Lu Ma, FSA

Price transparency MRF callout to be aware of. In the files, you could see for inpatient services MS-DRG's and/or APR-DRG's. These are different billing methodologies to be aware of when comparing network rates by NPI. See breakdown below. Diagnosis Related Groups (DRGs) are a patient classification system that relates the type of patients a hospital treats with the costs incurred by the care. Medicare Severity-Diagnosis Related Groups (MS-DRGs) classify a Medicare patient’s hospital stay into various groups to facilitate payment. These are typically used on the commercial side as well for inpatient services.   APR-DRGs are more comprehensive and include four levels of severity of illness or risk of mortality for each case. These are used on the commercial insurance side if MS-DRG are not chosen. Similar to MS-DRGs, an APR-DRG payment is calculated using an assigned numerical weight that is multiplied by an individual fixed dollar amount. APR-DRGs, however, consider severity of illness and risk of mortality instead of only a complication or comorbidity. More than one significant diagnosis, procedures, age, discharge disposition, and sex can add to the APR’s clinical severity. There are four levels of severity of illness or risk of mortality are: minor, moderate, major or severe.   APR-DRGs and MS-DRGs are both systems of classifying hospital cases based on diagnosis and procedure, and expand upon the basic DRG list by Medicare. #pricetransparency #employeebenefits #costcontainment

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CMS is ending the #medicareadvantage #vbid model after CY 2025. ▶️ "The Centers for Medicare & Medicaid Services (CMS) is terminating the Medicare Advantage (MA) Value-Based Insurance Design (VBID) model at the end of 2025 due to the model’s substantial and unmitigable costs to the Medicare Trust Funds...As such, the model must be terminated at the end of 2025 to meet the CMS Innovation Center’s statutory requirements." ▶️ "CMS is committed to supporting a stable transition for all enrollees in MA plans participating in the VBID Model. Importantly, even with VBID’s termination, enrollees may be able to remain in their MA plan based on their plan’s decision in CY 2026 or will be able to choose a different MA plan or Traditional Medicare, depending on what best meets their needs during the 2026 Open Enrollment Period."  ▶️ "...Enrollees who choose to remain in MA will likely be able to access many of the same benefits after VBID’s termination (e.g., transportation to medical appointments, healthy food assistance), because many elements of the VBID model have become benefits that can be offered in the MA program...In particular, SSBCI allows MA plans to offer similar interventions to those available under the VBID model. MA plans will be able to leverage similar pathways and help enrollees maintain access to supplemental benefits that meet their needs." ▶️ "CMS recognizes some beneficiaries may experience disruption to Part D cost sharing in CY 2026 due to the end of the VBID model. CMS strives to make prescription drugs more affordable for millions of Americans by continuing the improvements to the Part D prescription drug program enacted in the IRA – including the expansion of the Low-Income Subsidy – and through continued development of the CMS Innovation Center’s voluntary Medicare $2 Drug List model, which CMS aims to start in January 2027. CMS will also coordinate closely with beneficiary and consumer advocacy groups and the State Health Insurance Assistance Programs to assist beneficiaries in the 2026 Open Enrollment Season."

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Another great post form Chris Deacon. This one provides insight on how supposed "Non-Profit" Big Health Insurance companies behave just like their For-Profit peers.

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Let’s talk about vertical integration and how it impacts E=CUP, the equation for healthcare costs. On Monday, I broke down the basic algebraic equation behind total costs. Yesterday, I covered how the MLR (Medical Loss Ratio) incentivizes insurers to pay more, not less, in claims. Today, we’re diving into how insurers use vertical integration to influence costs and revenue. What is vertical integration? It’s when a company owns its supply chain. If you sell lightbulbs, this could mean owning the lightbulb manufacturer, the shipping company, and the retailer. A famous example: Luxottica. They don’t just design sunglasses—they manufacture, retail, and insure them. A powerful model. But in healthcare? This model interacts with MLR in ways that might surprise you. Here’s the hypothetical: • Insurance Co. contracts with two doctors: Dr. Independent and Dr. Company. • Both doctors work in the same building and provide identical services. The difference? Every dollar Insurance Co. pays Dr. Independent leaves their dominion forever. But with Dr. Company—who sold their practice to Insurance Co.—the money simply moves from one pocket to another. Now, Insurance Co. has an incentive to pay higher costs per claim (P) to Dr. Company. Why? Because it boosts their claims costs (MLR calculation) while keeping more revenue in-house. Since the ACA mandated an MLR, vertical integration has skyrocketed in the healthcare space. • The largest employer of physicians in the U.S.? A health insurance company. • 80% of Americans get their pharmacy benefits through just three insurers. What does vertical integration look like in health insurance? Take a look at the graphic from Drug Channels Institute, an HMP Global Company below. Vertical integration isn’t inherently wrong. But when price manipulation is rewarded by the system, it can drive higher costs for all Americans—straining personal and national budgets alike. When P increases without commensurate reductions in C or U, E increases. Let’s rethink how our healthcare systems incentivize behaviors. What are your thoughts on vertical integration and its impacts? P.S. If this resonated with you, consider resharing to your network.

