Departure of most loss and risk leveling mechanisms poses major test for ACA individual market reforms

A major test of the Patient Protection and Affordable Care Act’s individual market reforms begins with health plans effective next year — plan year 2017. That’s when two of three mechanisms designed to prevent big spikes in plan premium rates are set to go away. Their goal is to provide a degree of premium stability for plan years 2014 through 2016. They do so by balancing the spread of risk and losses among all health plan issuers, particularly given the uncertainty with the move to modified community-based rating in place of medical underwriting of individuals and families starting in 2014.

Gone will be reinsurance for plans sold through state health benefit exchanges to protect plan issuers from exchange enrollees who incur very high medical costs. Also going away is the risk corridors mechanism under which individual and small group plans whose members incurred costs exceeding 103 percent premiums collected receive subsidies from plan issuers having losses below 97 percent of premiums. Left in place for 2017 and later years is the loss leveling mechanism known as risk adjustment — whereby health plan issuers with plans having fewer members with high risk chronic health conditions transfer funds to those with higher numbers of members with such conditions.

Two big questions going forward 2017 post are 1) whether the risk adjustment mechanism alone will keep premiums from shooting upward as plan issuers signal robust premium increases are in the works for 2017 and 2) whether risk adjustment will ward off adverse selection against exchange plans by leveling risk among plans sold both within and outside the exchanges given health plan complaints of high losses on exchange plans.

Over the longer term, a looming question is to what extent for profit health plans will continue to offer individual plans in the exchanges given their function as voluntary marketplaces. “All indications are that … most insurance plans on the exchanges are yielding zero percent at the very most,” notes Vishnu Lekraj, senior equity analyst with Morningstar.

 


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. 

Observations and questions on exchange plan losses

Reading media accounts of health plan issuer complaints of losses on plans sold through state health benefit exchanges, one might think all individual plans are sold through the exchanges. That false perception has implications for gauging the success of the Patient Protection and Affordable Care Act’s individual market reforms since the exchanges are only one element of them. Other key components affect all individual (and small group) plans regardless of whether they are sold on the exchanges or outside of them such as modified community based rating barring medical underwriting of individuals and pooling all individuals and small employers into single state risk pools.

The tendency to view the individual market as one and the same with the exchanges appears driven at least in part by too little data on the off-exchange individual market as compared to exchange qualified health plans. Even though the number of off-exchange plans exceeds those sold on the exchanges in many states, “[th]e lack of transparency about this market will be a growing problem for consumers and regulators,” noted Joel Ario of Manatt Health Solutions and Katherine Hempstead of the Robert Wood Johnson Foundation at the winter meeting of the National Association of Insurance Commissioners (NAIC).

Another aspect of the complaints of exchange plan losses hasn’t been covered in any detail. While some health plan issuers say exchange plans are a money loser due to high medical utilization, they could also dislike having to meet additional compliance and plan administration requirements for exchange participation that makes them unattractive. Particularly if they don’t also offer Medicaid managed care plans serving a demographic more closely aligned with those who purchase coverage through the exchanges.

Finally, more examination and reporting are needed on what’s driving reported losses among plans sold on the exchanges. The frequently reported rationale is it’s because exchange plans enrolled people who are “sicker than expected.” Sicker with what, exactly? Are the losses being incurred by those eligible for cost sharing subsidies in silver plans given that most exchange plans purchased are higher deductible bronze and silver-rated plans? Are those enrollees not eligible for out of pocket cost sharing burning through the deductibles with high cost care such as outpatient surgeries and hospitalization?

 


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. 

Citing Losses, UnitedHealth to Pull Back From Obamacare – The New York Times

April 19th, 2016 No comments

The UnitedHealth Group, one of the nation’s largest health insurers, told investors on Tuesday that it continued to lose hundreds of millions of dollars selling individual policies under the federal health care law. The company said it planned to pull out of the majority of states where it offered coverage and would offer policies on the public exchanges in “only a handful of states” for 2017.UnitedHealth, which was a late and seemingly reluctant participant in the public exchanges, surprised investors last year when it announced its sizable losses, now estimated at more than a combined $1 billion for 2015 and 2016, because of its poor performance in the public exchanges. Policy analysts have been watching UnitedHealth closely as an indicator of whether the new individual market developed under the Affordable Care Act is sustainable.Addressing investors, Stephen J. Hemsley, the company’s chief executive, continued to offer a pessimistic view. “The smaller overall market size and shorter term, higher risk profile within this market segment continue to suggest we cannot broadly serve it on an effective and sustainable basis,” he said.

