Health Plans: Important Considerations for Medicare Part D Bids

Health Plans: Important Considerations for Medicare Part D Bids

Editor’s note: The Managed Care website is read by people in many areas of health care, and by the public too. This article will be of most interest to our readers in health plans.

Medicare plans are furiously working to develop an optimal 2015 bid to submit to the Centers for Medicare & Medicaid Services. The pressure is especially acute this year given the rapidly consolidating and fiercely competitive Part D environment. Missteps in the bid development process have always been costly — affecting member acquisition and retention and overall profitability for the plans. But in the current environment, bid errors paired with a poor star rating will severely reduce payments from CMS and likely put plans out of business.

It’s important to understand the implications of several changes CMS proposed affecting preferred networks and enhanced alternative plans.

Preferred networks

In 2014, 75% of Part D beneficiaries were enrolled in a plan with a preferred pharmacy network design. Preferred networks have become a key bid strategy by many plans that have been well accepted overall by Medicare beneficiaries. By including only a select number of pharmacies in a network, plans have been able to negotiate lower drug prices, saving money for both the plans and their members.

While CMS didn’t implement the sweeping changes it originally proposed, such as eliminating preferred networks by requiring that “any willing pharmacy” be able to participate in them, the government did state that it is looking at the adequacy of access to preferred networks and will not approve a bid if the plan’s preferred pharmacy network offers too few pharmacies with preferred cost sharing.

This would mean some plans may be asked either to increase the number of pharmacies offering preferred cost sharing, or to restructure their benefit design during this year’s upcoming bid negotiation.

Despite not demanding more drastic changes, plan sponsors must still carefully assess their preferred network access as they define and develop their 2015 benefits with lower cost preferred network options for members.

Enhanced alternative plans

Since 2011, plan contributions in the coverage gap have been steadily increasing in an effort to completely close the gap by 2020 in accordance with the Affordable Care Act guidelines. In 2015, standard Medicare Part D plans will be responsible for 5% of brand drug costs and 35% of generics.

For the coming year, CMS will not require Enhanced Alternative (EA) plans to provide additional cost-sharing reductions in the coverage gap as it had originally proposed. Also, CMS decided to remove supplemental gap coverage descriptions from both marketing materials and the Plan Finder website, meaning that members will no longer see these descriptions when shopping for a new plan. With these combined forces — the continued closing of the gap and the lack of promotion of supplemental coverage — EA plans should weigh the burden of providing this additional coverage.

This isn’t to say plans shouldn’t offer enhanced gap coverage, but they should apply a rigorous analysis to that decision. A recommended strategy is to carefully examine the member pool. Successful plans will assess their members’ utilization trends for both brands and generics in the coverage gap, as well as understand the prevalence of members that have historically entered the gap.

Plans must also have an accurate understanding of the prevalence of specific diseases affecting the region where that plan would be offered. For instance, it’s important to know that diabetes prevalence is highest in nearly all of the southern states, while lowest in many of the plains states. Knowing the regional rates of costly chronic conditions — as well as metrics around managing them — will allow plans to better evaluate potential member needs and resulting financial impacts.

Many factors

When developing a CMS bid, plans will need to carefully assess the design and benefits of preferred networks and enhanced alternative plans. Their decisions can be informed by understanding the environment in which they’ll be operating in terms of pharmacy competition, CMS expectations, and the health of those living in the area.

Since 2008, Snezana Mahon has helped Express Scripts Medicare clients to effectively manage their Part D prescription drug benefit. She is the company’s foremost authority on CMS Star Ratings and compliance Mahon holds a doctorate in pharmacy from the St. Louis College of Pharmacy.