AHLA's Speaking of Health Law
AHLA's Speaking of Health Law
Cutting Edge Developments in Health Insurance
David E. Kopans, Partner, DLA Piper LLP (US), and Larry Pliskin, Senior Vice President, General Counsel & Chief Compliance Officer, Home Care Delivered, Inc., discuss current trends and developments surrounding the delivery of health insurance coverage in the United States. They cover artificial intelligence in health insurance, marketing health insurance over the internet, alternative pharmacy benefit manager models, and Medicare Advantage supplemental benefits. David and Larry spoke about this topic at AHLA’s 2024 Health Plan Law and Compliance Institute in Chicago, IL.
To learn more about AHLA and the educational resources available to the health law community, visit americanhealthlaw.org.
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Speaker 2:This episode of A HLA speaking of health law is brought to you by A HLA members and donors like you. For more information, visit American health law.org.
Speaker 3:Hello, everyone. Welcome to ALA's speaking of Health Law Podcast. We are discussing cutting edge developments in health insurance based on our presentation at ALA's Health Plan Law and Compliance Institute back in May. My name is David Copans , a partner at the DLA law firm. I advise clients throughout the health insurance industries and managed care industries, including government healthcare programs with a focus on m and a transactions, innovative value-based and risk-bearing arrangements, and insurance regulatory compliance and filings.
Speaker 4:Ann , my name is Larry Lickin . I'm the Senior Vice President, general Counsel and Chief Compliance Officer at Home Care delivered. I've served in a variety of legal and compliance roles in my career, including for a Medicare Advantage Health plan and a health insurance broker.
Speaker 3:You know, a as noted in this episode, we're going to be discussing cutting edge developments in health insurance. You know, Larry, I mean , there is a lot happening within the health insurance industry too much really to , uh, you know, covering a single podcast, right?
Speaker 4:Well , I think that is right. You know, we're seeing many interesting developments both within the health insurance industry as well as the healthcare industry, where healthcare providers are continuing to test alternatives to insurance, such as direct primary care arrangements and the like. But for today, I think we've narrowed down our discussion to four specific topics. These topics are artificial intelligence and health insurance marketing, health insurance over the internet, alternative pharmacy benefit manager models, and Medicare Advantage supplemental benefits. So for our first topic, David, could you talk about what you are seeing and how health insurance, health insurers are testing and rolling out artificial intelligence? Sure.
Speaker 3:You know, well , we won't delve into the, the, the nature of very technical aspects of AI in depth here. You know, it's worth quickly summarizing what AI is. You know, it is machine-based systems that can make predictions, recommendations or decisions. You know, AI is given human defined objectives, but will take those objectives as well as inputs from, you know, real and virtual environments to formulate action items or present information. You know, alongside ai, there are predictive algorithms. The line can be a bit blurry, but for our purposes, you know, we can think of predictive algorithms as a , uh, you know, set of rules or instructions, you know, whereas AI is designed to operate when human intelligence would otherwise be required. A predictive algorithm, it's more like a flow chart , you know, without any discretion. You know, AI and algorithms are already employed throughout the health insurance industry, and our listeners have probably interacted with many of them, you know, such as with chatbots and virtual assistance . You know, other tools might not be customer facing , but primarily used internally by insurers or their vendors. Um, you know, such as the use of, of these technologies for claims management, prior authorization support, and as part of medical necessity determinations, you know, likewise, you know, it's even, it's even being rolled out for fraud detection and prevention. And more broadly for, for data analytics and business modeling .
Speaker 4:You know, it's true. David, we are hearing so much about artificial intelligence and the technology itself. Um, I'm, I'm sure that our listeners will be curious to know, you know, what , what are you seeing as particularly cutting edge to keep in mind in this area for an artificial intelligence and health insurance?
Speaker 3:Sure. You know, the law in particular, you know, more specifically, we're seeing a lot of federal and state guidance and bulletins that are aimed to interpret that existing law to provide guidance on the use of these technologies. As part of health insurance, we have seen, like bulletins issued by the National Association of Insurance Commissioners, state Insurance Departments, and, you know, even the Centers for Medicare and Medicaid services at the, at the federal level. You know, while we've seen some actual legislation, the law itself is not necessarily changing to, to really kind of address these different technologies. Rather, it's , um, really regulatory agencies that are leading the effort to, to apply longstanding and sometimes very old laws to these cutting edge technologies. Um ,
Speaker 4:Well , and , and I'm I'm sure, David, it's almost like these agencies don't wanna be left out in terms of giving their opinion about how , uh, a a new rule should be applied. This artificial intelligence is such a big deal. I think a lot of these agencies feel like they need to get involved and do something.
