Identifies Areas of Compliance and Opportunities to Continue Health Care Payment Transformation

Early in March, Insurance Commissioner Trinidad Navarro and Cristine Vogel, the Director of the Department’s Office of Value-Based Health Care Delivery, issued the Annual Review of Carrier Progress Towards Meeting Affordability Standards. Vogel leads the Department’s efforts relating to value-based care, primary care, pharmacy benefit managers, and other health-policy initiatives, including grant programs. After establishing affordability standards in 2021 and 2022, the Office collected data from insurance carriers concerning their projected compliance with the affordability standards for 2023, the first year of affordability standard implementation.

“The statutory charge of the Office is to “reduce health-care costs by increasing the availability of high quality, cost-efficient health insurance products with stable, predictable, and affordable rates,” said Commissioner Navarro. “I am pleased that overall, carriers project compliance with the affordability standards set by the Office.”

The 2023 projections show that carriers will increase their investment in primary care spending to seven percent of their total medical spend ($40 million) and will hit the mandated 8.5 percent of total spend toward primary care programs that have engaged in care transformation activities. This results in an $8 million increase from 2022. Additionally, carriers were required to limit price growth for hospital and other non-professional services increases to 5.5 percent. All carriers project compliance for each of the three required service categories – inpatient hospital, outpatient hospital, and other medical. A key finding of the Report is that the Office estimates these limits saved Delawareans $2 million to $12 million in 2023, depending on the price increases hospitals would have otherwise negotiated with carriers.

Critical to successful implementation of value-based care delivery programs, are carriers non-fee-for-service (FFS) reimbursement to primary care providers. Compliance with the affordability standards for does not require carriers increase payment equally across all providers, and therefore, the increased investment will generally lean toward larger practices already engaged in care transformation activities. Projections for 2023 show that on a per member per month (PMPM) basis, primary care investment has increased from $11 PMPM in 2022 to $29 PMPM in 2023 for those practices engaged in value-based care programs.

“Helping to bend the health care curve towards more affordable care is critically important in these times of ever-increasing hospital and medication prices,” said Commissioner Navarro. “The data in the 2023 Report make it clear to me that we can keep making progress toward higher-quality care at a lower cost.”

“Delaware continues to make progress in its innovative efforts to address care quality and cost,” said Director Vogel. However, she stressed that there is room for progress. Key challenges include the fact that the fully-insured portion of total health care spending is relatively small, carriers with low membership appear reluctant to design value-based programs, provider practices with low attributed members appear reluctant to invest in value-based infrastructure, and there is a lack of multi-payer program alignment (e.g., care delivery, payment, etc.).

Vogel also pointed out what she considers to be a critical challenge, namely that the Department regulates a small portion of the health insurance industry. “We regulate the fully-insured segment, which comprises only 10 percent of the total health insurance market and is therefore too small to drive change alone.” Vogel further commented, “we remain committed and engaged to collaborate with the industry to find ways to continue this great progress toward value-based care”.

An additional hurdle may come from a new strategy under consideration by carriers, namely, to separate hospital and physician fees for self-insureds from fully insureds. If this strategy were to be implemented, Vogel opined that the hospital price growth cap of CPI+1 would apply to only fully insured and not self-insured, as hospitals would not be held to the price growth cap for self-insured rates. Carriers and providers would need to re-think their care delivery approaches, since bifurcating the market will likely add administrative burdens and market inefficiencies.

Vogel continues to search for policy solutions. At the March 13th meeting of the Delaware Primary Reform Collaborative, she suggested that Delaware could consider ways to include additional payer types (e.g., Medicaid, self-funded) to increase the size of the market and result in more impactful results for value-based care programs. She is also seeking creative solutions for carriers with low membership counts to be able to offer non-FFS programs, opportunities to provide certain care transformation activities in a more “centralized” manner (for smaller practices) and expanding her Office’s ability to require financial amounts within categories of non-FFS activities. The Office is working on a supplemental report which will further explore these challenges and opportunities.

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