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What Does the Public Think of Risk-Based Pricing? I recently came across a fascinating report (published in September) based on a survey of around 900 people in the USA, exploring public attitudes toward insurance pricing. While public sentiment on pricing can be challenging to assess, since everyone naturally wants to pay less, this survey offers some insightful takeaways. 🚘 Key Highlights on Car Insurance: - Motoring convictions: Only 10% oppose higher premiums for drivers with convictions. - Gender-based pricing: Surprisingly, only 17% support pricing by gender, even though this is standard in most U.S. states. - Causal links to claims: Most respondents favour using factors with a clear causal link to claims experience. ✳️ Risk-Based vs. Mutualised Pricing: There's a consensus that risk-based pricing is appropriate for car insurance, while health insurance should be more mutualised. However, even for health cover, many respondents support higher premiums for those with clearly unhealthy lifestyles. 🌊 On Flood Insurance: This is where it gets really interesting: - A majority support risk-based pricing for flood insurance, even in cases where it might make coverage unaffordable. Only 30% objected to risk-based flood pricing in such scenarios. - When asked if they were willing to subsidise others by paying more themselves, only 30% supported mutualisation of flood risk. Similarly, just 30% thought the government should subsidise flood insurance when shown specific cost scenarios. ♾️ My Takeaway: While these findings may not map directly to the UK or European markets, they highlight an interesting public preference for fairness tied to risk rather than broad mutualisation or subsidisation. This is particularly noteworthy in areas like flood cover, where affordability is a significant challenge. Of course, surveying public opinion on pricing is inherently tricky - people often lean toward answers that reduce their own costs. Still, this report offers valuable insight into how consumers perceive fairness and responsibility in insurance pricing. What are your thoughts on these findings? Could they signal trends relevant to other markets? 🔷 Join the Price Writer Pricing Software Demo Days! Discover the latest in pricing software from leading providers, all in one place. What’s in store? 🖥️ Choose from 7 Exciting Demonstrations ⏰ Quick & Convenient: Each demo is just 1 hour. 📅 Attend live on 28th, 29th, or 30th January 2025 or catch up with 24-hour replays. 🎟️ Completely Free 👉 Register Now: https://bit.ly/3ZqsYhC #InsurancePricing #GeneralInsurance #PandCInsurance #PriceWriter

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📰 White paper release: Stars in Retrograde – Decoding the 2025 Decline The 2025 Medicare Advantage Star Ratings brought significant changes to the quality landscape, challenging health plans to rethink their strategies. Our latest Milliman white paper authored by Hayley Rogers and Matthew Smith dives into key factors affecting this year’s decline, including: ⭐ Sharp decline in Quality Bonus Payments (QBP): The member-weighted average fell below 3.5% for the first time, impacting revenue. See Figure 1 for number of contracts by change, with more contracts negatively impacted. ⭐ Rising impact of Social Risk Factors (SRFs): Plans with high SRFs saw more substantial rating drops, highlighting the need for targeted quality improvements. ⭐ Legal landscape: Multiple Medicare Advantage organizations are challenging the Star Rating methodology, including issues with transparency and data reliability. ⭐ Market restructuring: Fewer new entrants and increased contract consolidations may signal further Star Rating declines, with profound implications for future quality initiatives. Learn more about these industry-wide shifts and what they mean for healthcare policy and strategy. 📄 Read the full white paper to prepare your organization for what's next. Link in comments

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New Tshirt idea: "HEALTH ACTUARIES do it with diseases." So Health Actuaries, now that I have your attention, this article by Greg Fann is a must read. And the conversation is a must have. We've lost sight of what risk adjustment is. In this article, Greg brings us back to the fundamentals. Rating risks appropriately: In a world where any rating variables are fair game, the company that best uses all of them wins. Risk adjustment: Bridges the gap created when carriers are not allowed to use certain variables. Fundamental premise: The rates should dictate the rules of risk adjustment. But in today's rate review world, the risk adjustment is often dictating the rates. Can we figure out a solution? Are there any working groups that are addressing it? If there are, my bad, exams (ha, ha) have been blocking my view. https://lnkd.in/gF_pmGca

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Great explanation, which would be easy to miss. Thanks for pointing it out.

