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Operational Policy Letter
Health Care Financing Administration
Center for Health Plans and Providers
Medicare Managed Care
Operational Policy Letter #98.065
OPL98.065
February 4, 1998
Transitions in the Balanced Budget Act (BBA) of 1997 for
Health Care Prepayment Plans (HCPPs), Cost Contracts and
Residual Cost Members in Risk Contracts
Background
The BBA changed the HCPP requirements (section 4002(j)) to eliminate the HCPP option for entities eligible to participate as managed care organizations under section 1876 of the Social Security Act or the new Medicare+Choice program. The BBA also prohibits HCFA from accepting new section 1876 cost contracts unless the plan is currently an HCPP and wants to convert. All cost contracts sunset on December 31, 2002. Section 4002 © of the BBA also stipulates that any individual enrolled on
December 31, 1998 with an entity under section 1876 will be considered to be enrolled with that organization on January 1, 1999 under the Medicare+Choice option if that organization has entered into such a contract.
Therefore, the BBA eliminates:
(1) the HCPP agreement for entities able to participate as managed care organizations after December 31,1998 section 4002(j);
(2) 1876 risk contracts after December 31, 1998 section 4002(b)(1);
(3) 1876 cost contracts after December 31, 2002, section
4002(b)(5); and
(4) concurrent 1876 cost contracts and Medicare+Choice contracts in the same health care delivery system and service area after December 31,1998, if the Medicare+Choice contract begins January 1, 1999, section 4002(c).
Also, BBA section 4002(b)(2) and previous policy was used to support our policy decisions on transitioning enrollees.
Clarification and Implementation of New Provisions
The following policy outlines the decisions for each of the identified contracts:
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Cost Contractors
* No new cost contracts or service area expansions as of August 1997.
* Current cost contractors, with cost contracts only, may continue under current 1876 cost requirements until
December 31, 2002.
* Current cost contractors may enroll new members within the current contract area (no service area expansions).
* Since cost contractors may currently enroll Part B-only members, these members may remain enrolled until December 31, 2002.
* Current cost contractors that also have an HCPP agreement will not receive payment for services under the HCPP agreement after December 31, 1998. Therefore, cost contractors may "transition" HCPP members into their current cost contract after approval from HCFA and appropriate beneficiary notification.
* Alternately, current cost contractors may wish to participate as a Medicare+Choice provider effective
January 1, 1999. In this case, cost contractors must terminate or non-renew their cost contract on December 31, 1998 and inform members of the availability to enroll in a Medicare+Choice option on January 1, 1999. This information requires beneficiary enrollment applications, notifications, etc., dependent on HCFA requirements and beneficiary information rights. All Medicare members of cost contracts must make a positive election to join the Medicare+Choice product to be sure they understand the new requirements, particularly lock in. Medicare beneficiaries who do not enroll in the Medicare+Choice product must return to original fee-for-service(FFS)Medicare.
Cost contractors may close their cost contracts and choose a Medicare+Choice option anytime within the next 5 years. HCFA will not allow concurrent cost and Medicare+Choice contracts, except as stated below for residual members in risk plans.
HCPPs
* The BBA establishes new definitions for an HCPP.
(1) The organization is union or employer sponsored:
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When the entire health care delivery system under the HCPP agreement is sponsored by a union or employer, it may obtain or continue designation as an HCPP, or
(2) The organization does not provide or arrange for the provision of any inpatient hospital services:
The term "does not provide or arrange for" is defined as not contracting with hospitals for inpatient services or paying claims for inpatient hospital services. The entity that meets this criteria may obtain or continue designation as an HCPP.
* Current HCPPs must meet the new definition for an HCPP after December 31, 1998 or not be eligible to receive Medicare payment for services. New HCPP agreements must meet the new HCPP definitions as of the effective date of the agreement.
* HCPPs that do not meet the new HCPP definition may request applications from HCFA to become cost contractors. These applications must be approved with an effective date on or before January 1,1999 since the HCPP agreement must be in effect to convert to a cost contract.
* As of January 1, 1999, HCPPs are not required to meet Medigap requirements.
Residual HCPP and/or Cost members in Risk Contracts
* Risk contractors that have residual 1876 cost members, and will continue as Medicare+Choice plans after
December 31,1998 must offer all members an opportunity to enroll in the Medicare+Choice option without regard to their Part B-only and/or out-of-area status. The 1876 cost members must make a positive election to enroll in the Medicare+Choice product to ensure that they understand risk requirements, particularly lock in.
To summarize, plans must enroll all cost members, who made a positive election to enroll in the Medicare+Choice product, in that product effective January 1, 1999, or disenroll them from the cost contract on or before December 31, 1998 (these beneficiaries will return to original FFS Medicare). An exception is made on these enrollment/disenrollment actions for a limited time period for two categories of enrollees as described below:
NOTE: HCFA will maintain the 1876 cost contract number in a "terminated" status, with no new beneficiaries allowed to join after December 31, 1998, to allow a payment vehicle for the purposes of cost reporting for the following exceptions:
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(1) Medicare individuals who are enrolled in a plan that had an 1876 cost contract with HCFA prior to 1985 and who chose to maintain their cost enrollment at the time the plan converted to risk status may remain in the terminated cost contract until it sunsets in 2002.
(2) Current Federal annuitants (those who enroll prior to January 1, 1999) who choose to remain in the FEHBP group health product but allow the plan to submit cost reports to obtain Medicare payment as
first payor may remain in the terminated cost contract until it sunsets in 2002.
* Risk contractors with residual members in HCPP agreements may not receive payment for Medicare services under the HCPP agreement after December 31, 1998. Risk contractors that will continue as Medicare+Choice plans after December 31, 1998, must offer all members an opportunity to enroll in the Medicare+Choice option without regard to their Part B-only and/or out-of-area status. HCPP members must make a positive election to enroll in the Medicare+Choice product to ensure that they understand risk requirements, particularly lock in. Medicare beneficiaries who do not wish to convert to the Medicare+Choice option must be disenrolled by December 31, 1998 and returned to original FFS Medicare.
Medicare+Choice and HCPP agreements may not coexist in the same entity after December 31, 1998 according to BBA section 4002(j). HCFA has made an exception on these enrollment/disenrollment actions for a limited time period for two categories of enrollees as described below:
NOTE: To allow a payment vehicle for the purposes of cost reporting for the following exceptions, HCFA will allow the HCPP agreement to convert to a "terminated" cost contract. This will allow a payment methodology for current members in the following categories, with no new beneficiaries allowed to join after December 31, 1998:
(1) Medicare individuals who are enrolled in a plan that had an HCPP agreement with HCFA prior to 1985 and who chose to maintain their HCPP enrollment at the time the plan converted to risk status may remain in the "terminated cost contract" until it sunsets in 2002.
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(2) Current Federal annuitants (those who enroll prior to January 1, 1999) who choose to remain in the FEHBP group health product but allow the plan to submit cost reports to obtain Medicare payment as first payor may remain in the "terminated cost contract" until it sunsets in 2002.
HCFA Contacts:
Regional Office Personnel
Source: HCFA Web Site http://www.hcfa.gov
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