Action on ACA individual market reforms successor must come in Q1 2017 to avoid messy market meltdown

December 2nd, 2016 No comments

Heading into this year’s elections, the individual health insurance market segment developed signs of instability as health plan issuers were pulling back their market presence for 2017 and reassessing their plans for 2018 and beyond. The election that sent Donald Trump headed to the presidency and afforded his party the opportunity to implement their stated policy to quickly repeal the Patient Protection and Affordable Care Act piled uncertainty on top of uncertainty for health plan issuers.

It’s unclear how much of the Affordable Care Act the incoming Trump administration and Congress will gut. However, it is clear that first in their sights are the individual health insurance market reforms contained in Title I of the expansive law. With these reforms first in line for the chopping block, there is no luxury of time to contemplate a gradual transition for the individual market. Congress and the new administration will have to quickly come to a consensus in the first quarter of next year.

As has been widely reported, Congress and the Trump administration could defund the bulk of the reforms using a budget reconciliation bill requiring a simple majority vote, thereby avoiding a Democratic filibuster. But that would only create more market uncertainty, crashing the old Affordable Care Act market rules before new ones could be put in place. Even more comes from the House’s successful court challenge this year of the Obama administration’s funding of out of pocket cost sharing subsidies for many lower income households buying coverage on state health benefit exchanges. It would take effect very early in the Trump administration if the administration as expected opts not to pursue an appeal, prompting health plan issuers to bail from state health benefit exchanges in 2017 and leave millions without coverage. These circumstances underscore the fact that under the Affordable Care Act, health plan market participation is voluntary. If plan issuers can’t predict their finances with any degree of certainty, all bets are off.

Health plan issuers need to begin pulling together their individual market offerings for plan year 2018 early next year. It will be difficult if not impossible for them to do so with the market rules up in the air. Lacking any certainty in the first quarter of 2017, a transition to a new scheme won’t happen in 2018. New policy will have to be nailed down in that critical first quarter. With the Affordable Care Act individual market rules well established, it’s now impossible to quickly unscramble the Obamacare omelet and turn the calendar back to 2009.

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

Microeconomic mismatch undermines concept of interstate health insurance market for non-integrated plan issuers

November 30th, 2016 No comments

Creating an interstate market for individual health insurance is a component of President-elect Donald J. Trump’s healthcare policy. “To maximize choice and create a dynamic market for health insurance, the Administration will work with Congress to enable people to purchase insurance across state lines,” according to the Trump administration’s transition website.

The concept’s not new. It’s been around for decades as a reform element favored by conservative health policy wonks. It’s even baked into the Patient Protection and Affordable Care Act. Section 1333 of the law provides a mechanism for health insurers and plans to pool risk and sell across state lines via “health care choice compacts” starting this year. The provision allows two or more states to enter into an agreement under which health plans could be offered in state individual markets but subject to regulation by the state in which the plan was written or issued. The Affordable Care Act even provides for interstate health benefit exchanges. Section 1311(f) provides for “Regional or Other Interstate Exchanges” operating in more than one state with federal government approval.

On its face, enabling the marketing of health insurance across state lines appears appealing. After all, insurance is all about large numbers — and the bigger the better. More people in multiple states covered in health plans translates to enhanced spread of risk and potentially operating economies of scale. It’s a particularly appealing reform as individual health plan issuers worry about adverse selection, particularly in less populous states and those with poorer population health status. With health plan issuers able to offer plans in multiple states, the buy side of the market also benefits with more competition and consumer choice, proponents contend.

But undermining the concept is a microeconomic mismatch. Health coverage is far more portable than provider networks, which are geographically fixed by metropolitan areas and the brick and mortar physician offices, clinics and hospitals within them. Provider charges are not uniform, varying considerably from one metro area to another, even within a given state. Health plan issuers negotiate locally with providers because nearly all health care is provided locally and not across state lines except for those living near state borders.

An interstate model currently only favors integrated health plans such as California-based Kaiser Permanente and Molina Healthcare, which each operate health care facilities in a half dozen states and have fared better in the state health benefit marketplace environment than traditional non-integrated health plans.

