Willis Re Issues Public Comment on Centers for Medicare & Medicaid Services Proposed Rule

Targeted News Service

WASHINGTON, July 2 -- Daniel J. Melanson, executive vice president and health practice leader at Willis Re Inc., Portland, Maine, has issued a public comment on the Centers for Medicare and Medicaid Services proposed rule entitled "Medicare Program: Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and the Long Term Care Hospital Prospective Payment System and Proposed Policy Changes and Fiscal Year 2022 Rates; Quality Programs and Medicare Promoting Interoperability Program Requirements for Eligible Hospitals and Critical Access Hospitals; Proposed Changes to Medicaid Provider Enrollment". The comment was written on June 22, 2021, and posted on June 29, 2021:

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Willis Re Inc. (Willis Re) is pleased to comment on the Proposed Rule for the Medicare Program: Proposed Changes to the Medicare Shared Savings Program as published in the Federal Register on May 10th, 2021. Willis Re is a risk advisor and reinsurance intermediary that helps ACOs assess and mitigate risk through actuarial analysis and structuring of reinsurance options to protect the financial well-being of organizations as they work to improve the health of the population, reduce the cost of care and increase patient satisfaction. Our experience working with MSSP ACOs and other APM Entities informs our comments below.

BASIC Risk Track Advancement Deferral Option

In this notice of proposed rulemaking (NPRM), Medicare proposes to allow MSSP ACOs participating in the BASIC track's glide path the option to forgo automatic advancement along the glide path's increasing levels of risk for Performance Year (PY) 2022, and instead stay in the same risk track for another year. For PY2023, an ACO that elects this option would be automatically advanced to the risk track they would have been entering in the absence of this flexibility.

In recognition of the challenges MSSP ACOs face in the wake of the COVID-19 pandemic, including financial vulnerability and uncertainty around pent up demand for services, we support Medicare's proposal to allow BASIC track ACOs to remain in the same risk track for another year before skipping to the risk-track they would have been entering absent the advancement deferral option. For the same reasons and other considerations discussed in the following, we also urge CMS to reinstate reinsurance as an acceptable repayment mechanism for all MSSP ACOs in two-sided risk tracks. In particular, we recommend that CMS adopt aggregate reinsurance as an acceptable repayment mechanism; unlike specific coverage which caps losses for an individual beneficiary, aggregate coverage caps losses for the patient population in total and is much better aligned with programs that reconcile savings or losses at the population level and provides protection to both CMS as well as the participating ACO.

Background on MSSP ACO Repayment Mechanism

MSSP ACOs in two-sided risk arrangements "must establish a repayment mechanism to assure CMS that they can repay losses for which they may be liable upon reconciliation for each performance year under which they accept performance-based risk" (42 CFR Sec. 425.204(f)). Currently, the following three options are the only repayment mechanisms permissible to MSSP ACOs:/1

1. Funds placed in escrow established with an insured institution

2. A line of credit as evidenced by a letter of credit that the Medicare program could draw upon, established at an insured institution; or

3. A surety bond issued by a company included on the U.S. Department of the Treasury's List of Certified (Surety Bond) Companies.

For many APM Entities, having monies tied up in escrow or a line of credit is unrealistic, particularly in the wake of the COVID-19 pandemic. A surety bond is the only repayment mechanism for ACOs that do not have enough cash on hand. An aggregate performance-based reinsurance policy is very similar to a surety bond, but with several key advantages. First, when developed to mirror the structure of the MSSP program, aggregate reinsurance provides more risk protection for both the ACO and CMS than a surety bond. Surety bonds for MSSP ACOs cover the lesser of the following, in accordance with Sec. 425.204(f)(4)(ii):

1. 1% of the total per capita Medicare Parts A and B expenditures for its assigned beneficiaries, or

2. 2% percent of the total Medicare Parts A and B revenue of its ACO participants

Aggregate reinsurance, on the other hand, is structured to protect total losses, covering up to the maximum amount of dollars at risk. Second, reinsurance policies pay at the time of reconciliation, regardless of the financial health of the ACO, while surety bonds create much greater barriers for CMS to recover losses. Third, with historical data available the reinsurance market has been able to develop and use of experience rating models and the MSSP technical specifications to develop aggregate reinsurance products allows carriers to offer premiums that account for existing CMS protections and future program changes - a level of sophistication unmatched by the surety bond market.