Source: Citing Losses, UnitedHealth to Pull Back From Obamacare – The New York Times

Health plan issuers were supportive of the Patient Protection and Affordable Care Act’s individual and small group market reforms including public health benefit exchanges when the law was being enacted six years ago. The thinking was the reforms would stabilize these troubled market segments and grow the individual segment in particular by aggregating and subsidizing purchasers via the exchanges. Apparently the numbers aren’t adding up for UnitedHealth per Hemsley’s complaint that the individual market is too small and churn too high.

This development comes at the same time UnitedHealth is revamping its approach to the individual and small group segments with its Harken Health subsidiary. According to media accounts, UnitedHealth will continue to offer Harken Health plans in some state health benefit exchanges from which it is withdrawing other individual plan offerings.

 


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. 

UnitedHeathcare’s Harken Health redefines the HMO in the age of Obamacare

April 4th, 2016 No comments

AUSTELL, Ga. — UnitedHealthcare is betting $65 million that it can profit by making primary care more attractive.With little fanfare, the nation’s largest health insurer launched an independent subsidiary in January that offers unlimited free doctor visits and 24/7 access by phone. Every member gets a personal health coach to nudge them toward their goals, such as losing weight or exercising more. Mental health counseling also is provided, as are yoga, cooking, and acupuncture classes. Services are delivered in stylish clinics with hardwood floors and faux fireplaces in their lobbies. Harken Health is available only in Chicago and Atlanta, where it covers 35,000 members who signed up this winter on the Affordable Care Act’s insurance exchanges. UnitedHealth still sells traditional plans in those cities, too.

Source: UnitedHealth wagers $65 million on ounce of primary-care prevention

This individual and small group health plan offering appears primarily aimed at boosting health literacy and appreciation for healthy lifestyles among those new to health insurance following the expansion of coverage under the Patient Protection and Affordable Care Act. Since this cohort can be frequent users of care and who because they lack pre-existing provider relationships tend to rack up costly emergency room visits for non-emergent care, Harken Health aims to reach them — and reduce ER visits — by offering unlimited primary care visits without out of pocket costs.

An apparent goal here is that by improving health literacy of its members and instilling in them an appreciation for maintaining healthy lifestyles — key health determinants — Harken Health will build a long term relationship that will pay future dividends in avoided high cost care. It’s redefining the health maintenance organization for the Obamacare era.

 


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. 

Proposed Minnesota legislation would allow Basic Health Plan on state exchange to expand rural choice

March 31st, 2016 No comments

Area legislators believe they have found one possibility for cutting premiums and adding coverage to health insurance for those in rural Minnesota.They’ve introduced a bill to request a federal waiver so that MinnesotaCare, the state-run health insurance plan for low-income individuals and families, can be sold on the state exchange to those above the current income limit. Any new enrollees would pay a premium based on a statewide calculation that considers MinnesotaCare as other privately offered health insurance plans are.“In the metro area, there are a lot of insurance carriers who provide multiple products,” said Sen. Kathy Sheran, DFL-Mankato. “In the rural area, where we are more remote and there are fewer customers to be pursued, there are fewer providers of those products.”

Source: Legislators want MinnesotaCare open to all | Local | southernminn.com

This is an interesting development (h/t to Manatt’s Liz Osius) given that many state exchanges struggle to offer much in the way of choice among qualified health plans (QHPs) in their rural rating regions. This bill would allow a special state insurance plan authorized under Section 1331 of the Patient Protection and Affordable Care Act known as a Basic Health Insurance Plan (BHP) for individuals under age 65 with household incomes between 133 and 200 percent of the federal poverty level (FPL) and ineligible for Medicaid (which tops out at 138 percent of FPL in states that opt to expand Medicaid eligibility) to be offered on Minnesota’s state health benefit exchange. MinnesotaCare is the state’s BHP. The preamble to federal rules issued earlier this year governing federal funding for BHPs recognizes their utility as adjuncts to exchange QHPs and Medicaid plans:

BHP provides another option for states in providing affordable health benefits to individuals with incomes in the ranges previously described. States may find BHP a useful option for several reasons, including the ability to potentially coordinate standard health plans in BHP with their Medicaid managed care plans, or to potentially reduce the costs to individuals by lowering premiums or cost-sharing requirements.