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

Individual health insurance segment will continue to face existential crisis post-election

November 18th, 2016 No comments

Regardless of what the incoming Trump administration and Congress opt to do with the Patient Protection and Affordable Care Act’s reforms of the individual health insurance market, the segment will continue to face an existential crisis. The individual market remains the problem stepchild of health coverage, playing an important but relatively minor role in a siloed scheme dominated by employer sponsored coverage for a solid majority of those under age 65 and the big government entitlement programs of Medicare and Medicaid for most of the rest. Not to mention the other integrated government run care systems for active duty military members and their dependents and military veterans.

Given its place in the overall scheme of things, individual health insurance is the remainder market of last resort for those not covered by the dominant private and public systems. It functions as a high turnover, temporary segment that’s inherently unstable. People move in and out of coverage due to changing life circumstances or obtaining eligibility for coverage under one of the dominant systems. Others possess a deeply ingrained “culture of coping” as some have termed it to get medical care where it’s the most easily accessible and affordable such as hospital emergency departments, community clinics and free care events. That coping culture includes avoiding paying for individual health insurance, a pattern in place decades before the Affordable Care Act’s individual market reforms went into effect in 2014. It’s not going to be changed quickly even as health plan issuers are required to accept all applicants without regard to medical history and the law provides subsidies for premiums and out of pocket expenses to low and moderate income households.

That instability makes it very challenging for the basic insurance principle of risk spreading since the risk being insured against is highly dynamic. Actuaries base their projections on relatively stable risk pools and flows of premium dollars into the pool. As long as “covered lives” are moving in and out of the individual market, that desired actuarial predictability will remain elusive, the Affordable Care Act’s carrots and sticks aimed at stabilizing the pool notwithstanding.

As policymakers reassess the Affordable Care Act health insurance market reforms in the post-election period, they might well reexamine an assumption of the law that small group coverage would be eclipsed by the reformed individual market. It was expected that by making individual market coverage more like small group coverage by establishing small group plans as benchmark plans, that along with the individual market reforms would drive more people into individual coverage.

It hasn’t quite worked out that way. Even though the Affordable Care Act does not mandate they do so, small employers are continuing to offer group coverage, albeit less generous than the recent past and more akin to major medical, catastrophic plans with high deductibles. If they are offered coverage under them, employees have little incentive to enroll in individual coverage since they would not qualify for subsidized coverage sold on state health benefit exchanges.

That circumstance reduces the potential size of the individual segment and in so doing, degrades the individual market risk pool. While the Obama administration’s health insurance reforms are based on keeping employer-sponsored health benefits as the bedrock of coverage for most pre-retirement Americans, they also were aimed at revitalizing the struggling individual market. Given that employer-sponsored coverage cuts against a robust individual health insurance space, it may not be possible to have both.

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

Killing the ACA individual health insurance market reforms softly

November 16th, 2016 No comments

If they so choose, the incoming Trump administration and new Congress could begin quickly unwinding the Patient Protection and Affordable Care Act’s individual health insurance market reforms without taking any affirmative action to do so. The reason is the House of Representatives prevailed earlier this year in United States House of Representatives v. Burwell in which the House challenged the outgoing Obama administration’s funding of out of pocket cost sharing subsidies under Section 1402 of the Affordable Care Act. That section provides for supplemental subsidies in addition to advance premium tax credits for households earning between 100 and 250 percent of federal poverty levels. The additional subsidies limit out of pocket costs for households at that income level enrolling in silver level qualified health plans offered on state health benefit exchanges. In House of Representatives, plaintiffs argue funding of the cost sharing subsidies is not a continuing appropriation and thus requires an annual appropriation as part of the federal budget.

In a ruling issued May 12, U.S. District Court Judge Rosemary M. Collyer agreed, finding the supplemental cost sharing subsidies must be annually appropriated, but leaving them in place pending the Obama administration’s appeal. If the Trump administration opts not to move forward with the Obama administration’s appeal of Collyer’s decision, the ruling stands with immediate effect.

