In KPI Ninja’s “School District Claims Analysis” comparing claims costs under the Nextera plan and the competing fee for service (Choice) plan, the “Analyst” overlooked two major differences between the plans in how the “School District” pays “Claims“.
- Nextera members pay post-deductible coinsurance at a 20% rate and the district pays an 80% share. But for the exact same claim by a member of the competing fee for service plan (Choice member), the split is 10% and 90%.
- While both cohorts have the same $2,000 deductible, in theory, only the Choice plan members have access to an employer-paid $750 health reimbursement account that provides first dollar claims coverage, delaying the onset of the deductible and effectively reducing it to $1,250 dollar.
When two claims for exactly the same service rendered can draw different employer payments for Nextera members and Choice members, that difference payment has nothing whatever to do with Nextera’s effectiveness. Yet, the different effective rates at which claims are paid obviously have substantial effects on the total claims amounts for each group. Accordingly, a large part of any difference between the totals for the two groups is the result of SVVSD benefit design, not the result of anything Nextera does that reduces costs.
To accurately reflect only the savings attributable to Nextera, it is necessary to normalize the district’s average payment rate between the two populations. KPI Ninja did not see the need to do this.
Our method for doing this was to estimate and compare the actuarial values of the medical coverage in the two plans using the publicly available CMS actuarial value calculator developed for the Affordable Care Act’s individual market coverage. We arrived at an upward adjustment for Nextera plan total employer costs by a factor of 1.085.
Correcting just this one oversight by KPI Ninja makes a difference of more than $200 in the overall savings claims, deflating Nextera’s brag by over 22%. See the computations here; note therein that this $200/22% deflation is a conservative estimate.
Every one of over two dozen claim cost comparisons in the KPI Ninja report needs this same adjustment (plus others discussed both in other posts at this blog and in the Nextera Manuscript that can be viewed through a menu item above).
A happy by-product of understanding how claims are divided between the district and its employees is that it essentially resolves KPI Ninja’s concerns about not having been provided employee payment data. Once we have put employer payments for the two groups on a normalized scale, the details of how the employer and employee divided the costs of particular claims among themselves is of little or no value in assessing Nextera’s aggregate contribution to overall savings. In other words employee cost-sharing issues need not impair our ability to evaluate Nextera’s performance.
 Because the KPI Ninja study did not have pharmacy data, we isolated medical coverage from drug coverage in using the CMS AV calculator. We hypothesized two plans modeled on the SVVSD plan, but in which drug coverage was set at a 0% employer contribution. Our paired, hypothetical medical-only plans had AVs of 76.5 (Choice plan) and 70.5% (Nextera plan). The ratio (1.085) of the AVs represents the relative proportion of overall claims of paid by each plan.
 This estimate is generous to Nextera. The study data included claims from both two plan years, 2018 and 2019. The 80:20 coinsurance split for Nextera patients applied to 2018. For the 2019 calendar year, for Nextera patients, the district replaced coinsurance with copayments for several selected services, including e.g., $200 for advanced imaging and ED visits and $60 for specialist visits. See SVVSD 2019 benefits guide. We determined the actuarial value of both the 2018 Nextera plan and the 2019 Nextera plan. For 2019, the Nextera plan had a ever lower actuarial value, i.e, the net effect of the 2019 changes was to decrease overall employer payments for Nextera members.