Precedent to Allow Reinsurance as a Repayment Mechanism for MSSP ACOs

As discussed in the Medicare Final Rule "Medicare Shared Savings Program; Accountable Care Organizations-Pathways to Success and Extreme and Uncontrollable Circumstances Policies for Performance Year 2017" [CMS-1701-F2 and CMS-1702-F], published on 12/31/2018, CMS' prior decision to eliminate reinsurance as a repayment mechanism in MSSP was due to 1) concerns about administrative complexity, 2) ACOs had trouble obtaining reinsurance due to insurers' lack of experience and 3) because no ACO had established reinsurance as its repayment./2

In the two and a half years since this rule was published, the ACO reinsurance market has matured considerably; carriers and their underwriting companies have grown much more sophisticated, and many MSSP ACOs have bound reinsurance policies, along with Next Generation ACOs and Direct Contracting Entities. With more and more MSSP ACOs moving to two-sided risk tracks while concurrently grappling with cash flow constraints and uncertainty around pent up demand of health services, there is a greater market for reinsurance coverage and a greater demand to use that reinsurance policy to satisfy some or all of the repayment mechanism amount. To address concerns around administrative complexity, we recommend CMS develop standard criteria for acceptable reinsurance policies, like how CMS established criteria for financial institutions through which ACOs can secure other repayment mechanisms.

Establishing standard criteria for reinsurance policies to address administrative concerns

We recommend CMS collaborate with ACOs, insurance carriers, insurance brokerage companies and other stakeholders to implement a path forward that is administratively feasible. Through this collaboration, we recommend CMS establish standard criteria for reinsurance policies that would be accepted as repayment mechanisms. Examples of criteria include:

* Reinsurance policies provide aggregate coverage that is tied to reconciliation

* Reinsurance policies offer standard coverage terms that are tied to maximum risk exposure, the repayment mechanism amount or other program specific parameters

* Reinsurance policies have a standard range of options for deductibles set at a fixed percentage of the repayment mechanism amount

* Reinsurance policies account for program changes that occur during the performance period e.g., Public Health Emergency declaration

* Carriers binding reinsurance policies must have an "A" (Excellent) Rating by A.M. Best

* Carriers provide sufficient advanced notice to CMS before exiting the MSSP ACO market

In the aforementioned Medicare Final Rule for MSSP ACOs "Pathways to Success and Extreme and Uncontrollable Circumstances Policies for Performance Year 2017", CMS "declined commenters' suggestions to reinstate reinsurance as a permissible form of repayment mechanism arrangement" and said it "may revisit these issues in future rulemaking as we gain additional experience with program policies, and particularly as more ACOs participate under two-sided models, which we anticipate will be the result of this final rule."/3

In the aftermath of the COVID-19 pandemic, the time has come for CMS to revisit the issue of reinsurance as a permissible form of repayment mechanism arrangement. Through discussions with our MSSP ACO partners, we have concerns that failing to reinstitute reinsurance as a repayment mechanism will lead to deterioration in MSSP participation. To maintain robust participation in the program, we urge CMS to propose and solicit comment on this issue though the soonest NPRM possible.

We appreciate your consideration of our recommendations and look forward to your communication. Thank you for your commitment to advancing the value of care delivered to patients in our country. Should there be any questions regarding comments in this letter, please contact Daniel Melanson at [email protected] Sincerely,

Daniel J. Melanson

Executive Vice President, Health Practice Leader

Willis Re Inc.

Two Monument Square | Suite 800 I Portland, Maine 04101

W +1 207 274 6077

M +1 617 763 5067

[email protected]

willistowerswatson.com | willisre.com

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Footnotes:

1/ https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/sharedsavingsprogram/Downloads/Repayment-Mechanism-Guidance.pdf

2/ https://www.federalregister.gov/documents/2018/12/31/2018-27981/medicare-program-medicare-shared-savings-program-accountable-care-organizations-pathways-to-success

3/ https://www.federalregister.gov/documents/2018/12/31/2018-27981/medicare-program-medicare-shared-savings-program-accountable-care-organizations-pathways-to-success

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The proposed rule can be viewed at: https://www.regulations.gov/document/CMS-2021-0070-0002

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