Featured Health Business Daily Story, Jan. 2, 2018

CMS Draft Rule Aims to Change Medical Loss Ratio Calculation

Reprinted from HEALTH PLAN WEEK, the most reliable source of objective business, financial and regulatory news of the health insurance industry. Subscribe today!

By Judy Packer Tursman, Senior Reporter
November 27, 2017Volume 27Issue 42

From changing the way plans’ medical loss ratio (MLR) is calculated to allowing more plan flexibility on tailored benefit designs and encouraging the use of lower-cost medications, CMS covers a lot of ground in its proposed policy changes to Medicare Advantage (MA) and Medicare Part D, the prescription drug benefit program, for 2019. The agency released the draft regulations on Nov. 16; comments are due by next Jan. 16.

Under the proposed rule, CMS would significantly limit MLR reporting obligations and explicitly allow plans to include fraud prevention, detection and recovery expenses under quality improvement in the MLR numerator. It also would permit electronic delivery of more MA plan materials to beneficiaries, streamline how federal regulators review and approve materials used by MA plans to communicate with beneficiaries, and eliminate what CMS describes as “burdensome” MA enrollment requirements.

The agency projects that changes in its wide-ranging draft rule — 713 pages covering quality star ratings, marketing guidelines and drug rebates, among numerous provisions — would save about $195 million in the programs over five years.

“If finalized, the provisions of the Proposed Rule would impact a broad and diverse range of MA and Part D regulatory requirements, and would affect not only MAOs [i.e., MA organizations], but also health care providers, pharmacies, pharmaceutical manufacturers and others,” says a Nov. 20 McDermott Will & Emery analysis.

CMS said it is providing “new flexibility for customized” benefit designs. This “will allow additional plan variety and options, reduced cost sharing for customized benefits and different cost-sharing for beneficiaries that meet specific medical criteria.”

The agency said it also seeks to “provide greater flexibility to encourage lower maximum out of pocket levels of beneficiary cost sharing.”

Health Plan Week

CMS is drawing mixed responses to its proposed rule. The Pharmaceutical Care Management Association (PCMA), which represents pharmacy benefit managers, said in a statement the next day that, while it continues to review the draft, the group is “initially encouraged by provisions that promote the use of lower cost generics and biosimilars and make it harder for at-risk patients to go ‘drugstore shopping’ for opioids.” CMS seeks to codify the current Part D Opioid Drug Utilization Review (DUR) Policy and Overutilization Monitoring System (OMS) and integrate them with case management.

Yet PCMA was not entirely pleased with its first read of the draft regulations. New “any willing pharmacy” requirements outlined in CMS’s proposed rule “could put at risk the choice and affordability of preferred pharmacy plans — the most popular and widely chosen options in Part D,” the group said. “Protecting the stability of those plan options should be a top priority for regulators.”

Marilyn Tavenner, president and CEO of America’s Health Insurance Plans (AHIP) said CMS’s proposed rule reflects “a strong commitment to improving the patient experience, increasing flexibility and choice, and reducing regulation and red tape.”

CMS said it intends to clarify “that the any willing pharmacy requirement applies to all pharmacies, regardless of how they have organized one or more lines of pharmacy business.” CMS aims to revise the definition of retail pharmacy and define mail-order pharmacy.

Among the rule’s highlights:

  • It would allow midyear formulary changes. CMS is seeking more formulary flexibility, allowing Part D plan sponsors, for example, to immediately substitute newly released equivalent generics for brand name drugs at the same or lower cost-sharing. To do so, plans would have to meet revised requirements, including generally advising enrollees beforehand that such changes can occur without specific advance notice to them.

  • It would revise Part D tiering exceptions. CMS wants to eliminate the provision allowing plans to exclude a dedicated generic tier from the tiering exceptions process, and set up a framework based on the type of drug requested — whether brand, generic or biologic — and the cost-sharing for applicable alternative drugs.

  • It would encourage the use of lower cost drug alternatives. CMS seeks to do this by classifying follow-on biological products as generics for the purposes of cost-sharing for two types of Part D enrollees: those who don’t get the low income subsidy (LIS) and are in the catastrophic portion of the benefit, and subsidized enrollees through all phases of the benefit.

See the rule at http://tinyurl.com/y89uzmqm and MWE’s analysis at http://tinyurl.com/ybkjk9z6.


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