Despite this language suggesting flexibility, it remains to be seen whether the federal government would grant a state innovation waiver under Section 1332 of the Affordable Care Act allowing MinnesotaCare to be offered on the exchange if the legislation is enacted. Section 1332 provides program flexibility on exchange requirements but does not extend to BHPs under Section 1331.

 


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. 

California exchange mulls flexing market power to enforce hospital care quality

March 21st, 2016 No comments

California’s insurance exchange is threatening to cut hospitals from its networks for poor performance or high costs, a novel proposal that is drawing heavy fire from medical providers and insurers.The goal is to boost the overall quality of patient care and make coverage more affordable, said Peter Lee, executive director of the Covered California exchange.“The first few years were about getting people in the door for coverage,” said Lee, a key figure in the rollout of the federal health law. “We are now shifting our attention to changing the underlying delivery system to make it more cost effective and higher quality. We don’t want to throw anyone out, but we don’t want to pay for bad quality care either.”

“California is definitely ahead of the pack when it comes to taking an active purchasing role, and exclusion is a pretty big threat,” said Sabrina Corlette, a research professor at Georgetown University’s Center on Health Insurance Reforms. “There may be a dominant hospital system that’s charging through the nose, but without them you don’t have an adequate network. It will be interesting to see how Covered California threads that needle.”

Source: California Insurance Marketplace Wants To Kick Out Poor-Performing Hospitals | Kaiser Health News

State health benefit exchanges aggregate individual and small group health plans and purchasers in order to facilitate a more functional market and make health coverage more accessible and affordable. When they actively negotiate with health plan issuers on terms and conditions for exchange participation as Covered California does, they in effect become super payers relative to providers since they can leverage their market power to establish quality standards for medical care covered by participating plan issuers. Covered California now wants to exercise that power relative to hospitals. That dynamic disrupts the traditional contractual relationship between plan issuers and providers and both are initially reacting to the proposal by telling Covered California to butt out.

Hospitals operate in a market that tends to be oligopolistic in metro areas and monopolistic in less populous areas. In California’s expansive geography, it has a mix of both. Georgetown University’s Sabrina Corlette points up the tension between enforcing quality standards on hospitals and the realities of the hospital market relative to ensuring an adequate number of hospitals exist in exchange plan provider networks. The California exchange has a large degree of purchasing power. But in a market with few sellers and many buyers (plan members in a given rating region), sellers have a natural advantage relative to determining price and quality.

 


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. 

New Kentucky state benefit enrollment portal to include Medicaid E&E

March 10th, 2016 No comments

Kentucky: State Launches New Website for Medicaid and Public Assistance Programs. The Cabinet for Health and Family Services launched Benefind, a new web portal through which residents can enroll in Medicaid, Supplemental Nutrition Assistance Program and the State’s cash assistance program. Program enrollees can also use Benefind to renew benefits, check benefit amounts, report changes, upload verification documents, check claim status, make claim payments and receive electronic notices. The rollout of Benefind comes shortly after Governor Matt Bevin (R) announced plans to dismantle kynect, Kentucky’s State-based Marketplace, and transition to HealthCare.gov by the end of the year.

Source: Manatt on Health Reform: Weekly Highlights – March 2016 | Manatt, Phelps & Phillips, LLP – JDSupra

This latest development in Kentucky comes as the state shifts from a state-based health benefit exchange (kynect) to a federally supported state-based exchange. Benefind allows Kentucky residents to enroll online in Medicaid as well as the state’s supplemental nutrition assistance and cash assistance to families with children programs.