Speaker 3:Yeah. You know, I think anytime you see innovations within a particular industry, you know, the, the regulators certainly don't wanna be caught off guard. Um, they wanna understand the technology , um, and they wanna make sure everyone's kind of on the same page for where maybe the, the regulator's red lines are. Mm-Hmm. <affirmative> . And so, you know, while I haven't done like an official account recently, I mean, I think just to emphasize the activity in 2024 alone, I mean, we've seen more than right seven states that have issued bulletins on AI use by insurers. Um, and for the most part, these bulletins , um, you know, they adopt the approach that was taken by the NAIC and its model bulletin. Um, and in taking kind of that approach, you know, these state bulletins really draw their authority. And this is, I think, an important point for anyone who's going to look at these bulletins. They draw their authority from the state's existing unfair trade practice acts, and unfair claims settlement practice acts. Basically, every state has some version of those, of those laws. They're not, and I think this is somewhat to , to your point, Larry, right? Like, they're not drawing their authority from laws that specifically regulate artificial intelligence, and they couldn't because those laws don't exist. Um, you know, and so these laws are, are drawing from these other existing laws as the authority for the state regulators to kind of advise on and, and regulate the use of AI and health insurance. And that's where I think where we see common threads for all of these bulletins where, you know, they establish government mechanisms, risk management, internal controls, oversight of third party AI systems and data. You know, they're not prescribing specific practices, but they are focused on laying out the regulator's expectations. Again, to your point, Larry,
Speaker 4:Well, and I'm sure those expectations are to protect consumers, and those expectations are maybe we're not as adv , you know, we don't know all the details of every single artificial intelligence technology. And so we're not going to try and draft a rule or, or a law to a , a , you know, address that. But we want to give the folks that are in this industry that are deploying these technologies, some maybe parameters about how they operate them, how they , um, make sure that they're not doing things that are gonna harm consumers.
Speaker 3:And , and that's really a common theme that we see , um, you know , throughout all of these bulletins. You know, and you know, I was mentioning the states that, that follow the NAIC kind of model bulletin for, for the use of AI and health insurance. But, you know, California and New York have both issued , um, you know, kind of their own bulletins. Um, Colorado adopted an actual law. You know, we see, again, a lot of the same threads throughout all of this. And they really are kind of trying to set a standard for , uh, you know, approaching the responsible use of AI in health insurance. Um, you know , and ,
Speaker 4:And so you're, you're not seeing these come out saying, don't use AI in health insurance. I mean, I don't think that's what we're observing anywhere, right?
Speaker 3:So, yeah, so, so that, that's, that's right. Um, you know, you know, take for example, you know, at the federal level with the Centers for Medicare and Medicaid services, it also issued a bulletin , um, that addressed AI use by Medicare Advantage plans. This guidance, you know, it emphasizes the need for compliance. It wants decisions to basically be made, you know, based on each individual patient's circumstances. But like the state regulators CMS is really emphasizing the need, you know, to , to make sure that, you know, this technology doesn't exacerbate discrimination or bias, you know, really kind of setting the standard, the guardrails and, and the like for ai, but not in any way, to your point, Larry prohibiting kind of the use of of artificial intelligence by health insurers.
Speaker 4:Right? So, I mean, David, there's a lot going on here, a lot of activity across the country at the state level, at the federal level. It can be a lot to take in. I , I'm wondering, you know, based on your experience , uh, what what do you see as the big takeaway for our listeners here?
Speaker 3:Yeah, I would say, you know, there are two big takeaways for, for artificial intelligence, right? And, and it's rollout in health insurance. You know, the first, as we were kind of just discussing, you know, regulators aren't rejecting ai, they're not discouraging the use of AI or, you know, predictive algorithms or other similar technologies. Um, and in fact, it's, it's really the opposite. We see a lot of encouragement, you know, both, you know, the regulators just wanna make sure that these technologies are being used in a responsible, compliant way, that they're not exacerbating bias or discrimination. Um, and, you know, the regulators are kind of in this place of trying to take the existing, sometimes very old regulatory framework and apply it to these new technologies. Um, you know, I think the second takeaway here , um, and , um, i I , is that you should not listeners, like you should not expect AI or algorithms to be earth shattering. You know, I was listening to a health insurer's CEO the other day of a major health insurance company. His point was that the company was looking at hundreds of mundane uses of ai. And so, you know, and I think that that is more of what we're going to see, that the business of insurance will continue to operate, you know, as is . But with the benefits and efficiency offered by AI and algorithms and the, like, you know, that will help kind of improve or at least facilitate the business of insurance. And I think, you know, that second takeaway is perhaps the , you know, even if maybe a little disappointing for some, the most interesting 'cause in popular culture, there's so much focus on the extreme risks and benefits of ai. But I think, you know , we're gonna see, at least in the near term, that it's most useful with , you know, when applied in a very narrow and concrete way to the very specific aspects of, of the insurance business. Um,
Speaker 4:You know, I think if people can put that in their mindset and, you know, sort of reset their expectations, that while AI can have incredible impact, it may not be the most earth shattering if you're seeing the value come out of the way it's deployed in these smaller sort of , um, encapsulated ways that are gonna make a difference, but just not the big sweeping difference that maybe some people wanna see,
Speaker 3:Wanna see, or maybe they, they fear seeing as well, <laugh> . And so, so , you know, I , I think it, it's more about this, this, you know, kind of efficiencies that, that it can offer as opposed to any major revolution in the way insurance might , you know, is done. Again, may , you know, at least for now in the , the , the near term, right? And so, you know, that's kind of like what's going on with , you know, with artificial intelligence there , there's a lot, it's continuing to develop. We'll see more state regulatory kind of guidance. Maybe we'll see more laws passed . Um , but it's really kind of, you know, wait and see, you know, as things develop. Um, maybe turning to our next topic , um, you know, with marketing, health insurance over the internet , uh, you know, could you walk us through the, some of the developments that you're seeing there?
