Why pay taxes? Likely to avoid the potential consequences of tax evasion. Why slow down after spotting a police car? Likely to avoid getting a ticket. Closed-circuit television cameras, exam proctors, election observers, and other forms of surveillance can impact behavior. Think Hawthorne effect or observer effect, or what some describe as the sentinel effect. And when there are penalties for “bad” behavior, the impact of surveillance is even greater.
State and federal regulators surveil payers and directly or indirectly mete out penalties, as do employer and government purchasers and their consultants, the press, academics, the National Committee for Quality Assurance, and trade and advocacy organizations. So, what can payers get away with? Not much!
Let’s count the ways payers are monitored.
1. Benefits covered
Large public and private purchasers buy care for the vast majority of lives. These purchasers and their consultants know — and often stipulate — which benefits are covered and carefully review detailed utilization and cost reports to help ensure they are getting what they paid for and inform their future purchases.
2. Access managed
Large purchasers regulate formularies and medical policies that determine market access for covered products, tests, and procedures. Managed Markets Insight & Technology (MMIT) and Decision Resources Group (DRG) closely monitor market access for drugs covered under the pharmacy and medical benefits, and this information is sold to manufacturers and consulting firms for further analysis and reporting.
3. Amounts charged
Purchasers, benefits consultants, and brokers closely monitor premium inflation. The ACA also requires payers to publicly explain any rate increase of 10% or more for the more vulnerable individual and small-group markets. In partnership with states, HHS thoroughly reviews rate increases. Despite such scrutiny, premiums are, not surprisingly, on the rise. How else could the cost of innovation be absorbed?
4. Profits earned
The ACA established minimum standards for the medical-loss ratio (MLR), or the percentage of premiums insurers spend on health care costs and quality-improvement activities: 80% for the individual and small-group markets and 85% for the large-group market. Insurers can use remaining premium dollars on administrative, overhead, and marketing costs, and profits. State insurance departments watch insurers’ MLR closely. If the MLR percentage goes below these thresholds, then insurers must issue rebates to consumers and employers. For self-insured employers, MLR is not a “thing,” and, therefore, not monitored.
5. Capital reserved
State regulators monitor risk reserves and require insurers to maintain minimum levels of cash reserves to ensure that losses can be covered. As even further motivation to insurers, maintaining even larger reserves can improve their Standard & Poor’s credit ratings. In contrast, self-insured employers typically rely on stop-loss insurance to guard against bankruptcy, and the amount of stop-loss insurance purchased is not regulated.
6. Disputes handled
Denials are predictable and common, and insurers’ responses to appeals — including internal appeals and external reviews by an independent third party — are strictly regulated. ERISA has requirements for appeals under self-insured plans as well. Providers and consumers are increasingly aware of their rights to appeal.
7. Analyses conducted
Large purchasers require payers to report a significant amount of performance data including, but not limited to, Healthcare Effectiveness Data and Information Set (HEDIS) data. Payers measure management and manage measurement. NCQA uses HEDIS data to accredit health plans, and, in turn, purchasers and consumers can use NCQA accreditation when selecting plans.
The costs and benefits of surveillance
Clearly, surveillance provides purchasers and consumers protection. But at what cost? Surveillance is not free. How much do we spend monitoring payers? Good estimates are not readily available. How much of this spend crowds out spend on care? And to what extent does this surveillance stifle innovation by payers? Such estimates are nowhere to be found.
Surveillance for protection is good, but surveillance simply for the sake of surveillance may do more harm than good. Insurers are monitored more closely than self-insured employers. But to what end? Are insurers’ outcomes better or costs lower? A rigorous analysis measuring the costs of surveillance for insurers and self-insured employers and the impact of this surveillance on clinical and financial outcomes might help to inform and optimize payer monitoring. Invariably, some of what payers do is overmeasured, and some is likely undermeasured. It’s time to pump the brakes and audit how we surveil payers.
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