The cost sharing subsidies effectively increase the actuarial value of silver plans that cover on average 70 percent of medical care costs up to the annual out of pocket limit to a higher percentage. Without funding for the cost sharing subsidies, health plan issuers in state health benefit exchanges would be forced to take a bath since calculated premiums would not account for the higher actuarial value of silver plans with cost sharing subsidies. Already leery of higher than expected medical costs and concerned over the potential of adverse selection among exchange plans, the loss of federal funding for the cost sharing subsidies would likely send health plan issuers running for the exits and potentially seeking relief from enforcement of Section 1402. To avoid the pandemonium that would roil the exchanges, plans might pressure Congress and the new administration to appropriate stopgap funding to give policymakers time to reassess the options for plan year 2018 as part of an orderly transition to enact the incoming Trump administration’s avowed repeal of some or all of the Affordable Care Act.

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

No matter who’s in charge, rising health care cost curve must be broken

November 10th, 2016 No comments
Don Berwick

Don Berwick

Health costs continue to grow faster than the economy’s ability to pay for them. Partly as a result, high deductibles — what patients pay before insurance kicks in — have become widespread in employer and individual plans alike. Neither have much to do with the health law, said Don Berwick, who was acting Medicare administrator early in the Obama administration.

Republicans “managed to make the public think Obamacare was causing all the trouble. That is absolutely wrong,” he said. “They could repeal it tomorrow and still have a broken delivery system and costs would continue to go up.”

Source: Obamacare ‘Replacement’ Might Look Familiar

Berwick nails it: dead bang on. Health care reform no matter which administration is in charge cannot succeed unless it bends the cost curve of inexorably rising utilization costs. It’s not enough to expand insurance coverage. We have to move away from a culture that conflates health care (something individuals can only provide for themselves by leading healthy lifestyles) with the consumption of medical care (the point of health care is to avoid the need for it to the maximum extent possible).

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

Trump’s support of key element of ACA individual health insurance reforms suggests no wholesale, quick repeal

November 9th, 2016 1 comment

For his part, Trump has said that he favors keeping one key aspect, which outlawed the old practice by many insurers of refusing to cover people with preexisting medical problems or charging them more than other customers. The insurance industry has long said it would have a hard time abiding by this rule unless virtually all Americans are required to have insurance — a central feature of the ACA that Trump wants to cut.

Source: Obamacare’s future in critical condition with Trump’s victory – The Washington Post

This is the grand bargain underpinning the Affordable Care Act reforms of the individual health insurance market designed to save the market as it circled the adverse selection death spiral drain pre-2014.

It’s noteworthy Trump indicated during the presidential campaign that he wants to retain the prohibition on medical underwriting — the part of the deal imposed on health plan issuers in exchange for effectively forcing more people into the individual risk pool with the coverage mandate to help restore it to functioning. Keeping this ACA reform component in place suggests there will be no wholesale, rapid repeal of the health care law’s individual market reforms. Trump will clearly have to negotiate with health plan issuers if he wants to keep the medical underwriting ban intact, particularly if he wants to dispense with quid pro quo of the individual coverage mandate.

This demonstrates that the health care policy of the incoming Trump administration is a very rough work in progress that’s hardly set in stone. There will likely be a period of intense negotiations involving various stakeholders leading up to the new president’s inauguration and in the initial months of Trump’s administration.

Update 11/11/16:

The president-elect reaffirmed his position, The New York Times reported:

Mr. Trump said Friday that, after talking with President Obama this week, he might be willing to leave in place parts of the Affordable Care Act once he’s in office. Mr. Trump made the comments to The Wall Street Journal in his first interview since winning the election. The newspaper said Mr. Obama had urged the president-elect to reconsider repealing his signature health care law, which Mr. Trump said had become “unworkable.” But in the interview, Mr. Trump said he told the president that he would consider keeping two provisions of the law: the prohibition against insurers denying coverage because of a patient’s pre-existing condition; and the one that allows parents to keep their children on their insurance plans until they turn 26.