Speaker 4:Yeah, absolutely. David, you know, I , I , I think I, I'll start by stating that the marketing of insurance over the internet is not itself a new or cutting edge endeavor at this point in time. Um, some of our listeners may be aware that back in 1998, good old NAIC issued a white paper that was titled The Marketing of Insurance over the Internet. This is back in 1998, so
Speaker 3:Definitely not new.
Speaker 4:Yeah. So that at the time, the white paper was analyzing sort of a variety of ways that insurance was already being marketed and sold online, as well as a brief discussion on the risks and legal hurdles and conducting those activities online. And I think from where we are today in terms of like developments, it's really those risks and hurdles where, you know, the law as well as regulatory guidance has continued to evolve over the years to try and keep up with, or in some cases, limit industry innovation. So, you know, I, I, I think it would be nice if things were simple. It would be nice if online sales of insurance over the internet were, you know, sort of structured in a basic way such that you've got a consumer who wants insurance, that consumer goes and visits an insurer's website and finds the coverage. They like the consumer proceeds to sign the contract to receive that coverage. And the consumer pays the premium due for that coverage electronically, and thus the consumer is covered by the insurer. It's a very basic, straightforward structure, but , uh, the reality,
Speaker 3:It's not that simple of
Speaker 4:What it , it say again,
Speaker 3:It's not that simple, is it? It
Speaker 4:It , it's not that simple. I mean, the reality is in the market today, it seems like it's not just more complicated, it's exceptionally more complicated. Mm-Hmm. <affirmative> , and I'll talk about some of the things we're seeing. So we see what we call passive websites, and we see interactive websites, and I'll talk more about those. There of course, are private websites and there are governmental websites. And in fact, consumers now might interact with some person sitting in a call center who can discuss certain coverage options available to the consumer. Or maybe they'll , they'll get referred for coverage by an individual who's a licensed producer or maybe even by an unlicensed person , uh, to find out where they might get coverage and the type of coverage. And then finally, we're also seeing a lot of what we call lead generator websites. So one or two other elements that complicate the structure of online in health insurance sales is that the payment of commissions for such referrals or maybe just a referral fee to an unlicensed person, is that element of the transaction can add some complexity, and quite often is the subject of regulation. Um, and then finally accepting a contract electronically, something done over the internet , uh, as well as paying that premium electronically, can also really raise the level of complexity for transactions over the internet. So ,
Speaker 3:And , and this is not just right operational, but also goes to maybe the, the laws of, of the different states that, that are regulating a lot of these activities that kind of add to the complexity, right?
Speaker 4:It's true, you may know the rule , uh, or, or regulation for particular geographic location, but if you , you know, insurance typically is state , um, you know, overseen by a state agency. But if you're operating in multi-state, very important that our listeners pay attention to the different state rules and regulations about those other elements of an electronic transaction, contract payment and, and what have you. So in terms of what we're really seeing as, you know, innovations and cutting edge , uh, activities out there today, I , I think there's a variety of arrangements, and I'll sort of break 'em down briefly so that our listeners can get a sense of what's out there. You know, the first is what we call single source websites. This is one insurer's products that are being marketed and sold on a website. It sort of hearkens back to that simple structure that we talked about earlier. Uh, in comparison to that, we are seeing what are known as insurance marketplace websites. And in this situation, you've got a website where multiple insurers' products are marketed and sold in a single website so that a consumer can go and perhaps do some comparisons, perhaps , uh, see what options are available. And that's really something that consumers tend to like. Uh, you know, if you think about applying purchase decisions in other elements of our economy, not health insurance, most consumers would say, I'd like to see a choice . I'd like to see what else is out there so I can make those comparisons. And
Speaker 3:I think I , you know, Larry, I know you have a lot of experience, you know, wi wi in this space too, but with , you know, I think with this insurance marketplace in particular, the government likes it too. We see this is the structure that was taken with Obamacare, with the, the federal and state marketplaces selling, you know, the qualified health plans, right? I mean it , so we see it both in the private spa industry, but also from , from, you know, the government across the country and offering kind of these multi insurance kind of shopping options.
Speaker 4:It , it , it's true. It , it is a great benefit to a consumer to allow them to shop, compare and enroll in these plans in a single location, to not have to go all over the place and to be able to compare, almost like looking at , uh, nutrition labels on products, food products to compare what , what's important. You want less sugar, do you want less calories? What , you know, what are, what are the coverage options? And when information is presented in a way that is easily comparable to a consumer, it can really make the transaction , uh, a pleasant one if done properly and following the rules. Mm-Hmm, <affirmative> . So there are a couple other innovations that we've seen out there that I wanted to touch on real briefly. One being something that we call a review website. And this is a , a little different than that marketplace website in a review website, there is no marketing or sales activity. It is purely educational information and offering some comparisons regarding insurance. Just generally, this kind of website, the review website can absolutely be helpful for individuals who maybe are just starting the journey of looking for , uh, health insurance coverage. Maybe they're aging into a particular , uh, level of coverage, or maybe they've never had , uh, coverage either through their employer or otherwise. And this can be very helpful to them from an educational standpoint. Uh, the, the last two that I want to , to talk about, I, I think one of which is probably familiar to most of our listeners, and that's just banner ads on retailer or other websites. These are really passive advertisements that have hyperlinks to other websites where if you click on it, it will take you to that website that is marketing or selling insurance. And so we've all seen these banner ads for lots of products, and we're seeing them for health insurance as well. The last , uh, element I wanted to talk about that we're seeing a lot of activity around both positive and some controversy are what we call lead generator websites. These websites are specifically designed to have people targeted to click on them, go to their website, and then have the consumer's information collected by that website. That website would then engage in an activity of sharing that information with insurers or in, in a lot of cases, insurance producers or agents so that those agents can then market and sell insurance products to those consumers. So there's a lot of positives with lead generator websites. It's a way to gather information about individuals who are, of the buying mindset, individuals who are, you know , thinking about enrolling in health insurance. Uh , but there's some negatives associated with these websites due to some activities that have occurred where information that's collected is , uh, transferred or sold in ways that maybe violate , uh, existing rules or regulations.
