Health insurance needs risk management and loss control tools

September 21st, 2016 No comments

Risk management and loss control are established practices in the property/casualty insurance industry. An example in homeowners insurance is clearing brush and flammable materials away from structures to reduce the risk of loss due to fire. On the commercial side of the business, it might take the form of recommending an insured business replace old or damaged electrical wiring that could short out and cause a fire. Or reducing safety hazards at the job site that could lead to an injury and workers’ compensation claim.

These practices however haven’t been widely adopted in the health insurance industry. Notwithstanding s a consensus that engaging in health promoting behaviors such as getting sufficient sleep and exercise can mitigate the risk of lifestyle-related chronic metabolic and cardiovascular disease. These risk reduction factors are now measurable, thanks to the availability of wearable tracking devices over the past few years.

The health insurance industry should figure out the best way to use data from these devices to encourage sustained healthy lifestyle habits. If the data show, for example, that an individual is engaging in regular exercise and getting 7-9 hours of sleep most days, an employer-sponsored health plan could offer a premium discount. The discount is justified since an individual who demonstrably practices healthy lifestyle habits on a regular basis will likely be at lower risk to develop a chronic medical condition that could lead to a high dollar loss in the future. It recognizes that people are best situated provide health maintenance for themselves — not their medical providers – a critical distinction as the economics of health care are reaching a breaking point. It also recognizes that as long as the United States utilizes an insurance-based system of paying for much of the nation’s health care, there must be a partnership between health insurers and those they cover to reduce utilization to ensure money is there for those facing high, unexpected medical costs.

Large employer plans can already put this into practice. For the small employer and individual market segments, the addition of an optional rating factor (in addition to the permitted factors such as family size, age, location and tobacco use) under the Patient Protection and Affordable Care Act would be necessary. Given the particular concern health plan issuers have expressed over higher than expected losses in the individual market over the past few years, the impetus is there.

 


The Affordable Care Act is the most comprehensive overhaul of America’s health care payment and delivery system since the enactment of Medicare and Medicaid more than 50 years ago, posing significant challenges for public policymakers and health system stakeholders. Pilot Healthcare Strategies can help with insightful policy research and analysis, strategic consulting and project management services. For an initial consultation, email fpilot@pilothealthstrategies.com or call 530-295-1473. 

Employer-sponsored health coverage redefined in ACA era

September 14th, 2016 No comments

While employer-sponsored plans typically have much lower deductibles than the most popular plans found on the exchanges, more employees have deductibles, and those deductibles are increasing. Over all, employees have deductibles that are about 50 percent higher than they were five years ago. Four out of five covered employees pay a deductible, which averages about $1,500 each, Kaiser found. Employees who get insurance through a smaller company have deductibles that now average $2,100. Workers are also paying a greater share of the premiums, contributing $5,277 annually toward a family plan, nearly a third of the total cost.

Source: Workers Pay More for Health Care as Companies Shift Burden, Survey Finds

The Patient Protection and Affordable Care Act is predicated on the principle that the vast majority of working age Americans are covered by employer-sponsored health insurance (ESI). In the not too distant past, ESI could have been accurately described as an employee benefit since employees paid little or nothing for their coverage.

In line with the trend of the past several years to have employees share in the cost of their coverage, the Affordable Care Act redefined ESI as “employer shared responsibility,” referring to the law’s requirement that employers of 50 or more offer nearly all full time employees coverage providing minimum value. That’s a critical distinction that reshapes the traditional view of ESI.

 


The Affordable Care Act is the most comprehensive overhaul of America’s health care payment and delivery system since the enactment of Medicare and Medicaid more than 50 years ago, posing significant challenges for public policymakers and health system stakeholders. Pilot Healthcare Strategies can help with insightful policy research and analysis, strategic consulting and project management services. For an initial consultation, email fpilot@pilothealthstrategies.com or call 530-295-1473. 

The states with the biggest Obamacare struggles spent years undermining the law

September 8th, 2016 No comments

As insurers exit Obamacare marketplaces across the country, critics of the Affordable Care Act have redoubled claims that the health law isn’t working. Yet these same critics, many of them Republican politicians in red states, took steps over the last several years to undermine the 2010 law and fuel the current turmoil in their insurance markets. Among other things, they blocked expansion of Medicaid coverage for the poor, erected barriers to enrollment and refused to move health plans into the Obamacare marketplaces, a key step to bringing in healthier consumers.