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

Anthem CEO Won’t Commit To Obamacare Beyond 2017

November 2nd, 2016 No comments

Key changes need to be made to put Obamacare on a “path toward viability,” Anthem chief executive Joe Swedish told analysts during the company’s third-quarter earnings call Wednesday. Anthem, which operates Blue Cross and Blue Shield plans in 14 states, is one of the largest providers of Obamacare  coverage after Aetna AET +0.85%, Humana HUM +0.87% and UnitedHealth Group UNH +0.85% decided to scale back participation on public exchanges for 2017. Anthem has 1.4 million members in Obamacare plans including 889,000 who have purchased from the exchanges.

Among changes needed are elimination of certain special enrollment periods that allow Americans to sign up for coverage year-round and make it difficult for actuaries to predict costs. In addition, Swedish, like other health insurance CEOs, said the “risk adjustment model” needs to be updated to improve risk pools that currently see more sick Americans with chronic conditions than younger and healthier people. Because younger people haven’t signed up and Americans have opted instead to pay a penalty, enrollment in individual coverage hasn’t been the 20 million to 25 million that insurers anticipated, Swedish said, citing past Congressional Budget Office estimates. Instead, insurers have been competing for business in a much smaller risk pool of 10 million to 11 million customers who purchased coverage on exchanges

Source: Anthem CEO Won’t Commit To Obamacare Beyond 2017

Anthem’s concerns touch upon a major tradeoff contained in the individual health insurance market reforms of the Patient Protection and Affordable Care Act. In exchange for agreeing to end medical underwriting of those who apply for coverage and accept partial community rating, the reforms are intended to reward health plans by boosting enrollment and enhancing the stability of the individual market.

With more covered lives with continuous, year round coverage, the market becomes more actuarially viable and predicable. That’s why health plan issuers were initially bullish on the reforms, foreseeing a much needed rescue of a market segment they had all but lost to the adverse selection death spiral. Now four years into the reforms, they’re undergoing a crisis of confidence and not certain they’re getting the benefit of the bargain.

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

Multi-state plans fall short of nationwide availability

November 2nd, 2016 2 comments

President Obama and Democratic presidential candidate Hillary Clinton have called for a publicly operated health plan to offer individual coverage. The intent is to bolster coverage options that have dwindled in some states as health plan issuers rethink their individual market participation as well as to bring to bear market pressure on participating plan issuers to hold down premium rates.

One existing provision of the Patient Protection and Affordable Care Act designed to do just that is at Section 1334 of law. It creates federally chartered health plans overseen by the Office of Personnel Management (OPM) and authorizes OPM to contract with health insurance issuers (or a group of health insurance issuers affiliated either by common ownership and control or by the common use of a nationally licensed service mark) to offer plans in multiple states.

Under Section 1334, such plans are to be available in all states starting in 2017. Turns out that isn’t going to happen. According to this page at the OPM website, just 22 state exchanges will have multi-state plans for sale next year. That contradicts Section 1334(e), which mandates OPM contract only with multistate plan issuers offering plans in all states in 2017.

OPM issued guidance earlier this year explaining why the requirement cannot be met:

While section 1334(e) of the ACA authorizes OPM to contract with issuers that offer nationwide expansion of coverage over a four-year schedule, the law does not preclude OPM from contracting with issuers that offer fewer than the scheduled number of states in any given year. The statute establishes general authority for OPM to contract for at least two plans in each state, but does not mandate firm parameters for attaining nationwide coverage. It remains the goal of the MSP Program to provide nationwide availability of MSP options by an issuer or group of issuers.

However, the experience of the first three years of the program has demonstrated that providing nationwide coverage for any issuer or group of issuers is difficult to achieve. Moreover, the statute does not give the Director of OPM authority to compel any issuer to provide nationwide coverage or to participate in the MSP Program. Therefore, OPM will exercise administrative discretion in deciding whether to contract with an issuer or group of issuers who would like to participate in the MSP Program but who cannot commit to offering coverage in all 51 jurisdictions by the fourth year of their participation in the program.

