ACA architect Ezekiel Emanuel’s post-ACA alternative to individual market reforms: auto enrollment in catastrophic coverage

January 14th, 2017 No comments

The Patient Protection and Affordable Care Act retains the current system in which those not covered by employer-sponsored and government plans purchase their own medical coverage from insurance companies. The individual or non-group market as it’s termed is like buying life insurance. A policy is issued and the covered party pays a monthly premium to keep the coverage in force.

To ensure the market functions well with large numbers of people in the risk pool and a good spread of risk among those who use little medical care and those who use a lot, the Affordable Care Act compels health plan issuers to make coverage widely available to anyone wanting to buy it. Similarly, it stimulates buyer demand by requiring everyone to have some form of medical coverage or pay an income tax penalty.

The problem is while Americans like the idea of being able to purchase coverage and not be turned down for underwriting reasons as they can when applying for life insurance, they don’t support being forced to purchase individual coverage and want the option to go without. That gives health plan issuers concern because with too many people “going bare,” they will be nakedly exposed to too many high utilizers who aren’t inclined to forgo coverage because they suffer from costly-to-treat medical conditions. Summed up, what the buy and sell sides of the market feels the other side must do to make it work, the other side dislikes. Sellers and buyers are forced into an uneasy relationship, one that needs many years to determine if can sustainably work after a somewhat rocky start. Four years isn’t likely to be long enough, but political exigencies are now requiring policymakers to reexamine the relationship.

One alternative is coming from none other than one of the Affordable Care Act’s primary architects, Ezekiel Emanuel. In remarks delivered at the Commonwealth Club of San Francisco this week, Emanuel suggested moving away from the market-based model of the law and toward making the individual market more like a government insurance program and specifically Medicare. Those eligible – presumably those not covered by an employer-sponsored or government plan – would be automatically enrolled in basic, catastrophic coverage. There would be an option to pay a premium for more generous coverage. Emanuel predicted that approach could garner bipartisan support. While he didn’t specifically raise the point, such as scheme could conceivably be funded at least in part by payroll and self employment taxes. It also wouldn’t be incompatible with conservative ideas such as providing a tax credit to help households offset the cost of medical insurance. Emanuel’s comments on this topic start at 13 minutes into this audio recording of his remarks.


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 or call 530-295-1473. 

Fate of individual market hangs in balance

January 11th, 2017 No comments

An immutable truth of any market is sellers and buyers must be able to get together on mutually agreeable terms and conditions and do so on a sustainable basis. If that doesn’t occur, markets grow weak and eventually fail. Sellers withdraw and buyers don’t buy. That has certainly been happening in the individual medical insurance market. Some health plan issuers have pulled back their offerings in many states for the current plan year. Many consumers are reluctant buyers, accustomed for decades to all inclusive, low co-pay managed care plan model. They naturally see individual plans that come with both high premiums and high out of pocket costs as a poor value, expecting a greater inverse relationship between the two. Particularly if they don’t benefit from premium and cost sharing subsidies.

That’s not a prescription for long term buy side support. The Patient Protection and Affordable Care Act forces sellers and buyers of individual plans together by requiring sellers to sell regardless of an individual’s medical history and buyers to buy under pain of paying an income tax penalty for not having some form of continuous, credible coverage. But even those efforts to prop up the market appear less than certain to achieve a robust, well-functioning market. The big questions for the incoming administration and new Congress are:

  • Whether the individual medical insurance segment that covers a sizable and growing portion of the working age population can sustainably function as a market?
  • To what extent government policy should support the market and does the political will exist to do so?
  • If the market should be left intact, what must be done to make it actuarially viable over the long term and avoid its tendency toward adverse selection?

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 or call 530-295-1473. 

