Health Plan Weekly

Supreme Court to Determine States’ Ability to Regulate PBMs

January 23, 2020

The Supreme Court has agreed to hear a case that observers say ultimately could upend state-based efforts to regulate PBMs and potentially even lead to legislation on the federal level to rein them in. The lawsuit, which was brought by the Pharmaceutical Care Management Association, challenges a 2015 Arkansas law that requires PBMs to reimburse pharmacies at or above their wholesale cost for generic drugs.

By Jane Anderson

The Supreme Court has agreed to hear a case that observers say ultimately could upend state-based efforts to regulate PBMs and potentially even lead to legislation on the federal level to rein them in. The lawsuit, which was brought by the Pharmaceutical Care Management Association, challenges a 2015 Arkansas law that requires PBMs to reimburse pharmacies at or above their wholesale cost for generic drugs.

The case boils down to whether PBMs are acting as agents under the Employee Retirement Income Security Act of 1974 (ERISA) and therefore are exempt from state-level regulation, or whether they are a “non-interested party and therefore subject to regulation,” says Jeff Myers, founder of health care consulting firm OptDis. He says that he believes it’s likely the high court justices will side with PCMA and the PBM industry, agreeing that ERISA bars state laws like the one at issue in Arkansas.

“If the Supreme Court were to say states have the ability to regulate the PBM marketplace inside ERISA plans…it would give states an almost unlimited ability to force payers to pay a rate [to pharmacies] they deem sufficient,” Myers says. Independent pharmacy lobbies generally are quite powerful in states, and would demand higher rates, he says, adding that this would lead to higher drug prices overall.

If the Supreme Court rules that states can’t directly regulate PBMs, he adds, states may try to regulate them via insurers instead, and “stop attacking PBMs directly.” He says this is the more likely scenario, and something the nine justices could be keeping in mind as they consider this case.

“If the PBMs win, the precedent it sets is that states have no ability to control” them under ERISA plans, Myers says. “The only way you can do it is by going to the actual payer and saying, ‘This is a requirement for offering insurance in my state.’”

Optum, UHC Units Drive UnitedHealth’s Strong 2019 Performance

January 22, 2020

UnitedHealth Group beat analysts’ earnings-per-share estimate for 2019’s fourth quarter, driven by strong performance in both its UnitedHealthcare and Optum segments.

For the full 2019 calendar year, earnings from operations grew $2.3 billion, or 13.5% year over year to $19.7 billion, the company said. Full year adjusted net earnings per share of $15.11 grew 17% year over year.

By Jane Anderson

UnitedHealth Group beat analysts’ earnings-per-share estimate for 2019’s fourth quarter, driven by strong performance in both its UnitedHealthcare and Optum segments.

For the full 2019 calendar year, earnings from operations grew $2.3 billion, or 13.5% year over year to $19.7 billion, the company said. Full year adjusted net earnings per share of $15.11 grew 17% year over year.

“Underlying results were solid, with UnitedHealthcare (earnings $2.08 billion vs. consensus $1.88 billion) outperforming, while Optum was roughly in line (earnings $3.02 billion),” said Oppenheimer & Co. Inc. analyst Michael Wiederhorn in a Jan. 15 investor note.

UnitedHealth also predicted that its Medicare Advantage (MA) business — including dual-eligibles — would grow by approximately 700,000 people in 2020. Meanwhile, United’s medical loss ratio for full-year 2019 came in at 82.5%, in line with analysts’ expectations.

UnitedHealth’s MA plans grew to serve 5.3 million people by the end of 2019, up by 325,000 beneficiaries, and the company expects rapid MA growth to continue in both the individual and group retiree markets. “We are off to a strong start in Medicare Advantage this year,” Dirk McMahon, CEO of the UnitedHealthcare division, said during the company’s earnings conference call.

UnitedHealth’s Medicaid business also is performing well, with new contracts in Washington state, Texas and Nebraska, and more business possible in 2020 in North Carolina and Kentucky, Wiederhorn said.

Overall, UnitedHealth Group posted $60.9 billion in revenues and $5.1 billion in earnings from operations for the fourth quarter of 2019 for a 5.8% net margin. For all of 2019, revenues came in at $242.2 billion, while earnings from operations were $19.7 billion, with a 5.7% net margin.

‘Hotspotting’ Study Raises Questions About Social Determinants of Health

January 21, 2020

A newly published study suggests that efforts to improve care and lower costs associated with health care “superutilizers” — typically patients with complex medical and social challenges —aren’t always as effective as they’re heralded to be.

The subject of the study in question is the Camden Coalition of Healthcare Providers, which convened health systems, primary care officers, community organizations and other stakeholders in a bid to test whether short-term, intensive care management would help reduce the cost of caring for some of the hardest-to-treat patients after they’re discharged from the hospital.

By Leslie Small

A newly published study suggests that efforts to improve care and lower costs associated with health care “superutilizers” — typically patients with complex medical and social challenges —aren’t always as effective as they’re heralded to be.

The subject of the study in question is the Camden Coalition of Healthcare Providers, which convened health systems, primary care officers, community organizations and other stakeholders in a bid to test whether short-term, intensive care management would help reduce the cost of caring for some of the hardest-to-treat patients after they’re discharged from the hospital.

