharmacy and Therapeutics Committee

Medical Grievance Review and Appeals Committee

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Foundational Information Technology (IT) Systems

Key software functionality includes:

Benefit configuration

Employer group and member enrollment

Premium management

Provider enrollment, contracting and credentialing

Claims payment

Document Imaging and Workflow

Customer Servicing

Medical Management

Ability for two-way EDI with insurance exchanges, employers, state and federal government, members, providers, etc.

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HIPAA Mandated Electronic Transaction Standards

HIPAA requires covered entities that conduct certain electronic transactions to use only ANSI X12N 5010 defined standards

ACA is creating new standards and requiring more standardization of implementation

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Transaction Standard
Provider Claims submission ANSI X12 – 837 (different versions exist for institutional, professional, and dental)
Pharmacy claims NCPDP
Eligibility ANSI X12 – 270 (inquiry) ANSI X12 – 271 (response)
Claim status ANSI X12 – 276 (inquiry) ANSI X12 – 277 (response)
Provider Referral certification and authorization ANSI X12 – 278
Health care payment to provider, with remittance advice ANSI X12 – 835
Enrollment and Disenrollment in health plan* ANSI X12 – 834
Claims attachment (additional clinical information from provider to health plan, used for claims adjudication) ANSI X12 – 275 (not finalized at the time of publication), and HL7 CDA
Premium payment to health plan* ANSI X12 – 820
First report of injury ANSI X12 – 148 (not yet issued)
* These are for voluntarily but not mandatory use by employers, unions, or associations that pay premiums to the health plan on behalf of members.

Source: Compiled by author based on 45 CFR §160.920 and other sources at the Center for Medicare and Medicaid Services (CMS);

Accessible at http://www.cms.gov

HIPAA Mandated Privacy and Security Requirements

HIPAA requires high levels of privacy and security for electronic information, to:

ensure the confidentiality, integrity, and availability of electronic PHI;

protect against any reasonably anticipated threats or hazards to the security and integrity of electronic PHI;

protect against any reasonably anticipated uses or disclosures of electronic PHI not permitted by the HIPAA privacy rules; and

ensure compliance with the above by its workforce (Source: Federal Register, 45 CFR § 164.308)

There are eighteen standards for HIPAA security rules:

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Security Management Process Assigned Security Responsibility Workforce Security
Information Access Management Security Awareness and Training Security Incident Procedures
Contingency Plan Evaluation Business Associate Contracts
Facility Access Controls Workstation Use Workstation Security
Device and Media Controls Access Control Audit Controls
Integrity Person or Identity Authentication Transmission Security
Source: Federal Register, 45 CFR § 164.308(a & b), 45 CFR § 164.310(a-d); 45 CFR § 164.312(a-e)

Standardized SBC/SOC

ACA requires all health plans, including self-funded, must provide a standardized Summary of Benefits and Coverage (SBC), also called a Summary of Coverage (SOC) to all current and prospective enrollees

The SBC/SOC to be done in a uniform and common format that defines the number of pages, the exact information that must be provided, and even the size of the font

The SBC does not replace the far more detailed Evidence of Coverage (EOC), sometimes called a Certificate of Coverage or Certificate of Insurance

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Marketing vs. Sales

Marketing and sales are related but distinct activities

Marketing

Focus is on overall growth goals, strategies and tactics, management of the process

Compensation combination of salary and overall growth goals

Role in Insurance Exchange as well as outside exchange

Sales

The actual process of selling the plan’s offerings in the marketplace through any distribution channel

Compensation usually heavily weighted towards achievement of sales goals

No real role in the insurance exchange

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© P.R. Kongstvedt

Fundamental Elements of Marketing

Brand Management

External Communications and Public Relations

Advertising

Employer versus consumer advertising

Collateral texts: outdoor, direct

Market Research

Lead Generation

Sales Campaign Support

Heavily regulated for individual and small group market through the Exchange

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Distribution Channels by Market Segment

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Health Insurance Exchanges…

ACA created state-based American Health Benefit Exchanges and Small Business Health Options Program (SHOP) Exchanges, administered by a governmental agency or non-profit organization, through which small businesses with up to 100 employees can purchase qualified coverage

Separate exchanges for individuals to access coverage

Permit states to allow businesses with more than 100 employees to purchase coverage in the SHOP Exchange beginning in 2017

States may form regional Exchanges or allow more than one Exchange to operate in a state

Feds operate exchanges in states that refused to build them

Office of Personnel Management to contract with insurers to offer at least two multi-state plans in each Exchange. At least one plan must be offered by a non-profit entity

Creation of plan rating systems similar to that used in Medicare Advantage

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Health Insurance Exchanges (cont.)

Brokers still allowed to operate in this market segment for health

Exchanges do not prohibit a non-Exchange market for individual and group coverage, but rates must be the same if sold both in and outside of the Exchange

Require the Office of Personnel Management to contract with insurers to offer at least two multi-state plans in each Exchange. At least one plan must be offered by a non-profit entity

Each multi-state plan must be licensed in each state and must meet the qualifications of a qualified health plan

Members of Congress and congressional staff may only enroll in either plans created under ACA (e.g., CO-OPs) or in plans offered in Exchange – but this also required a “fix” because ACA as written did not allow of an employer contribution to coverage purchased through the individual exchanges

Two-way data exchange requirements are huge

© P.R. Kongstvedt

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Actuarial Services

Actuaries analyze the data and predict costs, adjusted for

Trend

Utilization

Costs

Benefits design

Behavioral shift

Distribution amongst different providers with different cost profiles

Actuaries generally do not create the rates, but only model costs

Large payers have their own, smaller and mid-sized plans use actuarial consulting firms

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Rating and Underwriting

Underwriting has had two distinct but related meanings:

Medical underwriting referred to using an individual’s or small group’s medical history to determine whether to offer coverage at all

General underwriting includes gathering of information to assist in the development of premium rates

Underwriters use the actuarial data and other factors to calculate rates

Three types of premium rating:

Community rating

Experience rating

Premium equivalent or imputed premium rates

Type of rating only affects the calculation of the base rate, not the mechanics of creating actual premium rates

Community rating requires the same base rate for all, though may be different for all individuals vs. all small groups

Experience rating uses base rate from actual costs of the group

Premium equivalent is calculated just like experience rating for the base rate