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Comparison of Consumer Protections in Three Health Insurance Markets: Medicare Advantage, Qualified Health Plans and Medicaid Managed Care Organizations

Private plans that provide health coverage to people with Medicare or Medicaid, and in the new Marketplaces collectively serve more than 70 million Americans as of January 2015 – and the numbers are on the rise.1 These plans – Medicare Advantage plans, Qualified Health Plans (QHPs) and Medicaid Managed Care Organizations (MCOs) – operate under rules established by the federal government, many of which are designed to ensure that enrollees have access to coverage and the full scope of benefits and providers to which they are entitled. The rules for plans in each of the three markets differ, even though each market is overseen and regulated, to some degree, by the same federal agency, the Centers for Medicare and Medicaid Services (CMS). In addition, Medicaid MCOs and QHPs may be subject to more stringent consumer protection standards established and enforceable by the state in which they operate.   This report examines similarities and differences in federal consumer protection standards for Medicare Advantage plans, QHPs, and Medicaid MCOs. It focuses on rules established at the federal level, though some states have chosen to go above the federal minimums and impose additional requirements for QHPs and Medicaid MCOs.

These three insurance markets were created at different times, for different purposes and for different populations, and to some extent, the different set of rules in which plans operate reflect this diversity. While Medicare is a purely federal program, Medicaid is a joint federal/state program, and the Marketplaces are subject to minimum federal standards but can be administered by either states or the federal government, or the two in partnership. Medicare was designed to serve people ages 65 and older, and younger people with disabilities, without regard to income. Medicaid is a program for individuals with low-incomes and also is a major source of coverage for people with disabilities. The Marketplaces were created to provide insurance to non-elderly people without access to other sources of coverage. The consumer protections now in place for both Medicare Advantage and Medicaid MCOs have evolved over time, and in response to issues that have emerged over many years. The rules for Marketplace plans are relatively new, developed and implemented following enactment of the Affordable Care Act.

Our comparison of the federal consumer protections requirements for Medicare Advantage, QHPs and Medicaid MCOs finds some similarities across the three markets, as well as several notable differences that could have important implications for consumers (See Table ES-1). In some instances, the different set of rules across the three markets can be easily explained; for example, differences in allowable cost-sharing reflect different statutory requirements. However, the rationale for other differences – such as minimum coverage standards for prescription drugs, network adequacy standards, appeal rights when claims are denied, and the circumstances under which an enrollee may change plans mid-year – is less clear.

While beyond the scope of this paper, further work is needed to explore whether the different set of rules for plans that provide coverage to Medicare, Marketplace and Medicaid enrollees are in the best interest of consumers, plans, and the federal government. Many insurers operate in all three markets – so inconsistencies in applicable standards can add to administrative burden. In addition, individuals can and do move between these different sources of coverage, sometimes within the same calendar year, and may also be confused, if their rights and protections shift abruptly following an enrollment change. At the same time, it is important to not dilute existing consumer protections simply for the sake of achieving uniformity, particularly provisions needed to safeguard vulnerable populations. Analysis of the reasons for and impact of some of these differences could inform whether more consistency across programs would be helpful.

Table ES-1. Key Differences in Medicare Advantage, QHPs and Medicaid MCOs
Medicare Advantage (MA) QHPs Medicaid MCOs
Benefits:General approach Must cover same benefits as traditional Medicare; no flexibility to substitute benefits, but can add additional benefits Must cover benefits in 10 essential benefit categories with the flexibility to define benefit categories and substitute one benefit for another within categories All federally required Medicaid benefits and others at state option
Prescription drugs Must cover substantially all drugs in six protected classes (e.g., cancer medications); must also cover 2 or more drugs in each category; must have Pharmacy & Therapeutics (P&T) Committee for coverage decisions No protected classes; must cover the greater of the number of drugs in a class covered by the “benchmark plan”, or 1 drug in each class; like MA, must have P&T Committee, starting in 2017 Must cover all FDA approved drugs with rebate agreements (if state opts to cover prescription drugs and deliver through MCOs)
Cost-sharing:General approach Some limits on variations in cost-sharing from traditional Medicare Discretion to vary cost-sharing within metal categories Limited cost-sharing at state option; certain populations and services exempt
Out-of-pocket limit $6,700 for A & B plus a soft cap of $4,700 for Part D in 2015, with 5% coinsurance above cap $6,600 per individual for all benefits, including prescription drugs, in 2015, rising to $6,850 in 2016 5% of monthly or quarterly income
Balance billing and cost-sharing limits
Out-of-network providers cannot balance bill for services rendered and covered by the plan;
Cost-sharing for covered services in HMOs generally limited to in-network amounts
No balance billing restrictions on non-contract providers, including emergency services;
Cost-sharing limited to in-network amounts for emergency services provided out-of-network
Balance billing limits similar to MA;
Cost-sharing limits similar to MA, with additional protections for individuals with incomes below 100%FPL
Cost-sharing and premium subsidies for low-income enrollees Subject to an asset test, cost-sharing subsidies available for people with incomes up to 100% FPL for Part A & B benefits and up to 150% FPL for Part D benefits and premiums, and Part B premium subsidies for incomes up to 135%FPL Not subject to an asset test, cost-sharing reduced for individuals up to 250% FPL; premium subsidies available for people with incomes up to 400% FPL Not applicable
Enrollment: Enrollment defaults Default is traditional Medicare Default is no coverage Depends on state rules; can mandate MCO enrollment
Rules to switch plans due to provider network changes Limited allowance to change plans if plan makes “significant” mid-year provider network terminations No allowance to change plans mid-year if plan terminates providers from networks Some allowances for mid-year changes in managed long-term services and supports providers
Minimum medical loss ratios (MLRs) At least 85% of revenues must be spent on healthcare At least 80% of revenues must be spent on healthcare No similar federal requirement
Provider network requirements Must meet time and distance minimums. Plans not required to report claims from out-of-network providers No time and distance minimums required. Plans required to report claims from out-of-network providers; rule not implemented Similar to MA
Notices, appeals and grievances:Denial notice content and external appeals
Required to provide standardized notices created by CMS
CMS selects the independent review organization (IRO) for external appeals
Notice requirements mirror those for ERISA/self-insured group health plans (less robust)
In 8 states, insurer can select IRO for external appeals; parallel to ERISA for self-insured group plans
Notice requirements are detailed
External appeals through state fair hearing system with impartial hearing officer
Consumer information and assistance Medicare.gov (plan finder), 1-800 Medicare and State Health Insurance Assistance Programs (SHIPS). Funded by annual appropriation Navigator programs and Consumer Assistance Programs (CAP) to help with information, enrollment, subsidy applications, and appeals. Navigators funded by Marketplace operating revenue; CAPs funded by appropriation (last in 2010) May provide ombudsman and/or enrollment counselor at state option. If MCO enrollment is mandatory, the state must provide beneficiaries with a plan comparison chart
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