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There are many fewer options in states whose leaders have spent years working to sabotage the law.

Source: The states with the biggest Obamacare struggles spent years undermining the law

It is inaccurate to describe red states as “sabotaging” Obamacare. The ACA is a federal-state initiative that afforded a good degree of policy latitude to the states, with that freedom vis Medicaid expansion broadened by the USSC in NFIB v. Sebelius (2012).

The real issue is there is no policy consensus among the states re health care reform notwithstanding broad agreement that reform is essential. Also, the individual market poses enormous challenges re achieving spread of risk to ensure this market segment’s long term actuarial viability. Contributing to that challenge is a culture that does not value health promoting lifestyles and regards medical care and insurance as high cost consumer commodities.

 


The Affordable Care Act is the most comprehensive overhaul of America’s health care payment and delivery system since the enactment of Medicare and Medicaid more than 50 years ago, posing significant challenges for public policymakers and health system stakeholders. Pilot Healthcare Strategies can help with insightful policy research and analysis, strategic consulting and project management services. For an initial consultation, email fpilot@pilothealthstrategies.com or call 530-295-1473. 

Health Exchange Signups Fall Short – The Yeshiva World

August 28th, 2016 No comments

In February 2013, the Congressional Budget Office predicted that 24 million people would buy health coverage through the federally and state-operated online exchanges by this year. Just 11.1 million people were signed up as of late March.Exchanges are marketplaces where people who do not receive health benefits through a job can buy private insurance, often with government subsidies.“Enrollment is key, first and foremost,” said Sara Collins, a vice president at the Commonwealth Fund, a nonpartisan foundation that funds health-care research. “They have to have this critical mass of people so that, by the law of averages, you’re going to get a mix of healthy and less healthy people.”A big reason the CBO projections were so far off is that the agency overestimated how many people would lose insurance through their employers, which would force them into the exchanges. But there have been challenges getting the uninsured to sign up, too.

Source: Health Exchange Signups Fall Short – The Yeshiva World

There’s a strong element of irony here given the Obama administration’s stated position that health care reform should retain the employer-sponsored model that covers the majority of Americans under age 65. According to this report, it retained a bit too much  — to the detriment of a robust individual market the Patient Protection and Affordable Care Act insurance market reforms envisioned.

 


The Affordable Care Act is the most comprehensive overhaul of America’s health care payment and delivery system since the enactment of Medicare and Medicaid more than 50 years ago, posing significant challenges for public policymakers and health system stakeholders. Pilot Healthcare Strategies can help with insightful policy research and analysis, strategic consulting and project management services. For an initial consultation, email fpilot@pilothealthstrategies.com or call 530-295-1473. 

Federal study finds Medicaid expansion improves individual risk pool, reduces HIX plan premiums

August 27th, 2016 No comments

The HHS analysis uses 2015 data on HealthCare.gov plans and enrollment to assess how Medicaid expansion affects Marketplace premiums. It controls for differences across states in demographic characteristics, pre-ACA uninsured rates, health care costs, and state policy decisions other than Medicaid expansion, finding a 7 percent difference in Marketplace premiums holding these factors fixed.

States that expanded Medicaid coverage under the ACA have Marketplace risk pools comprised largely of individuals with incomes above 138 percent FPL, while non-expansion states have Marketplace risk pools that include more individuals below 138 percent FPL. Because lower-income individuals on average have poorer health status than those with higher incomes, a state’s decision not to expand Medicaid affects the Marketplace risk pool and, ultimately, Marketplace premiums. Issuers have noted that Medicaid expansion is one way that states can strengthen their Marketplaces.

Source: Medicaid expansion lowers Marketplace premiums by 7 percent

The upshot of this analysis is the actuarial health of the statewide individual health insurance risk pools would be improved taking into account the correlation between socio-economic status and health status and removing households earning between 100 and 138 percent of federal poverty from the pool by making that cohort eligible for expanded Medicaid.

Given that some health plan issuers have withdrawn from state health benefit exchange marketplaces citing lower population health status — and higher risk — than anticipated, it would be interesting to see if there’s a correlation between states that opted not to expand Medicaid eligibility and states where plans have exited exchanges for plan year 2017.