Speaker 3:Right. And I think on, on top of that too, right? I mean, I think where someone is going to operate, whether it's a review website or a lead generator website, you know, I think it's, it's, there's concerns about data sharing. There's also right concerns from an insurance regulatory perspective of whether or not whoever's operating that website is licensed to sell insurance. You know, if they can stay out of kind of right that, that line of kind of selling or soliciting insurance, you know, there's a lot of educational material you can provide online, but it's finding that line between education and, and selling specific insurance, right? That I think these options, you know, need to be carefully structured and they, they present risk,
Speaker 4:They do present risk, and it can be a gray area. And folks that are interested in engaging in this activity really need to understand where the parameters, where the guardrails are to make sure that they don't run afoul of that. Mm-Hmm. <affirmative> , um, you know, and so some folks have taken an approach on setting up websites, for example, to , uh, offer health insurance online in one of two ways. We have seen websites that we refer to as static, meaning that the website has basically non-changing information on it. And then other websites we refer to them as interactive in that the website would sort of prompt an exchange of information based on the consumer's interaction with that website. Now, as you might imagine, static websites, they're largely treated like typical insurance advertisements. So the rules and regulations that apply to the standard insurance advertisements are gonna apply to a static website as well. But when you get into an interactive website, which can, you know, engage the consumer a little bit more, it can collect some more sort of tailored information to really make sure that you're perhaps delivering a product or offering something to the consumer that is really gonna match up well with what they're looking at those interactive websites. It, it just takes a more complicated assessment and it's hard to say, this is right or this is wrong. It's really done in terms of what we've seen. These regulators are looking at these interactive websites on a case by case basis to determine whether
Speaker 3:Yeah . Right. And that , and that, that case by case basis. I mean, as you , you mentioned earlier that that, you know, while insurance is very much regulated on a state by state basis, that means for anyone who wants to offer a website that maybe is interactive and has a multi-state audience, regulators could come to a different conclusion about that website on a state by state basis, right. For each insurance department, each, you know, set of insurance regulators.
Speaker 4:It's true. And it's hard to keep track of the 50 different, you know, setups of, of health insurance regulation by the different state agencies. And, you know, beyond that, you , you are, you have to look at some other elements of a transaction that may be, you know, impacted by state law or state regulation. And that includes things like , uh, conducting electronic transactions or obtaining electronic signatures, or even making an , you know, electronic payments. Uh, some states are more permissible and some are less. So if you're offering a website that's going to be available to residents of different states, it's really important that you understand what the different state regulatory frameworks are .
Speaker 3:Agreed, agreed.
Speaker 4:So I think, you know, the last tidbit I wanted to mention is this distinction that we're seeing out there, which involves a , a two different kinds of websites, a review website, and a referral web website. The review website is one that sort of hearkens back to the, the , um, you know, purely educational. There's no solicitation. It's a relatively low risk offering, assuming that the information is accurate and truthful. And it, it , um, it really just is available for consumers to learn and to start to understand what the different options mean when they look at language. 'cause not everyone is familiar with the lingo that health insurance , uh, plans sometimes use that referral website is something which is much more actively urging consumers to sign up for a particular insurance. And, you know, because the websites operate differently and the laws and guidance that are applicable to these different scenarios really vary. I think I would, again, direct listeners to look at their particular jurisdiction for the applicable guidance.
Speaker 3:Yeah. And so, so I , you know, I see that you're , you're focused, I think, on a lot of these points, quite a bit on the functionality of the website, you know, could , could you talk a little bit about , about like why that is so important? You know, especially, you know, if our, our listeners are our fellow attorneys and the like, or compliance officers, or just someone who's, who's worried about compliance concerns. Like why is the functionality of the website so important? We've probably hinted at this a little bit already, but I think be really good to drill down into that a bit.
