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Speeches & Remarks

Speech of OPM Healthcare & Insurance Director John O'Brien

FEHB Carrier Conference

March 29, 2012

As prepared for delivery

Thank you, it is my pleasure to be here. I'd also like to thank Candy Schaller and America's Health Insurance Plans, our partner in hosting this conference for over 15 years now. I would also like to specifically acknowledge Ellen Gay, who pulls this together every year. Herding all of the agenda, the logistics, and the presentations and the inevitable last minute adjustments is no mean feat, and that this comes off as smoothly as it does is a testament to her efforts.

The primary challenge for all of us is the same as it has been for the last 50 years: To provide a diverse pool of over 8 million federal employees, retirees and their dependents with high quality, high value health coverage. Since those 8 million live in every county in the country and around the world and reflect the demographic diversity of the country, that is challenge enough. The FEHB's key insight is the recognition that there is not a one-size fits all response to this challenge. The FEHB model of a marketplace where employees and retirees can choose among a wide range of private coverage options has worked remarkably well. In fact, as we all know, the FEHB model is a template for the state based exchanges that are being implemented under the Affordable Care Act in 2014.

The model works because it is both reliable and constantly changing.

Reliability: open season rolls around every fall and the federal employees and retirees we serve are assured that they will have a good set of coverage options available to them no matter where they live.

Constantly changing: The mix of coverage options, delivery systems and benefit structures that are on offer in 2012 are very different from those offered in 1992 or 2002. We engage in a yearly dance to reconcile changes and innovations based upon plans' experience in the larger health care market place with the needs the federal workforce. Together, we keep health care coverage affordable and available.

It is not a simple process, and it must be reworked and, yes, rediagnosed, continually if it is to continue to succeed.

Before I touch on some of the issues that will be a focus for this coming year, I would like to highlight some of major program events of the past year.

First, the one-percent adjustment to the premiums of community rated plans is no more.

This adjustment was needed to account for the challenges inherent in collecting and confirming plan enrollments across the diversity of federal agencies and payroll systems. Thanks to the combined efforts of OPM, plans and agencies, that need has been met. We've worked through the complex, almost innumerable issues needed to have a reliable reconciliation process. This was not a quick fix - in fact it took several years - but the issue has been addressed. The long slog of incremental improvements doesn't make a tidy, Hollywood-style triumph. But make no mistake: the accomplishment is real and it is important.

Second, the Similarly Sized Subscriber Group, or SSSG methodology for community rated plans is also a thing of the past. As the Director said last year, plans were concerned that this methodology - developed for the health care market place of the mid-1990's - had outlived its usefulness. We agreed. With the passage of the Affordable Care Act and the development of clear standard for medical loss ratios there was a ready substitute. We implemented MLR on a pilot basis last year, which provided us with very useful information. So, taking what we have learned into account, an MLR based approach to premium negotiations for community plans is our new standard. Final regulations implementing this approach will be posted soon - maybe even as soon as tomorrow-but certainly no later than next week.

I am very excited about this new approach. It introduces a greater degree of transparency and predictability, both for plans and for OPM's negotiators. The FEHB works because plans see a market in which they can effectively compete on the basis of price and quality. OPM, for its part, is looking to work with plans committed to delivering services to federal employee and retirees over the long term. This revised methodology contributes to those goals.

In fact, we are already seeing the introduction of the MLR methodology bear fruit. For the 2013 contract year we have approved, or are about to approve, 10 new plans in the FEHB. This is more new plans entering the FEHB than the last 5 years combined. This is significant development, which I hope to see more of next year. It says to me that private insurers recognize that this is a market place where the rules of the road allow high quality plans to fairly compete to serve the program's roughly 8 million lives.

We are not only welcoming new plans to the FEHB,… but also a whole new population to serve. Under the Affordable Care Act tribes and tribal organizations may purchase health coverage for their employees through the FEHB. Implementing this provision of the Affordable Care Act has presented some special challenges for OPM. We have had to figure out how to interact with what are essentially up to 600 new organizations to collect enrollment information and premium payments. Our hard-working staff partnered with the Department of Agriculture's National Finance Center - the same folks who do TCC billing and collections. We have been simultaneously developing the rules and regulations for the program and the operational processes to allow enrollment. I am proud to say that we succeeded in meeting a very aggressive time line. The enrollment system went live last week and is currently processing the enrollment information for our first 16 tribes, which represent over 2,800 enrollments. The enrollment information for these individuals will come to you via the same channels as all other FEHB participants, and they will be covered effective May 1. We expect these numbers to increase throughout the year as more tribes sign up. This program, long requested by tribal representatives, is an example of the power of the FEHB model. The ability to participate in the 8 million person group that is the FEHB will provide choice of price competitive, quality plans to small groups, many in remote areas. Since we have been doing just that for federal employee all these years we were in a perfect position to do it for tribes. Now, we are looking to you to both help educate tribal benefit administrators about the program and to welcome these new enrollees in your health plans and to make the transition from their current health coverage to the FEHB as seamless as possible.

In the upcoming year we will continue to move forward.

We remain committed to a strong wellness focus, in the workplace and in the delivery systems. These are not just a benefit and part of health insurance, but integral to OPM's mission of assuring that the federal workforce is as effective as it can be. Wellness contributes to productivity and we should be incorporating a wellness focus in everything we do. Our smoking cessation initiative is an example of the FEHB leading the way on wellness, and we will be presenting information on the progress of that initiative. We have asked in the past and will ask again for innovative ideas on how to incorporate wellness incentives into FEHB plans. We are taking a broader view of incentives and encourage you to propose solutions that you have pioneered with private employers.