 


The Affordable Care Act is the most comprehensive overhaul of America’s health care payment and delivery system since the enactment of Medicare and Medicaid more than 50 years ago, posing significant challenges for public policymakers and health system stakeholders. Pilot Healthcare Strategies can help with insightful policy research and analysis, strategic consulting and project management services. For an initial consultation, email fpilot@pilothealthstrategies.com or call 530-295-1473. 

NYT: Vision of robust individual health insurance market remains elusive three years after key ACA reforms

August 22nd, 2016 No comments

State health benefit exchanges established by the Patient Protection and Affordable Care Act were envisioned as robust marketplaces with many health plans offering a wide selection of providers. That robust marketplace is central to the law’s policy thrust to create a market in which consumers would fare far better value than in the dysfunctional pre-ACA individual marketplace, able to select from a broad range of health plans offering both value and choice of providers. More consumers thanks to premium subsidies and mandated coverage, in turn attracting a greater number of health plans and providers to tap into that enlarged market. More is better for all.

The New York Times published two stories Sunday suggesting that hoped for market vigor is proving elusive three years after most of the Affordable Care Act’s main reforms took effect and that market forces are favoring less over more. One story reports health plans driven by consumer demand for low premiums are narrowing provider networks as plans leverage market power to negotiate aggressive reimbursement rates with fewer providers. On the health plan issuer side of the market, The Times reports, there aren’t many playing in the state exchange space with consumers in large parts of the nation having only one or two exchange plans from which to choose.

 


The Affordable Care Act is the most comprehensive overhaul of America’s health care payment and delivery system since the enactment of Medicare and Medicaid more than 50 years ago, posing significant challenges for public policymakers and health system stakeholders. Pilot Healthcare Strategies can help with insightful policy research and analysis, strategic consulting and project management services. For an initial consultation, email fpilot@pilothealthstrategies.com or call 530-295-1473. 

Too early to declare failure of individual health insurance market statewide risk pooling

August 13th, 2016 No comments

One of the primary reforms of the individual health insurance market under the Patient Protection and Affordable Care Act was to create a single risk pool for entire states for individual health plans effective 2014 and later. The purpose was to rescue the individual market from a death spiral crisis of adverse selection that threatened its existence. To keep their individual plans solvent pre-2014, plan issuers resorted to playing a game of whack a mole with their plans. As losses mounted in existing plans, they would shut them down and place them into runoff mode by closing them off to new enrollees. Then they set up new plans containing new enrollees stringently screened via medical underwriting in an attempt to hold down claims costs.

The result was widespread market failure. Many consumers in the individual health insurance market couldn’t purchase coverage because they couldn’t meet the increasingly strict medical underwriting criteria. Those already in existing plans faced steep premium rate increases making coverage unaffordable.

There are widely differing views on whether the Affordable Care Act’s single statewide risk pooling mechanism is achieving adequate spread of risk to remedy the adverse selection that plagued the market pre-2014. Media coverage is sloppy. Accounts such as this one conflate the statewide risk pool with the health benefit exchange marketplace. They are not one and the same. Individual plans are sold both on and off the exchanges. There is no separate risk pool for those enrolling in the individual market through exchanges and another for those who do not.

Many media reports frequently report individual market enrollees are “sicker than expected.” Higher medical utilization as the 2014 reforms kicked in was in fact expected. The Affordable Care Act contained premium stabilization mechanisms that took into account the possibility of high utilization due to pent up demand from those who were previously without coverage either voluntarily or because they fell short of medical underwriting standards or couldn’t afford the premium increases as the market imploded.

A problematic issue with current mainstream media coverage is the tendency to jump to the conclusion that high anticipated medical utilization in the early years of the individual market reforms are indicative of its long term viability. As the standard investment exculpatory disclaimer goes, past performance doesn’t guarantee future results, good or poor. Ditto short term volatility.

Respected health care industry blogger Timothy Jost offers a sharply contrasting perspective to bearish sentiment that the statewide risk pooling mechanism is a failure. He cites a report issued this week by the Centers for Medicare and Medicaid Service indicating claims costs were flat year over year from 2014 to 2015 as evidence the statewide risk pools are functional. Higher premiums for 2017, he writes, are due to health plan issuers adjusting rates to comport with actual experience in 2014 and 2015 plan years instead of the educated guessing they employed for 2014, the first year of the major individual market reforms. Also being factored in is the end of the reinsurance component of the Affordable Care Act’s premium stabilization mechanisms starting in 2017.