Trump Promises On Health Insurance Appealed To Family Struggling With Cost : Shots – Health News : NPR

January 10th, 2017 No comments

Source: Trump Promises On Health Insurance Appealed To Family Struggling With Cost : Shots – Health News : NPR

Pocketbook issues can determine the outcome of elections. In this case, National Public Radio did a piece today profiling a young Pennsylvania family that perceives it is getting poor value in the individual health insurance market. They are among what I dubbed a few years back as the 401 percenters, households who earn more than 400 percent of federal poverty levels and thus ineligible for premium and cost sharing subsidies under the Patient Protection and Affordable Care Act.

Premiums for catastrophic coverage with high deductibles appear to this family more in line with those one might expect for a very generous plan with little or no out pocket costs. That’s the economic disconnect and sense of unfairness that Trump tapped into and was likely a major issue in his victory over Hillary Clinton. In 2013, I predicted the 401 percenters could seek political redress, feeling the Affordable Care Act has left them worse off than before. In 2016, at least a sizeable portion of that voter cohort did just that, donning red Trump hats and voting for what they hope will be a better deal under a Trump administration. It remains to be seen whether Trump and the new Congress can deliver one.


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 or call 530-295-1473. 

Pence calls for “market-based” medical insurance system. Problem is it already is.

January 6th, 2017 No comments

President-elect Donald Trump has made repealing President Barack Obama’s signature healthcare law the “first order of business” and intends a smooth transition to a “market-based” medical insurance system, Vice President-elect Mike Pence on Wednesday.

Source: Pence Calls Obamacare Repeal ‘First Order of Business’

The Patient Protection and Affordable Care Act specifically kept intact the nation’s private medical insurance system that covers the bulk of Americans under age 65. The Affordable Care Act intervened in the private market with its managed competition-based approach, but by no means replaced it. It strongly intervened on both the sell and buy sides of the individual health insurance market in an attempt to rescue the segment from an adverse selection death spiral and restore it to healthy functioning. Doubts have been raised as to whether the rescue effort would have succeeded as premium rates rose and fewer plans were offered for plan year 2017. By the same token, rescinding the individual market reforms aren’t likely to restore it to health either given its deeply problematic nature.


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 or call 530-295-1473. 

First step toward bending medical utilization cost curve is not equating medical care with health care

January 4th, 2017 No comments

The Republicans’ primary strategy is to shift more expense to individuals through high-deductible plans and Health Savings Accounts. They hope people will seek services less often if they have to pay more for it. That’s a prescription for illness.

Source: Partisan battles shouldn’t afflict good health care | The Sacramento Bee

This assumes medical care is subject to the economic principle of price elasticity that holds demand for a product or service moves inversely to its price. But medical care isn’t a commodity like food, clothing and shelter. It’s not consumed on a regular basis throughout life. People generally use it only when they need it, not because they want to buy it at the mall. In addition, the vast majority of people tend toward health with healthy lifestyles and don’t require preventative care.

To begin bending the medical utilization cost curve, the first step is to not regard it as a consumer commodity. The goal is to avoid having to need medical care in the first place by taking good care of our health. That’s truly preventative care. Medical care isn’t a substitute for health care — something only people can give to themselves. Reducing its cost or making it more accessible won’t automatically translate to lower overall spending on medical care.


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 or call 530-295-1473. 

ACA provisions to restore individual health insurance market may have missed target

December 27th, 2016 No comments

One of the major reforms of the individual health insurance market segment put in place by the Patient Protection and Affordable Care Act is pooling people into statewide risk pools to achieve greater spread of risk. In addition, the law reinforces the fundamental insurance principle of risk spreading by creating incentives for people to get into the pool. Those include advance tax credit premium and reduced cost sharing subsidies for individual plans offered on state health benefit exchanges and tax penalties applied to everyone not covered under some minimum form of coverage for hospital and physician care. Also, requiring health plans to accept all applicants for coverage regardless of medical history.