Benefind appears at odds with the Patient Protection and Affordable Care Act’s “no wrong door” policy that requires a single application to determine eligibility for subsidized individual plans sold on all state health benefit exchanges as well as for state subsidy programs such as Medicaid and CHIP. It’s contained at ACA Section 1413, titled Streamlining Of Procedures For Enrollment Through An Exchange And State Medicaid, Chip, And Health Subsidy Programs.

With its own portal for Medicaid eligibility as well as for individual plans offered on the exchange, the Bluegrass State won’t have a single application door but rather two: one offered though the state health benefit exchange and another through its Benefind web portal. The Benefind portal will also refer applicants to the exchange portal if it determines their household income potentially qualifies them for enrollment in an exchange plan, Vickie Yates Brown Glisson, Kentucky’s health and family services secretary, told state lawmakers.

While perhaps not compliant with the ACA’s single, no wrong door policy, Kentucky’s model may address problems in some state exchanges getting Medicaid-eligibles quickly qualified and enrolled in coverage due to difficulty interfacing with state Medicaid computer systems.

 


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. 

Report tempers outlook for HIX enrollment

March 9th, 2016 No comments

The 10 best-performing states – which include several large states such as Florida, North Carolina, and California — have collectively signed up 59% of the potential market. While that might appear to leave room for substantial further growth, there are reasons to believe that enrollment has close to plateaued in those states. The potential market includes people who are buying their own coverage outside the marketplaces, many of whom do not qualify for subsidies. The experience so far is that the vast majority (82%) of marketplaces enrollees are receiving premium subsidies, while people who are ineligible for subsidies typically buy coverage on the outside market. In fact, we estimate that in the top-performing states the number of people who have selected a plan and qualified for a subsidy represents more than 90% of subsidy-eligible people. This is a very high take-up rate for a public program, suggesting there is very little potential for growth in these states. The only way enrollment could grow substantially is to attract people not eligible for subsidies who are already buying their own coverage directly.
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There are signs that marketplace coverage could continue to grow modestly in the years ahead. But, absent a substantial boost in outreach or changes to the subsidies to make insurance more affordable, substantial increases in marketplace enrollment are unlikely.

Source: Assessing ACA Marketplace Enrollment | The Henry J. Kaiser Family Foundation

 


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. 

“Waiting to get sick:” In depth research, more info needed

February 29th, 2016 No comments

The biggest problem with the exchanges reflects a basic insurance rule: Insurers need healthy, premium-paying customers to balance claims they cover from the sick. Insurers have struggled in many markets because people who couldn’t get coverage previously due to a condition were among the first to sign up when the exchanges opened a few years ago. Healthy customers have been slower to enroll.Insurers say they’ve also been hurt by customers who appear to be waiting until they become sick to buy coverage. The companies blame liberal enforcement of the ACA’s special enrollment exceptions

Source: Insurer warnings cast doubt on ACA exchange future

This is a topic that cries out for in depth research and more information. The critical question that needs answering is how are those who apply for coverage outside of annual open enrollment able to time a serious illness or accident in order to plan when to buy coverage for it as this analysis prepared for America’s Health Insurance Plans and the Blue Cross Blue Shield Association suggests? While the analysis shows significantly higher medical utilization among those who enrolled in individual plans outside of open enrollment periods, it does not definitively demonstrate that these individuals waited until they needed medical care before enrolling. They could well simply be in poorer overall health compared to those enrolling in the open enrollment period and also have difficulty managing their household finances.

The urgency of the issue relative to the individual health insurance market reforms and the viability of the state exchanges as well as simple logic demand an answer. It makes no sense, for example, that an applicant for coverage could know in advance they were going to suffer a costly care event such as a heart attack or stroke, a bout of appendicitis or kidney stone and purchased coverage to take effect shortly before the event.

 


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. 

Arkansas proposes overhauling Medicaid program to emphasize employer-sponsored coverage

February 25th, 2016 No comments

Arkansas is asking the U.S. Department of Health and Human Services to sign off on an overhaul of its Medicaid expansion program to make it into more of an employment expansion program based on employer-sponsored coverage rather than a traditional state insurance program for low income earners. The state is proposing federal Medicaid funding go toward defraying the cost of premiums for employees and also subsidizing small employer plans.

Source: 20160215 ArkWorks Summary_JM – 20160215_ArkWorks_Summary_share.pdf

 


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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