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This is an important post in order to understand how the Big Health Insurance companies are manipulating the ACA's Mandatory Loss Ratios and why they have no interest in holding cost down. "UnitedHealthcare pays Optum billions for services like pharmacy benefits and clinical support. These transactions appear in Optum’s revenue but are eliminated from the consolidated financials. The result? We lose sight of how much profit is extracted internally versus earned externally. This opacity shields the true financial power of UnitedHealth’s ecosystem. "Moreover, UnitedHealth can (and does according to recent studies) set artificially high prices for Optum’s services, passing these costs to employers and patients through higher premiums and out-of-pocket expenses. Eliminations can quietly erase these inflated internal transactions on the books, but the financial pain for those paying for care is very real. "By controlling both payer and provider roles, UnitedHealth can steer patients toward Optum-owned services and manipulate formularies to its advantage. Eliminations act to erase the financial trail, making it harder to challenge how this dual role distorts the healthcare market. "$165 billion in UnitedHealth Group eliminations aren't just accounting adjustments—they’re a proof that vertical integration deserve scrutiny from regulators, employers, and anyone concerned about rising healthcare costs."

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eHealth (EHTH), a Medicare eBroker, released Q2 '24 results last week. Here are 12 important financial metrics: 1\ MA LTV up 4% YoY -current Q: $927 -prior year same Q: $891 2\ MS LTV up 27% YoY -current Q: $1,112 -prior year same Q: $875 3\ IFP LTV mixed YoY Non-qualified Health Plans up 7%: -current Q: $353 -prior year same Q: $329 Qualified Health Plans down 1%: -current Q: $354 -prior year same Q: $357 Note: “IFP” stands for Individual and Family Plans 4\ Medicare Customer Acquisition Costs (”CAC”) down 4% YoY Made up of 2 components: Customer Care and Enrollment (”CC&E”) per approved policy down 15% -current Q: $599 -prior year same Q: $706 Marketing per approved policy up 15% -current Q: $457 -prior year same Q: $396 5\ IFP Acquisition Costs (”CAC”) up 20% YoY Made up of 2 components: Customer Care and Enrollment (”CC&E”) per approved policy up 23% -current Q: $284 -prior year same Q: $230 Marketing per approved policy up 5% -current Q: $59 -prior year same Q: $56 6\ Total Approved policy counts down 7% YoY -current Q: 56,568 -prior year same Q: 60,768 7\ MA Approved policy counts up 6% YoY -current Q: 37,638 -prior year same Q: 35,597 8\ MS Approved policy count down 33% YoY -current Q: 1,954 -prior year same Q: 2,923 9\ Total Revenue down 1% YoY -current Q: $65.86 million -prior year same Q: $66.77 million -includes $9.0 million non commission revenue 10\ Operating Loss increased 7% YoY -current Q: $(27.96) million -prior year same Q: $(26.15) million 11\ Commission Receivable Balance up 5% -current Q: $832 million -prior year same Q: $790 million 12\ Valuation Metrics -Market Cap: $127 M ____ Like, comment and share! I post Medicare market insights daily. P.S. -> sign up for my free weekly newsletter. Designed to keep busy leaders informed and up-to-date. https://lnkd.in/gmv65ipM

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Despite the challenges of cost pressures and catastrophic events, insurers are leveraging advancements in data and analytics, as well as innovative solutions, to effectively identify low-risk properties within the same ZIP code. My colleague, Nathan Golia, Senior Analyst on Celent's P&C Insurance team, dives into how these cutting-edge technologies are empowering insurers to make informed decisions and maintain their position in risk management. Learn more > https://lnkd.in/eVfMxMcr

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ICHRAs and the individual market risk pool: "The lack of a large, continuous enrollment base has led to instability. Insurance risk pools need large volumes of consistent enrollment for insurers to be able to reasonably predict future costs. Regardless of the composition of migrating individuals, an increase in the individual market size alone would increase stability and predictability to at least some extent." "However, by virtue of being employed, an actively-at-work population indicates a healthier membership. Also, healthy individuals less inclined to purchase individual health coverage are more likely to enroll when coverage is sponsored and partially subsidized by their employer. Migration of workers to the individual market will help minimize claim variation, add to balance of the risk pool, and lower average costs in the market."   https://lnkd.in/gE2uFR9c "Are Individual Coverage Health Reimbursement Arrangements the next big thing for the exchanges and employers? Most employers wish they were not in the health insurance business. Saying like, "Here’s a set amount of money, go do whatever the hell you want," there may be an appetite for that. I can also see some employers who are a little more paternalistic saying, "Well, then we're worried people will get bad coverage. They will buy a cheap plan and then we'll have more absenteeism." So I think it's too early to judge whether it would be welcomed by a majority of employers. But it might improve the risk pool. One would assume that people coming out of an employee benefit program have had access to good coverage all along, and probably are either under care for ongoing issues or always have been able to address issues if they came up." https://lnkd.in/gGXM_MQv Stacy Edgar Daniel Cruz