We will be challenging you to work with us to better control pharmacy costs in the program. These costs represent almost a third of our overall spending. Success in managing pharmacy costs creates opportunities for better value for all program participants. We have some very concrete and specific ideas that we are pursuing and will be presenting them to you today. This is a complex issue with numerous perspectives. We look forward to a lively discussion here, and elsewhere, on how to best move forward.

We also need to align ourselves with initiatives that go beyond the FEHB. The adoption of new, readily available technological innovations has the potential to markedly improve an individual's ability to actively participate in their health care. We've worked with many of you on Blue Button, a great example of such an innovative technology. It has implications not only for the FEHB, but also for how individuals interact with the health care system. Because of our size, when we adopt such technologies we help move the ball in these areas significantly.

Finally, I want to highlight some developments that will enormously influence how we collectively chart the FEHB's future course.

There are two areas where we are making long term commitments and significant investments to improve our management of the FEHB. The first is to more effectively use data to better understand our population, its utilization patterns, and the performance of individual plans. The second is to sharpen the FEHB's focus on health quality measurement and accountability so that those concepts are at the forefront of our work with plans. I am very pleased that this conference will highlight the very tangible ways we are moving forward in these areas.

A year ago at this conference, Director Berry announced that OPM's Health Claims Data Warehouse would be operational this year. To quote Director Berry "with eight million covered lives in every corner of or country, of every age and every health status, we can be at the forefront of learning" while "vigorously protecting patient privacy."

I am happy to report that through the hard work of the Planning and Policy Analysis team, working in close cooperation with OPM's Office of the Inspector General -- OPM has delivered on the Director's charge. We have an operating, secure data warehouse. To assure the security of this data, the data warehouse is operated jointly with the OPM Inspector General.

The analysis is at the population level.

We have much work to do to refine the data warehouse and the analytic tools needed to fully take advantage of this resource. But, even at this early stage, we now have the ability to use this data to look at the disease burdens and utilization of enrollees at the population level in the FEHB in ways we never have before. This afternoon Jon Foley and his team will be presenting some of that early analysis. We are very interested in getting your thoughts on what all this means, how we can do things different and better, and what it means for the FEHB.

As I said, the second area where we are making a long term commitment is to bring a clear and strong clinical perspective to the oversight of the FEHB. As the largest private insurance operation in the nation, with over 43 billion dollars a year in premiums, the FEHB must be a leader in truly integrating quality, and quality measurement into everything we do.

While it is almost a cliché to say that health care and the health delivery systems are rapidly changing, I think that we can agree that the changes put in motion by the Affordable Care Act have added new dimensions to that change. We must be actively responding to the potential of Accountable Care Organizations and Patient Centered Medical Homes while remembering that we serve areas where some innovations will arrive slowly. We need to understand the value and limitations of performance metrics HEDIS vs CAHPs, and also push to develop new and better ways to look at performance. All of these concepts hinge on questions of clinical quality, how you measure it, and what to do once you have measured it.

If OPM and its contract officers are to hold plans accountable for performance in a way that is consistent with good practice, we must have a clear understanding of the underlying clinical issues and a vision for how the FEHB interacts with the larger delivery system.

I am very pleased to say that we have taken important steps to give the FEHB the strong clinical leadership it needs. First of all, we have created the position of Chief Medical Officer. This position is charged with providing leadership in clinical quality issues for the FEHB, as well as for the multi-state plans that OPM is charged with developing under the Affordable Care Act. More importantly, we have filled that position with someone immensely suited to the task at hand. Dr. Christine Hunter comes to OPM following a distinguished 30 year career in the Navy during which she served as Commanding Officer of Navy Medicine West and Naval Medical Center San Diego,…. Chief of Staff, Bureau of Medicine and Surgery, Pacific Fleet Surgeon, ….Commanding Officer of Naval Hospital Bremerton,…. Executive Assistant to the Navy Surgeon General, and Director of Medical Services at Naval Medical Center San Diego. And, if that wasn't enough, she completed her active duty career as a Rear Admiral, coordinating health care for 9.6 million military beneficiaries worldwide as the Deputy Director of TRICARE Management Activity.

In the less than 4 months Dr. Hunter has been at OPM, she has used her talents and experience to move the program forward in some very meaningful ways. She has already reached out to many of your medical officers to establish ongoing relationships which will help us in aligning FEHB with best practices in the private sector. We are committed to making quality accountability and performance measurement central to the FEHB model and, as you will learn in just a few minutes Dr Hunter has some clear thoughts on how to accomplish that.

Dr. Hunter is the latest addition to a team that it has been my great pleasure to work with. In my colleagues - both at OPM and at the plans - I find a level of commitment to mission and creativity in accomplishing that mission that is unmatched in my career. We share in our dedication to making the FEHB work. I saw that commitment most recently in the real and practical advice a number of plans provided OPM about on how to assure that OPM succeeded in bringing tribal employees into the FEHB.

It is my great privilege to work with each of you. I have worked my entire career in health care in capacities as varied as clinic manager to hospital regulator. I can honestly say that I have never had a position as constantly interesting, exciting and fun as the position I have now. None of the work we have before us is easy. It is hard.

But it is good work. It recalls President Kennedy's reference - that the ancient Greeks defined happiness as the full use of your powers along the lines of excellence.

Together, we pursue excellence in our field. Done well, it will help a lot of people in very tangible ways. We can and we will provide insurance to the healthy and get care to the sick, at prices both can afford I look forward to continuing that work with you.

Thank you.

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