For the study, researchers randomly assigned 800 hospitalized patients with medically and socially complex conditions to the Camden Coalition’s care-transition program or to usual care. Medicare was the primary payer for 48% of the trial population, and Medicaid was the primary payer for 45% of the population. The study found that the 180-day readmission rate was 62.3% in the intervention group and 61.7% in the control group.

“I think that navigation and coordination is totally necessary, but it’s insufficient to solve the problem,” says Jeffrey Brenner, M.D., who founded the program, and is now senior vice president of integrated health and social services at UnitedHealthcare’s Community & State division. “In many instances we found we were navigating patients to nowhere,” he adds.

Brian Castrucci, CEO of the de Beaumont Foundation, says that the Camden Coalition experiment underscores how the health care industry is thinking about social determinants of health in the wrong way.

While it’s good that “we finally understood that there are social conditions that impact our health,” Castrucci says, “instead of dealing with those social conditions, we’re still trying to do it from an individual basis.”

“You don’t clean the fish tank by focusing on the fish. What this study has shown is that the context that people live [in] is a lot harder to deal with than just signing them up for a social worker, referring to housing — because when you refer someone to housing, it assumes that there is housing for them to be placed into,” he says.

Wall Street Analysts See Mostly Blue Skies for MCOs in 2020

January 16, 2020

Analysts from major financial institutions are cautiously optimistic about the value of managed care organization stocks during 2020, citing a more stable regulatory environment and rising revenues across the industry.

Over 2018 and 2019, markets were skeptical of MCOs’ value due to regulatory turbulence in the form of attempts to roll back the Affordable Care Act, according to a Jefferies report by analysts David Windley and David Styblo.

By Peter Johnson

Analysts from major financial institutions are cautiously optimistic about the value of managed care organization stocks during 2020, citing a more stable regulatory environment and rising revenues across the industry.

Over 2018 and 2019, markets were skeptical of MCOs’ value due to regulatory turbulence in the form of attempts to roll back the Affordable Care Act, according to a Jefferies report by analysts David Windley and David Styblo.

In particular, they cite the Texas v. United States court case, in which Republican attorneys general challenged the ACA’s constitutionality based on the elimination of the individual mandate’s tax penalty. In December 2018, U.S. District Court Judge Reed O’Connor ruled in favor of the plaintiffs, causing MCO stocks to drop. A subsequent appeals court ruling kicked most of the case back to O’Connor, which caused MCO stocks to rally but could prolong the litigation unless the Supreme Court agrees to take up the case.

But even before that ruling, MCO stocks had gained value in the latter half of 2019. The Jefferies report cites setbacks in ACA repeal efforts and strong third-quarter earnings, particularly from UnitedHealth Group, as reasons why MCO stocks have, in the report’s words, “outperformed the market by 20+ points.”

Still, analysts have some misgivings about the recent rally. Citi analyst Ralph Giacobbe suggests that the late 2019 correction might have pushed valuations too high. Despite his skepticism, Giacobbe does expect MCO revenues to continue to rise in the coming year.

So does a more optimistic Credit Suisse report by A.J. Rice, though it predicts that “most MCOs anticipate a stable to modest pickup in medical costs for 2020.”

Both the Credit Suisse and Citi reports anticipate stability, if not growth, in enrollment, citing growth in Medicare Advantage markets across the country.

AHIP Tests Automated Prior Authorization Initiative

January 14, 2020

Health insurer trade group America’s Health Insurance Plans (AHIP) is partnering with six insurers to test systems and technology designed to automate parts of the prior authorization process in a bid to develop best practices.

The initiative, which AHIP calls the Fast Prior Authorization Technology Highway, or Fast PATH, will run for six months, during which AHIP and its partners will collect data to be used for an evaluation of the processes and technology used. The trade group will attempt to determine how much money and time an automated system saves providers and insurers.

Health insurer trade group America’s Health Insurance Plans (AHIP) is partnering with six insurers to test systems and technology designed to automate parts of the prior authorization process in a bid to develop best practices.

The initiative, which AHIP calls the Fast Prior Authorization Technology Highway, or Fast PATH, will run for six months, during which AHIP and its partners will collect data to be used for an evaluation of the processes and technology used. The trade group will attempt to determine how much money and time an automated system saves providers and insurers.

Both providers and insurers are affected by cumbersome manual prior authorization procedures, although they don’t necessarily agree on what will fix the problems. Insurers say prior authorization is necessary and promotes good patient care, while physicians maintain prior authorization leads to worse outcomes in many cases.

In a search for common ground, AHIP joined with other industry stakeholders, including providers, two years ago to produce a consensus statement that laid out core principles for addressing prior authorization issues. Federal lawmakers also have considered requiring electronic prior authorization.

As for AHIP’s pilot, “the effect will be marginal at best as the small scale of this effort means physicians won’t see a material impact,” says Joe Paduda, principal with Health Strategy Associates LLC. “However, it may earn some good will.”

The Fast PATH pilot will address two common but critical prior authorization processes: approval for certain prescription medications and approval for medical and surgery procedures. The initiative will use technology from Surescripts for the prescription component of the project and from Availity, LLC, for the medical and surgical procedures authorization piece.

The program will help to determine what types of automation solutions have the potential for widespread adoption, and how much they might improve practice workflow. Insurers participating in Fast PATH will include: Anthem, Inc., Blue Shield of California, Cambia Health Solutions’ affiliated health plans, Cigna Corp., Florida Blue and WellCare Health Plans, Inc.