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Can Reciprocal Insurance Exchanges (RIE) change the game for insurtech valuations? Clearcover recently launched an RIE—a move that largely went unnoticed but shouldn’t be overlooked. For insurtechs frustrated with the MGA model, this should be a big deal. While reciprocals are an old concept, they’re making a comeback for good reason. Unlike the carrier/MGA model, the Attorney-in-Fact (AIF) in a reciprocal isn’t exposed to balance sheet risk, which investors like and reward with higher valuations. Think of a reciprocal like a mutual fund—owned by policyholders but managed by an AIF, which oversees operations in exchange for a percentage of the premiums. (Read Sean Harper's post at Kin Insurance) This model has proven to be successful, with over 60 reciprocal exchanges in the U.S., including top carriers such as Farmers Insurance, USAA, Erie Insurance Group (Market Cap of $21B), and PURE Insurance (acquired by Tokio Marine Group for $3B). The surplus and capital of these exchanges are generally contributed by policyholders, which helps align their interests with those managing the risk. Insurtechs like Kin Insurance and Branch have already embraced this model, and I believe more insurtechs should take note. Reciprocals could be a key strategy to unlocking higher valuations and sustainable growth. 👏 Congrats to Clearcover and Kyle Nakatsuji on the launch!

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Everyone in the Medicare space should absolutely take a moment to read this article. It is an incredibly well written article from Sachin H. Jain, MD, MBA, explaining the confusing landscape of STAR Ratings and the need for reform regarding this particular CMS model. Well done Sachin!

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eHealth (EHTH), a Medicare eBroker, released Q1 '24 results yesterday. Here are 12 important financial metrics: 1\ MA LTV up 6% YoY -current Q: $952 -prior year same Q: $901 2\ MS LTV up 9% YoY -current Q: $957 -prior year same Q: $880 3\ IFP LTV mixed YoY Non-qualified Health Plans down 4%: -current Q: $385 -prior year same Q: $400 Qualified Health Plans up 4%: -current Q: $402 -prior year same Q: $387 Note: “IFP” stands for Individual and Family Plans 4\ Medicare Customer Acquisition Costs (”CAC”) up 12% YoY Made up of 2 components: Customer Care and Enrollment (”CC&E”) per approved policy up 20% -current Q: $419 -prior year same Q: $349 Marketing per approved policy up 5% -current Q: $415 -prior year same Q: $396 5\ IFP Acquisition Costs (”CAC”) up 43% YoY Made up of 2 components: Customer Care and Enrollment (”CC&E”) per approved policy up 44% -current Q: $161 -prior year same Q: $112 Marketing per approved policy down 45% -current Q: $58 -prior year same Q: $40 6\ Total Approved policy counts up 1% YoY -current Q: 98,259 -prior year same Q: 97,576 7\ MA Approved policy counts up 9% YoY -current Q: 65,750 -prior year same Q: 60,451 8\ MS Approved policy count up 35% YoY -current Q: 6,182 -prior year same Q: 4,585 9\ Total Revenue up 26% YoY -current Q: $92.96 million -prior year same Q: $73.7 million -includes $12.0 million non commission revenue 10\ Operating Loss improved 22% YoY -current Q: $(17.9) million -prior year same Q: $(22.9) million 11\ Commission Receivable Balance up 5% -current Q: $845 million -prior year same Q: $802 million 12\ Valuation Metrics -Market Cap: $155 M ___ If this is helpful, like, comment and repost. Then give me a follow! Also, sign up for my free newsletter "Medicare Market Insights". https://lnkd.in/gmv65ipM

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This strikes me as a significant development. Allowing employers to access the ACA individual marketplace has always been an interesting discussion. I wrote about the risk pool implications in 2017 when federal regulations were a bit cloudy before the codification of ICHRAs. HealthSherpa has a big footprint in the individual market; it will be interesting to watch this play out. https://lnkd.in/gE2uFR9c

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