Speaker 4:Yeah. You know, I , I , I guess there's maybe four main areas of concern that really make it so important to focus on and understand the website's functionality. If you're advising a client or doing this on your own, I, I think first and foremost is licensure. You know , they're , it's fairly well understood that only licensed insurance producers, and these are agents and brokers and the, like, are permitted to solicit, negotiate, or sell insurance. And unlicensed persons may not do that. So when you are engaged in a website, understand the functionality so that you can understand it does, does there , um, need to be licensure? Is there license rules in your particular state going to apply? It's really important. Secondly, I , I think this payment issue understand that generally speaking, only licensed producers are permitted to receive commissions. And I know that you can have some limited referral fees for referrals from unlicensed persons, but you need to understand through the website functionality, are there commissions that are being generated and paid? And if so, we need to understand how to whom those are going, how that's processed, to make sure that you're not running afoul of the rules. Third, I think is a little more general, and that relates to what we refer to as gifts and discounts, you know, free or reduced price, gifts or items or services , uh, you know, may not be permitted by insurance or, or even other applicable laws. So if you're designing a website and you need to understand its functionality as it relates to any sort of free or reduced price gifts or items that may be offered. You know, and I guess the fourth and final one would be overall just the regulation. So it's generally understood that, you know, people and websites that are marketing and selling insurance are subject to insurance regulatory oversight, and all the attendant rules that come with that. And these regulatory agencies are not going to let go of that. So it's very important to understand the functionality of the particular website to understand if these insurance regulatory rules are going to apply based on what the website is actually doing. So ,
Speaker 3:And , and this is potentially very significant. I mean, I love these points because, you know, take for example, if you are an , uh, telehealth, you know, provider of some kind providing medical services, items products, and you wanna help educate your patients on health insurance. And so you might have educational materials, you might have a relationship with some plans, and, and you might wanna start kind of, you know, providing links or information about those plans. You know , I think each of your points of, of what the, the telehealth provider might get paid by , you know, for putting that information on their website or, you know, kind of what information they're communicating or how interactive their site and specific it is to, you know , specific insurance products and payers, right? All of this could really change some , you know, someone from just being a healthcare provider wanting to educate their patients for someone who needs to be licensed as an agent or broker or, or some, some other kind of of licensure. Um, and this could also impact, right? Like any payments, if any, that can be made for kind of that cooperation, right? I mean, these are pretty significant , um, implications if you cross these lines from a regulatory perspective.
Speaker 4:You do need to be careful. And , um, you know, that in itself, the awareness that there are rules and regulations out there that may apply can actually tamper down some of the innovation and cutting edge , you know, developments that we'd like to see that could really benefit consumers, could perhaps lead to a more efficient process. Um, and I , you know, I think that fear of , um, crossing a line for a lot of folks keeps them from maybe pushing the envelope a little bit. Um , so, you know, I , I think the last thing that I just wanna make sure we , we at least reference and talk about , um, maybe before we move on , um, for summary is, you know, this, this rise of third party marketing organizations or T PMOs, it's one of the newer acronyms in the, you know, healthcare industry. And these T PMOs have absolutely drawn attention of regulators and agencies. And in fact , uh, just , uh, back in 2022 , uh, the Senate committee on Finance , um, you know, did a report on activities of these third party marketing organizations, CMS has issued guidance and regulations about T PMOs, you know, multiple times. Um , mm-hmm , <affirmative> over the years, I think as recently as April of 2024 , uh, some new guidance came out. And it just shows that, you know, there's likely going to be some continuing scrutiny by CMS and other regulatory agencies on these type of entities that are out there collecting information, making referrals of consumers, sharing information, selling information, all kinds of things that could lead to efficiencies within the system or could potentially cross lines and lead to trouble. And , uh, I just would, would make sure that our listeners pay special attention to understanding what the rules are that apply to t PMOs as they proceed.
Speaker 3:And so, you know, whether it's t PMOs, these websites, you know, all of the kind of issues we've been talking about here with, with marketing, I mean, what, what do you think kind of our listeners should really kind of take away here? Like what is, what is next for kind of marketing and, and what they need to think about, I guess, you know, given everything that's happening in this space?
Speaker 4:Well, it's hard to sum it up for one particular area, but I, I think there is a theme that is a major takeaway here. And that theme is there's an increasing amount of oversight and attention being paid to protecting consumers as they navigate this online world of insurance marketing. You know , players in this space have to be keenly aware of the emerging rules and restrictions that really impact all aspects of the consumer experience from the type and functionality of the website and the contents of the website to the way the transaction is consummated online. Um, even managing the collection of consumer information. What is done with that consumer information? How is it stored protected? Is it sold? All of that is going to just create enormous risk. So, you know, the attention being paid to this area and the way that the consumers are being impacted is probably the biggest theme that I can say is a takeaway. So with that, David, I think it's time to turn to our third topic. I was wondering if you could , um, maybe share with us what you're seeing , uh, what's going on in the pharmacy benefit manager space, PBM space?