 


The Affordable Care Act is the most comprehensive overhaul of America’s health care payment and delivery system since the enactment of Medicare and Medicaid more than 50 years ago, posing significant challenges for public policymakers and health system stakeholders. Pilot Healthcare Strategies can help with insightful policy research and analysis, strategic consulting and project management services. For an initial consultation, email fpilot@pilothealthstrategies.com or call 530-295-1473. 

Economic pressures of ACA individual insurance market reforms tear at fabric of provider networks

July 30th, 2016 2 comments

The Patient Protection and Affordable Care Act’s reforms of the individual health insurance market removed tools health plan issuers historically utilized to control costs such as medical underwriting, unlimited annual cost sharing and lifetime limits. That has left health plan issuers one main tool: using the market power represented by their plan memberships to negotiate lower reimbursement rates with providers while maintaining quality of care. Those providers who don’t play along can find themselves left out of provider networks. That naturally functions to narrow plan networks.

The Affordable Care Act permits the standardization of benefits within metal tier actuarial value rating levels. California’s health benefit exchange, Covered California, has opted to standardize benefits to facilitate consumer comparisons of plan benefits and costs. The exchange has also chosen to actively negotiate with health plan issuers and affirmatively select which plans will be included among its qualified health plans (QHP) for a given plan year. In a state as large as California, that gives the exchange real negotiating power given the number of covered lives it can potentially bring to the table. Plan issuers that want on the exchange must reach an accommodation with Covered California on premium rates and providers as well as their own providers — while at the same time convincing regulators their plans offer a sufficient selection of providers.

Striking that balance since the Affordable Care Act reforms began to be felt in 2013 was never easy and could be getting a lot tougher. Something eventually has to give to resolve the economic tension. When a complex system like America’s private health care market is placed under stress, stress fractures first appear at its weakest links and components. Particularly given that the Affordable Care Act has welded shut most of the escape hatches. In this case, it appears to be a rent in the fabric of the provider network, described by the journal Health Affairs (and reported here by The Los Angeles Times). The issue of plan members having difficulty connecting the providers has caught the attention of regulators. (See this recent, in depth Health Affairs policy brief for a detailed discussion. As it should since if the fray grows into a larger tear, it could prove fatal to the Affordable Care Act’s individual insurance market reforms.

 


The Affordable Care Act is the most comprehensive overhaul of America’s health care payment and delivery system since the enactment of Medicare and Medicaid more than 50 years ago, posing significant challenges for public policymakers and health system stakeholders. Pilot Healthcare Strategies can help with insightful policy research and analysis, strategic consulting and project management services. For an initial consultation, email fpilot@pilothealthstrategies.com or call 530-295-1473. 

“Health care arms race:” Payers, providers scale up to boost negotiating power

July 24th, 2016 No comments

Last year, the head of California’s health benefit exchange and a health economist opined that consolidation among health plan issuers offsets the urge to merge that’s also taking occurring among health care providers. A rough balance of market power between payers and providers will benefit buyers of health insurance, argued Peter V. Lee, executive director of Covered California and Victor R. Fuchs, emeritus professor of health economics at Stanford University. The enhanced market power of bigger plan issuers would exert pricing pressure to hold down provider fees, they asserted.

The primary rationale of the Lee/Fuchs position is the Patient Protection and Affordable Care Act’s requirement that individual and small group health plan issuers must devote at least 80 cents of every premium dollar to paying providers (85 cents for large group plans) and care quality improvements. That will force health plans to find ways to hold down health care costs since they are statutorily limited in terms of what they can keep for themselves, Lee and Fuchs contend.

The U.S. Department of Justice holds a far different view. It filed legal challenges last week to block proposed mergers of Anthem and Cigna and Aetna and Humana on antitrust grounds, contending the resulting market consolidation would harm market competition. Meanwhile, The Sacramento Bee editorialized that while it sympathizes with insurers looking for negotiating leverage to counter a similar consolidation among providers, it is concerned about the prospect of a “health care arms race” that would create megaliths on both the payer and provider sides, giving them enormous market power.