In sum, OPM is saying Section 1334(e)’s requirement notwithstanding, if health plan issuers don’t want to play in all states, it cannot force them to given the Affordable Care Act’s recognition of health insurance markets as voluntary. Also, the realities of the individual market in 2017 substantially reduced the likelihood of plan issuers offering multi-state plans nationwide as they reassess their participation in the state individual health insurance markets and the exchanges 2017 and post.

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

Greater than expected staying power of employer-sponsored health coverage could jeopardize viability of post-ACA individual market

October 28th, 2016 No comments

There are three basic explanations being offered up by individual health plan issuers on the eve of plan year 2017 open enrollment to justify sharply increased premiums in many states:

  1. Most of the Patient Protection and Affordable Care Act premium stabilization programs are expiring in 2017 and money is still owned plans under one of the expiring mechanisms designed to even out a given health plan issuer’s loss experience with that of other issuers;
  1. Plan issuers have more extensive loss experience data than in the initial years of the individual market segment as the Affordable Care Act reforms kicked in and it was harder to estimate what to charge;
  1. Closely related is the previous point, loss data indicates statewide individual risk pools are posting higher than expected medical utilization, with even higher utilization among plans sold on state health benefit exchanges. Premiums are thus being aligned to reflect the true quality and loss experience of the statewide risk pools.

The third point describes a dynamic situation that could change over time. For example, if medical utilization decreases and the health risk profiles of those in the individual market improve, premiums could readjust downward to reflect that more favorable environment.

However, a more long term concern that should be troubling for health policymakers voiced within some quarters of the health insurance industry is the state risk pools are unbalanced. Or to use an insurance industry term, adversely selected and skewed toward those more prone to using a lot of medical care with too few folks in the pool who use less. Those are actuarially assumed to be the so-called “young invincibles” in their twenties and thirties.

This is a larger concern because it could reflect a more long term, structural problem in the individual market as a whole. If the pool remains unbalanced, premium rates are likely to remain elevated since there are fewer premium dollars flowing into the pool from those who use less medical care to offset the expenses of higher utilizers. The longer premiums remain elevated, the greater the risk to the viability of the individual market as a whole since adverse selection tends to perpetuate an unvirtuous cycle of more people abandoning the market as premiums increase, reinforcing the need for additional premium hikes. This was the situation that existed prior to the Affordable Care Act’s 2010 enactment. Even in populous states like California, where accounts of premium increases of nearly 40 percent and an individual market posed to enter the terminal “death spiral” phase of adverse selection tipped the political scales to assure the needed votes in Congress for the law’s approval.

One of the assumptions of the Affordable Care Act’s individual market reforms is that by making individual coverage more like employer-sponsored coverage with minimum benefit requirements, annual enrollment periods and no medical underwriting, employer-sponsored coverage among smaller organizations would decline. It hasn’t turned out that way. The greater than expected staying power of employer-sponsored health coverage could reinforce an ongoing structural imbalance in the individual market, particularly in smaller states where by definition the risk pool is naturally limited.

The reason is the twenty and thirty somethings health plan issuers say they need to help achieve a good spread of risk for a balanced pool are more likely to be covered in employer sponsored plans than people age 50 and older  — and therefore not participating in the individual market. They are beginning their careers and more likely to be employed full time and whereas the latter age cohort is more likely to be retired, semi-retired, self-employed, and otherwise not employed full time by an employer offering health benefits.

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

High premiums for catastrophic coverage violate consumer expectations

October 28th, 2016 No comments

Levine has a Bronze plan, which has a $6,800 deductible, up from $6,500 last year. This year, Anthem has ended out-of-network coverage in its Bronze plans, turning them into EPOs, throughout much of the state.

That means Levine will be paying $517 month for a policy he says he may not even use.

“It has turned into a catastrophic policy,” he said, referring to plans intended to only cover large unexpected medical bills.

Source: As Obamacare enrollment nears, some Californians see big hikes in health premiums

This goes to the heart of the low value perception of bronze-rated individual health plans. When people are paying their own costs out of pocket for routine and minor medical care, they reasonably expect their premiums to be lower. Paying more than $500 a month for catastrophic coverage violently upends that expectation.

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

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