Speaker 3:Yeah. And you know, I find this to be, you know, a particularly interesting time for PBMs, you know, for better, for worse, for, for them and everyone who has to work for them. I mean, for the, for the audience's benefit, you know, PBMs, they're, they're not insurance companies. Um, they're not pharmacies. They, they don't manufacture or sell drugs or other healthcare products. I mean, their role is to administer pharmacy benefits for health plans. Um, and that might include managing a network of healthcare providers. And, you know, these plans, you know, they might be sponsored by employers, they might be fully insured plans offered by, you know, licensed insurance companies. PBMs might be affiliated with other companies that do a lot of these other things. But PBMs themselves, they're, they're, they're facilitating and administering the, the benefits , um, you know, the pharmacy benefits for health plans, you know, as kind of like quote the, the middleman in the industry, you know, between plans and providers. Uh , you know, PBMs have been subject to a lot of regulatory scrutiny. Um , we've just seen, you know, many new laws issued, you know, across almost all states. Um, you know, some of these laws are focused on, on licensing PBMs , um, sp you know, with PBMs specific licensure or, or other types of licensure that overlaps with PBM functions. But, but many of these laws in particular have been primarily focused on transparency, right? So anytime you're kind of in the middle of, you know , uh, the payers with the plans and, and the, the providers of services, you know, people wanna know kind of what, what's happening in the middle, how does that impact quality costs , just the overall industry? So transparency has been a big focus of a lot of these laws. Um, you know, and in particular they're focused on, on getting the PBMs to report on drug pricing on the PBM fees matters related to manufacturer rebates, which are rebate manufacturer rebates are , are kind of the payments and manufacturer will make back to a health plan if somebody , um, purchased some of their drugs through that health plan coverage and the transparency requirements , uh, you know , address a variety of other aspects of PBM operations too .
Speaker 4:It , it's fascinating to me, David, as, as I, you know, interacted with PBMs, both as a consumer and as a professional, but you know, the, the idea that they are so embedded within the overall healthcare system and process, they have such an impact, and it can be very positive if done the right way. It seems like, you know, there's this issue of transparency is, is maybe brought upon by some folks not understanding the PBM set up an arrangement or, you know, that lack of understanding maybe is like a lack of trust. We don't know. Are they, are they doing it in our best interests as a plan or as a consumer? You know, I , I think people want information and wanna understand how does this complicated healthcare system work? And if you're not a, you know, a doctor treating a patient, what is this other aspect of the healthcare system? This PBMI wanna understand it better. And I think that may be drive some of these desires to get transparency.
Speaker 3:Yeah. You know, and it's, it's always important to keep in mind the larger picture of, you know, we're focused here on the us the kind of healthcare health insurance market with a lot of these kind of cutting edge measures. We're talking about other jurisdictions around the world, you know, some of their laws are more relaxed, some of them are , are stricter. And, and so innovation is happening kind of at different paces around the world. But for the US kind of regulatory environment , um, you know, PBMs are one of many , um, kind of areas of regulatory scrutiny of media scrutiny, you know, from , from kind of, you know, and , you know , uh, reporters investigating what's going on in healthcare. Also kind of like what we're just hearing from healthcare providers and insurance companies in the sense that, right, you hear that, you know, people say hospitals charge too much or the insurance companies premiums are, are too high and the coverage isn't good enough. And with PBMs it's, you know, kind of the same thing where you have people that are maybe concerned about the way PBM fees or pricing is somehow , um, impacting kind of the cost in the market or the efficiency of, you know, drug coverage getting approval. And so where we see regulator regulator scrutiny, where we see the media , the media kind of, you know, looking into aspects of PBMs, it's very much the same across the board. You know, most people acknowledge that that healthcare in the US is very expensive. And so I think everyone is trying to pinpoint where are the problems and where are the benefits with the hope of identifying kind of the , those benefits to increase the efficiencies. Um, and I think that's what takes us into kind of our topic here right now for PBMs that, you know, where people are kind of looking at maybe the cost of PBMs and how that impacts the, the cost of healthcare in the us . You know, we've seen the rise of a number of alternative PBM models recently. Um, there's been a lot of news coverage and , and growth of some of these models. Um, you know, and and in particular, we're seeing a lot of attention given to these. So-called kind of pa um, pass through models , um, you know, to, to really understand the pass through model. It's, you know, important to understand the , the , the traditional model. Like, so when we talk about PBMs and we talk about alternatives, you know, there is kind of a more traditional core model that has been around for quite a while. Um, and , and under that traditional model, you see a PBM that provides a broad range of services. I kind of hinted at this earlier, you know, claims processing provider, you know, pharmacy network development and management, negotiating rebates and developing formularies. Um, you know, as well as doing that, that, that , um, really important task of utilization management for any managed care kind of set up where they're assessing, you know, maybe medical necessity, you know, that's more in the, maybe the medical side, but kind of managing that, that formulary and the appropriateness of medication that might be prescribed and coverage by a plan. Um, and in return for all these services, the PBM, you know, it charges, you know, kind of the traditional PBM charges a variety of fees. And, you know, for example, they , they might charge an administration fee, right? For just the admit cost of administering the plan. Um, you know, where the manufacturer issues that rebate to health plan, the PBM might retain all or a portion of that rebate if the PBM is able to negotiate a lower reimbursement rate with a contracted pharmacy than what the plan is paying to the PBM to pass on to the pharmacy. You know, that that difference between the plan payment and what the PBM pays, you know, might be retained by the PBM, either partially or in full. Um, you know, we call that difference between, between those two numbers, you know, kind of the spread. Um, you know, and there's other fees that PBM might collect, including directly from the pharmacies themselves. And, and the idea is that, that the PBM is providing a variety of services , um, and by kind of collecting these various fees, it kind of can spread out the amount of, of any one of the fees.