The rationale for preserving competition is to hold down prices consumers pay. Fewer sellers in a given market means consumers have less to choose from, lessening the deterrent to charge more since higher prices could mean consumers going to a competitor that charges less. The problem however as the health care market tends toward oligopoly (few sellers, many buyers), it offers a natural advantage to sellers. In an oligopolistic market, it’s not in any one seller’s interest to significantly undercut the other guy since competitors, like them, are big by definition and have staying power. They can ride out a competitor’s lower pricing and know that unless the competition has some unfair cost advantage, they can offer significant price discounts for only so long before they lose money or go out of business. Notably, health plans are amplifying the oligopoly effect on the provider side. As health plan networks narrow, consumers have fewer and fewer providers from which to choose.

Back to the Lee/Fuchs argument on the Affordable Care Act’s minimum loss ratio rule serving a forcing function to keep the lid on rising health care costs. In the first post on this blog in February 2010, Veteran Sacramento-based journalist and policy wonk Daniel Weintraub pointed out that it won’t necessarily result in lower premium rates for consumers. If health plan issuers devote 80 or 85 percent of premium dollars to care and care improvements as required under the Affordable Care Act, any increase in overall health care costs still gets proportionally passed on to consumers as the size of the overall health care cost pie grows. Similarly, so does the pot of premium dollars representing the 15 or 20 percent health plan issuers set aside to cover overhead and profit as underlying health care costs continue to ratchet upward.

 


The Affordable Care Act is the most comprehensive overhaul of America’s health care payment and delivery system since the enactment of Medicare and Medicaid more than 50 years ago, posing significant challenges for public policymakers and health system stakeholders. Pilot Healthcare Strategies can help with insightful policy research and analysis, strategic consulting and project management services. For an initial consultation, email fpilot@pilothealthstrategies.com or call 530-295-1473. 

Paying cash and negotiating price: Will it reduce the cost of health care and coverage?

July 9th, 2016 No comments

Many of us now have high-deductible health insurance plans, which makes us “cash-pay” patients until we meet our deductibles. According to a Health Affairs health policy brief, high deductible plans are now much more prevalent in both individual and group markets.The higher the deductible, the lower the monthly premium. If you have a high deductible plan and don’t consume much medical care, you are most likely a cash pay patient. You might even avoid medical care because of the out of pocket cost. I know I have.I talked with a friend yesterday who has a $9,000 deductible. She has a torn meniscus. She is avoiding the surgery because she isn’t even close to hitting her plan’s deductible. I suggested she try asking for a “cash pay” price from her surgeon and the hospital or surgery center where her procedure would be performed. Negotiating cash pay prices for medical treatment has become a common practice. Often a cash-pay price for medical care can be much less than what you’d have to pay if you haven’t met your deductible.

Source: How cash-pay patients can beat high-deductible plans

The strategy of paying cash for medical care to get a better price originally appeared in The Los Angeles Times and is getting legs elsewhere such as here. That’s the way it was back in the 1950s and 1960s where people had “major medical” insurance that covered only large and unexpected medical care needs such as auto accidents and heart attacks. Everything else was paid on a cash basis.

Going forward, it bears watching to see if this gains momentum among those covered by high deductible plans. If it does, it could create downward pricing pressure on non-emergency medical procedures including primary care visits that aren’t preventative care and thus subject to out of pocket cost sharing.

Ditto high deductible plan rates. If more people pay providers directly rather than engaging in the paperwork exercise with their health plans for care falling well below their annual deductible, that reduces the administrative burden on the issuers of high deductible plans. As well as providers willing to negotiate a cash price knowing they’ll get paid sooner with less paperwork.

There’s an added bonus for high deductible plan members. At one time, having a high deductible plan meant a broader choice of providers. No longer the case with today’s narrow networks. Paying cash can potentially substantially widen the provider network to any provider willing to accept cash as payment in full for services.

 


The Affordable Care Act is the most comprehensive overhaul of America’s health care payment and delivery system since the enactment of Medicare and Medicaid more than 50 years ago, posing significant challenges for public policymakers and health system stakeholders. Pilot Healthcare Strategies can help with insightful policy research and analysis, strategic consulting and project management services. For an initial consultation, email fpilot@pilothealthstrategies.com or call 530-295-1473. 

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