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CMS Backtracks on Star Penalty for Plans under Intermediate Sanctions

CMS Backtracks On Star Penalty For Plans Under Intermediate Sanctions

Fresh off issuing its 2017 Call Letter where it stayed the course (and even ramped up) on strong compliance and quality mandates, the Centers for Medicare and Medicaid Services (CMS) seemingly backtracked on a major policy last week.

We say seemingly because on the face of it, the 2012 policy has yet to be implemented in any major form and some would argue it was entirely draconian. The policy calls for the reduction to 2.5 Stars for any plan that has been subjected to Intermediate Sanctions (suspension of marketing or enrollment). For plans already at 2.5 Stars or below, they would be reduced by one more Star.

The rollback in the policy was very much instigated by the recent leveling of Intermediate Sanctions on Cigna Healthcare, which is in the process of a merger with Anthem, the nation’s second largest insurer. Hundreds of millions in additional “rebate” dollars and quality bonus payments (the revenue dedicated to enhancing member benefits) were at risk for Cigna if CMS followed through with the original policy.

There are certainly pros and cons regarding the original policy as well as CMS’ recent action. On one hand, some policymakers argue that if a plan is egregiously non-compliant (the very definition of intermediate sanctions), why shouldn’t it be penalized beyond just freezing enrollment? For example, isn’t compliance with turnaround times, processes, and protections for authorizations, appeals, and grievances (among other important issues) an important indicator of quality?

On the flip side, opponents of the original policy claim there is little empirical tie between performance on audit and quality and the policy would have had a disproportionate impact on high-performing plans compared with lower performing ones. Most importantly, the punitive nature of dropping a plan from high performing to 2.5 Star would create serious concerns about plan sustainability, as well as member concern on level of benefits and plan services.

Indeed, Cigna was the case in point. Cigna has a number of 4 and 4.5 Star plans. It even has one 5 Star plan in 2016. Cigna still needs to work its way out of suspension, but its premium is protected at least through 2017. This helps protect some of its market share in the meantime, by supplying the added revenue for better benefits to members. With the average time to get out from under suspension now over one year and the unlikelihood of a complete cleanup in CMS’ eyes before March 31, it was a godsend for Cigna for its 2017 bidding.

CMS also notes that when the policy was first announced back in 2012 relatively few contracts were high performing and covered a small fraction of overall members. In its recent announcement, CMS suspended its policy with a promise to refine its approach in the 2018 Call Letter. It also left open the possibility of Civil Money Penalties (CMPs) on such plans, although that is usually a step taken before imposition of intermediation sanctions.

So CMS erred on the side of caution and can be forgiven for a small backslide, given its tremendous accomplishments. But it has many asking why it didn’t just include it in the recent Draft Call Letter where it might have led to less rumblings about a major corporate giveaway.

As the great America watcher Alexis de Tocqueville might have said, “Ah….. les rouages du gouvernement!”

Marc Ryan

Marc S. Ryan serves as MedHOK’s Chief Strategy and Compliance Officer. During his career, Marc has served a number of health plans in executive-level regulatory, compliance, business development, and operations roles. He has launched and operated plans with Medicare, Medicaid, Commercial and Exchange lines of business. Marc was the Secretary of Policy and Management and State Budget Director of Connecticut, where he oversaw all aspects of state budgeting and management. In this role, Marc created the state’s Medicaid and SCHIP managed care programs and oversaw its state employee and retiree health plans. He also created the state’s long-term care continuum program. Marc was nominated by then HHS Secretary Tommy Thompson to serve on a panel of state program experts to advise CMS on aspects of Medicare Part D implementation. He also was nominated by Florida’s Medicaid Secretary to serve on the state’s Medicaid Reform advisory panel.

Marc graduated cum laude from the Edmund A. Walsh School of Foreign Service at Georgetown University with a Bachelor of Science in Foreign Service. He received a Master of Public Administration, specializing in local government management and managed healthcare, from the University of New Haven. He was inducted into Sigma Beta Delta, a national honor society for business, management, and administration.

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