Speaker 4:And , but for someone maybe who's a benefit administrator at a plan or an employer, they may look at this and say, well, I , I kind of like the cafeteria offering. I can sort of pick and choose the services and things that the PBM might do for me, and I can understand these discrete packets of activity and what I'm paying for them. It's very interesting. I may choose to only , uh, subscribe to three of the seven offerings and then I'll, I'll sort of know what I pay for those three. Uh, you know, if , if folks think of it that way , um, I'm not sure if from a PBM perspective, they're gonna say, well, all of these offerings integrated are what bring the overall value. It's hard to separate one from another. But, you know, you could look at, you know, from the perspective of someone paying the PBM fees, is it good or bad for them to be able to sort of allocate them for these different activities that you just described?
Speaker 3:Yeah, definitely. And I think it's always important to, to also keep in mind the , the process for when a plan, especially employers, and we know employers are one of the, the, the kind of most common providers of health insurance type coverage in, in the us . Um, that, that when employers are selecting whether it's their pharmacy benefit manager on the, the , the pharmacy, the kind of the prescription drug side or, or the third party administrator on the, the medical benefit side , um, you know, when when they go through that selection process, it's often through some kind of , of bidding process. Um, you know, where, where they , they get a number of proposals from competing PBMs and you know, and they have to assess what is best for that, for that employer and for its employees and the members of the plan and the like. And so there's a lot of thought that we'll go through into to what is kind of that medical coverage, that prescription drug coverage and, and what are the costs kind of across the board. Now there, you know, there isn't necessarily always complete transparency. Um, you know, in terms of how everything works. I mean, there's the , the numbers and the structure, the benefit plans and , and everything that might be part of these bids. And so that might be some of what kind of these laws are getting at is to, to kind of pull out more data and more specifics. Um, you know, especially where maybe some of the, the details of the arrangements are, you know, contained in very complicated agreements that the PBM has lined up with all these partners, the, the manufacturers and the pharmacies and, and the like. Um, but that's what takes us, I think, to kind of that pass through model , um, where, you know, as people are looking at the traditional PBM model, you know, it's, it's kind of a well tr tro trodden path in the sense that people know generally how , how, how, how it works. You know, they, they've gotten the bids over the years, they've chosen their PBMs , um, especially from kind of the plan employer perspective. Um, but you know, as people are trying to think about are there alternatives , um, that, that, you know, not to oversimplify the model, but, but a pass through PBM, you know , offers, you know, a potentially simplified fee structure , um, where payments technically pass through the PBM, you know , hence its name , so that the plan pays for drugs , um, you know, it gets passed through the pharmacy rebates from manufacturers get passed through to the plan and separate and apart from that, you have the PBM charging an administrative fee to the health plan. And so all costs kind of pass through, but then there's this administrative fee , um, you know, to each model. I mean , yeah , the way
Speaker 4:You describe it, it , it, it sounds pretty good. Do you think a pass through model might replace the traditional model in its entirety?
Speaker 3:You know , I think what you're gonna see is a lot of pros and cons from each one. Again, as I mentioned, the employers are gonna , they're gonna have to do their, their homework. But, but you know, when , when employers are thinking about this, they have to think about like what, you know, if there are higher administrative fees from the pass through model, you know, which one offers the most predictability in terms of , of kind of the overall costs . Um, you know, which one might offer the most incentives from the PBM to negotiate favorable rebates from manufacturers, which one might be able to better support and fund a lot of those kind of quality of care and member support services that we see from traditional PBMs and, and the like. So I think really kind of going forward as we think about alternatives, and we see many alternatives out there, including what's called kind of quote , you know, cost plus PBMs , um, you know, the employers are gonna have a number of options in front of them. They're gonna have to do their homework, and everyone's kind of get getting need to get their contracting rights and make sure that they've really lined up the arrangements that they , that they want to have for kind of their, their members basically going forward. Um, you know, maybe turning to our final topic , um, you know, developments and Medicare Advantage supplemental benefits. I mean, Larry, would you like to kind of get our listeners up to speed on, on what's happening there?