The goal is to restore what was a struggling market segment circling the drain of runaway adverse selection prior to the reforms going into effect in 2014. Few might have thought such a sweeping overhaul of the market wouldn’t restore it to a healthy, viable segment of the health insurance market. But as the reforms are about to enter their fourth year, it’s unclear whether they will achieve the goal of improved spread of risk. Health plan issuers complain the risk pool is imbalanced with too few young people and too many older and higher utilizing folks. They’ve openly expressed concern that’s driving adverse selection – the very problem the reforms intended to remedy.

Other factors that jeopardize the sustained actuarial viability of the individual market:

  • Poor overall population health status and low health education levels (i.e. how to stay healthy, minimize need for medical care), generally increasing utilization and cost trend.
  • Inadequate market forces exerting downward pressure on medical costs. The Affordable Care Act includes provisions to shift to value-based medical provider reimbursement reform for Medicare, but not the individual or small group market segments.
  • A high level of churn as people’s life situations change, moving them into and out of the individual health insurance market.

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 or call 530-295-1473. 

New Washington regime seeks to move from managed competition to more unfettered health care markets

December 21st, 2016 1 comment

Republicans take the reins of the federal government next month and are generally expected to repeal or at least revamp the Patient Protection and Affordable Care Act to harness market forces and competition to achieve the triple aim of better health care outcomes and patient satisfaction while lowering costs. Instead of the managed competition of the Affordable Care Act that put in place rules on the sell and buy sides of the health insurance market to promote competition and established government run markets for small group and individual coverage, the incoming Trump administration and new Congress will favor less managed competition with fewer market rules and constraints.

Achieving such a market environment is an enormous challenge given the heavily siloed health care system, with each silo having its own complex microeconomics. Cast as a market, health care has the essential element of many sellers and many consumers. Buyers ultimately drive the economics of all markets and determine their long term viability. But consumers generally don’t deal directly with health care providers given the large role of public and commercial health plans and employers. For the most part, people don’t plan to use health care, only doing so when accident or illness strikes. That precludes time for deliberate, considered comparison of providers and costs to determine the best value. Instead, consumers must deal with difficult to decipher bills filled with multiple, incremental charges after they consume health care services.

True market competition cannot function ex post facto transaction without some intermediary to negotiate terms and conditions on behalf of consumers. It remains to be seen how the new administration and Congress will finesse the complex microeconomics of health care as they seek to harness competitive forces to lower costs without resorting to even more extensive reforms than under 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 or call 530-295-1473. 

November elections increase likelihood of California revisiting single payer

December 21st, 2016 No comments

Various media accounts report that California of all states stands to lose the most federal funding for health care coverage under the Patient Protection and Affordable Care Act – 20 to 25 billion dollars annually – if the law’s health insurance reforms are repealed as expected next year. The large majority of that sum comes from enhanced federal cost sharing under the law’s Medicaid eligibility expansion, representing more than $18 billion this year, according to this issue brief by the State Health Reform Assistance Network. Accounting for the balance are advance premium tax credits and cost sharing subsidies to offset the cost of qualified health plans purchased on the state’s health benefit exchange, Covered California.

Other media accounts portray California’s state policymakers as circling the wagons to fight this substantial loss of federal dollars given the potential for many low and moderate income households not covered by employer group plans to lose health coverage as well as extensive fiscal damage the state budget. But they are unlikely to prevail against the political will of Washington under the new administration and Congress and will have to consider alternatives. One likely candidate would be some form of single payer coverage, perhaps utilizing an all payer Accountable Care Organization (ACO) structure to hold down rising health care costs and financed by income, payroll and self-employment taxes.

In the previous two decades, single payer failed to gain voter approval when proposed as a ballot measure or as legislation. This time, however, with a supermajority vote margin gained in the November elections, legislative Democrats along with incumbent Democratic Gov. Jerry Brown could enact a single payer measure with — or without — support from Republican lawmakers. It would represent a far more radical reform than the Affordable Care Act. However, among the states, California has a sufficiently large population base and economy to go single payer if it chooses. The Golden State may well have to if it wants to carve out its own health reform destiny in the post Affordable Care Act era.


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 or call 530-295-1473. 

