ACO Reinsurance is Available For Medicare Shared Savings Programs Track 2- Two Sided Model
The approach of spring signals new things; in the Accountable Care Organization world on April 1,2012 those who have been selected to participate in track 2 Medicare Shared Savings Programs will be selected. Those who selected the Track 2 will be assigned a patient group. Accountable Care Organizations can share in up to 60% of the savings, and conversely they can also share in the losses after a 2% minimum is achieved.
CMS will give a per year per member, or PYPM, factor which is based on past payment per member. This has been adjusted for trend, and there has been adjustment for the chronically ill hopefully assuring that the Accountable Care Organizations does not get an inordinate amount of patients with known morbid diagnosis.
The math will look like this:
5,000 ACO patients x $13,000 (cost that CMS feels it will pay this year per patient) = $65,000,000.
The $65 million will be the target budget, and through coordination of care, EMR, preventative medicine, and other services the cost will be driven down and will improve patient morbidity. The Accountable Care Organizations will share in the savings. If they blow the budget then they have to pay CMS a penalty based on a small percentage of the losses.
The ACO must post cash, bond, LOC, or reinsurance to assure there will be some security, so that if there are losses the Accountable Care Organization’s part is secured. ACO reinsurance presents some challenges since there are no off the shelf solutions. The reinsurance company will have multiple risks to access. However it is not outside of the lexicon of provider stop loss; it is also called Managed Care Excess, provider stop loss reinsurance, or capitated stop loss.
Our company was an early pioneer of provider stop loss; over 20 years ago, we created many of its applications along with some bold reinsurance companies. Provider Stop Loss was designed to provide per patient protection for a capitated provider. There is a deductible per patient and once it is met, the reinsurer reimburses the provider. The ACO reinsurance policy will need this type of outlier protection so that if the patients that are assigned have significant shock loss there needs to be protection for the Accountable Care Organization. If they have a fair number, this could cause the ACO to exceed its budget and the reinsurance will be there as an outlier to reimburse the provider, who now owes its penalty for exceeding the budget. There is also an aggregate need, which would basically take the total budget and use this as the aggregate deductible and once it is exceeded by X% the ACO reinsurer pays the claim.
We at HCP National have been working with our reinsurance companies for years to create an ACO reinsurance product. We have a wide range of products that we offer and can help you expand your insurance portfolio. Contact us for more details, (888) 478-6756.