Speaker 4:Sure. Happy to do that. You know, just I'll start with a brief and basic overview of, you know, how Medicare is structured, just to make sure we're all on the same page. You know, Medicare's a federal health insurance program available to eligible beneficiaries who typically are people who are 65 years , uh, old or older. And if , uh, it's possible if they're under 65, if they have certain disabilities or if they have end stage renal disease. So, you know, Medicare has what it calls part A, which covers things like inpatient hospital care, skilled nursing, facility, hospice, and the like. Medicare also has what they call A part B, which covers things like doctors appointments and other healthcare providers, outpatient care, durable medical equipment, and certain preventative services. So, you know, people who choose Medicare in the original form, they have part A and part B together, and oftentimes they'll add what's known as part D for drug coverage, and then they might add on a Medicare supplement insurance policy. So an alternative to this traditional Medicare arrangement is known as Medicare Part C or Medicare Advantage, which we sometimes shorten to ma. So Medicare Advantage or MA offers parts A and B together, and most plans will also cover part D for the drugs. And then the MA plan will have something that they call supplemental benefits. And supplemental benefits are these items or services that are not covered by original Medicare. Uh, they're typically primarily health related , uh, at least traditionally. And there are things that the MA plan has to incur what's called a non-zero direct medical cost. So I think a few quick things to note about supplemental benefits. You know, they're , they're subject to very strict rules and regulations limiting , uh, what they are and how a plan can offer them. Uh, they, an MA plan can potentially provide them through non-Medicare providers or even at non-Medicare certified facilities. And they, you know, essentially extend original Medicare benefits. So just recently in January of 2023, there was a report , uh, made to Congress that really looked into Medicare Advantage plans offering of supplemental benefits and this report, you know, reviewed the supplemental benefit offerings that are out there, things that are sort of cutting edge , things that are innovative, that are, you know, plans are, are trying to come up with. And it, it noted a couple of things. I mean, the first thing it noted was that most plans are offering what they called traditional supplemental benefits, things like vision, dental, hearing. These are benefits that are not offered through original Medicare, but most MA plans offer them as supplemental benefits. Then that report started looking at , um, you know, the newer benefits, which I'll describe in a moment. And at that time it seemed like most , um, most of those plans over the past couple years were not offering the newer benefits. And supplemental benefits have been, you know, available originally to sort of, you know, they were intended to reduce avoidable healthcare use. And then over time the allowable supplemental benefits could include benefits that, you know, had a reasonable expectation of improving or maintaining health or function of chronically ill enrollees, chronically ill enrollees. So you can see that the type of benefits offered is sort of expanding. And so when you talk about these newer benefits, the ones that are most commonly offered in this report, things like in-home support services. So these are services that assist individuals with disabilities or medical condition in performing their activities of daily living or ADLs, things like bathing, dressing, eating, toileting. So these in-home support services could be classified as supplemental benefits. And then there are things that help compensate for other physical impairments that can be offered. And beyond that, we saw supplemental benefits that cover things like food, meals, produce for beneficiaries. So the typical, traditional offerings that are out there , uh, over the years, things like fitness and , uh, you know, meals after an inpatient stay, medical transportation , um, health education and all of that started to be expanded so that other common offerings would include things like over the counter items , uh, smoking cessation programs and things like that. So in the past 5, 6, 7 years, CMS has really been testing out innovations and supplemental benefits. Uh, they have set up in , in particular a program called Value-based insurance design Model. This V bid VBID model is really out there to offer payers the flexibility in putting certain benefits out there like rewards and incentives and even monetary rebates. So, and we find that at least according to most recent reports, individuals who are dual in dual special need plan enrolled in those kind of plans in a VBI plan only about , um, uh, you know, almost all of them had access to these supplemental benefits, but only about a third of Medicare beneficiaries overall offered those. And these vbi plans are really pushing the envelope. They're really getting innovative and cutting edge things like pet care, pest control , uh, addressing social needs like , uh, assistance with attending community events, you know, to address a senior's isolation and, and other , uh, personal care matters. So some even are offering what we call living support , uh, help with rent or utilities or even support for an individual's caregivers. So I think that, you know , the key development here in this area is that CMS has started to allow plans to offer these supplemental benefits that are targeting specific disease states and to offer benefits that are, you know , both not primarily health related and can be offered non uniformly to eligible chronically ill enrollees. So I, I think that we , um, you know, if anything really is important for our listeners to pay attention to on supplemental benefits, I would say that just recently, a couple months ago , um, CMS really in an attempt to gain more insight on the supplemental benefits that are being offered, put out a memorandum that significantly changed how ma organizations are to report the utilization of their supplemental benefit offerings. And it's interesting because historically it's been very difficult , uh, if not impossible to report supplemental benefits and usage because of the non-traditional nature of the benefits. It's not, right.
Speaker 3:It's been pretty difficult, you know, and I think, like you said, right, if not impossible at times, this is a big change.
Speaker 4:It is. And so, you know, the, the, the guidance and changes are really intended to require plans to report all supplemental benefit utilization. And this is gonna offer CMS an opportunity to really get transparency and data around what's being offered, what's working, are consumers or beneficiaries taking advantage of these supplemental benefits. And CMS is gonna have much better insight into what's happening, you know, on the ground with respect to these benefits. And in fact, they've even suggested that plans midyear put out a report and information to their beneficiaries about unused supplemental benefits. So these are things that are maybe put out in marketing originally, and, and someone signs up for a plan, but then the beneficiary doesn't take advantage of it. CMS is saying, Hey, you need to go and notify these beneficiaries that they still have benefits available to them. So it's really trying to make sure that the supplemental benefits are innovative and creative, but also meaningful to the beneficiary.
Speaker 3:Got it . So I think as , as we're we're looking to kind of wrap up for today , um, you know, do you have any kind of big takeaways on, on what we're seeing , you know, gonna see with Medicare supplemental benefits, kind of, you know, going forward?
Speaker 4:Well, I think CMS embraces them. They want to collect more information about what the plans are putting out there so that they can see what's innovative, what's cutting edge , what's working. And I think you're gonna see CMS is very supportive of these supplemental benefits. It really is a distinguishing element of a plan's offerings, especially compared to traditional Medicare. And what you're gonna see are plans that are designing and rolling out supplemental benefits that are really going to have an impact on seniors wellbeing and their ability to manage disease progression. And I think that's good for all of us.
Speaker 3:Got it. Well, I think that takes us to the end of our last topic for today. You know, thank you listeners for joining us.
Speaker 4:Thank you everyone. We hope you enjoyed the discussion.
Speaker 2:Thank you for listening. If you enjoy this episode, be sure to subscribe to a HLA speaking of health law wherever you get your podcasts. To learn more about a HLA and the educational resources available to the health law community, visit American health law.org.