Democrats open to replacing Obamacare – POLITICO

December 16th, 2016 No comments

Senate Democrats will never vote to repeal Obamacare. But once the deed is done, a surprising number of them say they’re open to helping Republicans replace it.“If it makes sense, I think there’ll be a lot of Democrats who would be for it,” said Sen. Claire McCaskill (D-Mo.).As Republicans aim to make good on their years-long vow to quash Obamacare and replace it with their own health care vision, they’ll have to do something Democrats were never able to: Bring members of the opposing party on board. Enacting any substantive alternative will take at least eight Democratic votes in the Senate.

Source: Democrats open to replacing Obamacare – POLITICO

This item points up the political reality that while one party — the GOP — can defund the Patient Protection and Affordable Care Act via budget resolution, it will take members of both parties to replace it in order to get the necessary 60 yes votes in the Senate to head off a long filibuster. That gives minority Democrats a large degree of influence over the law’s successor.

The pressure for a deal on that legislation during the first quarter of 2017 will be intense. Both parties will hear plenty from constituents concerned they will lose their health coverage. They will also hear from health plan issuers who fear a meltdown of the individual market segment and may demand a bailout to remain in the market. Health care providers and especially hospitals will also weigh in with urgency, concerned a loss of the individual market as well as more expansive Medicaid coverage in most states under the ACA will lead to a jump in uncompensated care.


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 or call 530-295-1473. 

House leaders survey states on ACA Section 1332 state innovation waivers

December 14th, 2016 No comments

Instead of outright repeal of the Patient Protection and Affordable Care Act’s insurance market reforms, Republican House leaders are examining a key provision of the law that permits states to dispense with many of the reform requirements state innovation waivers starting in 2017. That indicates a possible strategy shift of using the law’s provisions to shape reforms more in line with GOP thinking to give more leeway to states rather than dispensing with it wholesale.

On Dec. 2, House Majority Leader Kevin McCarthy (R-CA), committee Chairmen Kevin Brady (R-TX), Fred Upton (R-MI), John Kline (R-MN) and Chairmen-elect Greg Walden (R-OR) and Virginia Foxx (R-NC) sent a letter to state governors and insurance commissioners asking if their states had requested or plan to request a Section 1332 waiver. The letter also inquires what could be done to facilitate a Section 1332 waiver as well as the impact of repealing state statutes implementing the ACA. The letter requests a response by Jan. 6, 2017, indicating House Republicans wish to move quickly.

Section 1332 of the Affordable Care Act allows states to opt out of most the law’s individual and small group health insurance market reforms including requirements to have a health benefit exchange, that plans provide specified essential health benefits as well as advance tax credit premium subsidies and reduced cost sharing for those households meeting income criteria. Also waivable are the individual and employer shared responsibility mandates.

To qualify for a waiver from the federal government, states must demonstrate their programs would ensure individual and small group plans would offer coverage at least on a par with plans providing the essential health benefits prescribed by the Affordable Care Act. State programs would also have to ensure individuals and small employers would have access to coverage with affordable premiums and protections against “excessive” out-of-pocket costs (such as annual maximums) like those for ACA plans and cover a comparable number of residents as existing ACA plans. States granted Section 1332 waivers are eligible for “pass through” federal funding operating like an annual block grant. The funding would cumulatively represent what state residents would otherwise receive under ACA rules for premium tax credits, cost-sharing reductions and small business credits. Federal funding under the waiver cannot exceed that amount by adding to the budget deficit.

The ACA Section 1332 state innovation waiver dovetails with GOP House Speaker Paul Ryan’s “A Better Way” health care reform proposal that calls for state innovation grants. However, Ryan’s grant qualification benchmarks differ from the Affordable Care Act’s state innovation waiver, most notably reducing insurance premiums rather than merely ensuring they are affordable. According to a summary of Ryan’s proposal, states must achieve a targeted reduction of individual and small group premiums and the number of medically uninsured.


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 or call 530-295-1473. 

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