Monthly Archive: March 2012

California could adopt own health reform plan with individual mandate if PPACA ruled unconstitutional

If the U.S. Supreme Court decides this summer that the Patient Protection and Affordable Care Act’s (PPACA) mandate that all Americans have health coverage or purchase it by 2014 is unconstitutional, California could nevertheless move forward with its own health reform plan including such a mandate.  That’s according to the state’s Health and Human Services Secretary Diana Dooley, per this excerpt from this story appearing in today’s Sacramento Bee:

If the court does rule the federal law unconstitutional, state Health and Human Services Secretary Diana Dooley said California should at least consider enacting its own universal health care legislation, including requiring every Californian to buy insurance.

“I think that we should be committed to making this system more rational than it is today, and improving the health of the people of California,” Dooley said in an interview. “If we ask the insurance plans to take everybody and insure everybody with no screens or pre-existing conditions, then we have to have everybody buying some level of health insurance to meet their responsibility to the system.”

That reciprocity was a core principle of the Health Care Security and Cost Reduction ActIn early 2008, California lawmakers considered but rejected the legislation championed by then-Governor Arnold Schwarzenegger and top legislative leaders.  Like the PPACA, the act was modeled after Massachusetts legislation enacted in 2006 that also served as a prototype for the PPACA and included as a central feature the so-called “individual mandate” requiring adults to have some form of public or private health insurance or managed health care plan.  In turn, insurers and health plans would abandon medical underwriting and accept all applicants regardless of medical history, thereby making coverage accessible to more people.  Other key policy goals of the mandate are to alleviate “cost shifting” in which those who have coverage end up paying for health care costs of those without coverage through higher premiums and to reduce the threat of adverse selection that can rapidly render payers insolvent.

It remains to be seen whether California would move forward with its own reform plan if the PPACA fails to survive judicial scrutiny by the nation’s highest court.  Increasing the probability is the view among the Golden State’s health care industry leaders that health care reform has achieved critical mass and will move forward regardless of what happens at the federal level.

Also generating momentum for reform is the state’s already partially spent federally funded investment in setting up the California Health Benefit Exchange under the PPACA to create a marketplace to help individuals and small employers aggregate their purchasing power.  Then there are the state’s demographics.  California is the nation’s most populous state and has more people in the individual health insurance market than other states — about eight percent of those 65 and younger versus about five percent in the nation as a whole.  It also has a relatively large percentage of medically uninsured residents, whose numbers have increased as many people lost employer-paid coverage in the economic downturn.

The recession was just getting underway when the Health Care Security and Cost Reduction Act was before the California Legislature, prompting then-state Legislative Analyst Elizabeth Hill to question if the state could afford its tax credits, subsidies and other costs.  Four years later, the state’s finances remain under siege amid ongoing deep budget deficits. Selling the individual mandate could also prove politically challenging as it did in 2008, when California health care payers were divided over it and business and consumer interests nearly uniformly opposed.


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. 

More signs of distress in California’s individual market

The death spiral of California’s individual health insurance market appears to be speeding up.  The market segment — which covers about eight percent of working age Californians — has been plagued by adverse selection as relatively healthy people drop coverage.  That in turn forces managed care plans and insurers to boost premiums to make up for the lost dollars when healthier people pull out of the pool and to cover the costs incurred by the less healthy who feel they must keep their coverage in place.  Exacerbating the problem, payers attempt to staunch claims with strict medical underwriting guidelines that reject relatively healthy individuals whose premiums could bolster the solvency of the pool.  As premiums keep rising, even more people question the value of paying the higher rates.  Or can’t afford them even if they want coverage as monthly premiums equal the size of modest home mortgage payments.   As the state’s individual market fails, self-employment is becoming synonymous with being medically self-insured.

Take for example, the Libresco family of San Rafael, California, mentioned in this recent Los Angeles Times story on the latest round of rate increases by the state’s largest individual market payer, Anthem Blue Cross:

Last month, Anthem notified Josh Libresco, a 57-year-old marketing researcher in San Rafael, that his family’s monthly premium would increase 29% to $1,636, effective May 1. This is after Anthem raised the deductible for the family of four to $5,900 from $5,000 last fall as well as increasing co-payments for doctor visits and prescription drugs.

“I don’t know how people can afford these increases every year. We are about at our limit,” Libresco said. “Whether it’s 20% or 29%, it’s still an enormous number.”

It’s not hard to see why this family might be inclined to drop its coverage.  Especially when they are essentially getting only catastrophic coverage but not at a price they would expect to pay for it.


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. 

Self-insurance trend in small group market seen as threat to actuarial integrity of SHOPs

Self-insuring health benefits has traditionally been the province of large employers that could afford to assume the risk of paying much of their employees’ health care costs.  Smaller employers with too few workers to feasibly spread that risk have traditionally relied on insurance as a risk transfer mechanism.

In a sign of how distressed the small group health insurance market has become, that notion is being turned on its head.  Now small employers are shunning insurance and self-insuring their health benefit risk — to a certain point.  After an employee’s medical costs hit a set amount, stop loss insurance kicks in.  That “attachment point” as it’s referred to in insurance terminology can be as low as $10,000 to $20,000, according to this Los Angeles Times article.

As the Times reports, the practice is stoking controversy and raising concern it could steer small employers away from Small Business Health Options Programs (SHOPs) being set up under the state health benefit exchange component of the Patient Protection and Affordable Care Act (PPACA). Beginning in 2014, SHOPs will allow small employers to offer employees a variety health plans like so-called “cafeteria plans” offered by large employers.  The concern is without sufficient participation by employers, the SHOP plans could face increased risk for adverse selection by limiting the size of the SHOP’s risk pool.

While not directly saying so in the Times story, California’s insurance regulator is sufficiently alarmed by the potential threat to the actuarial integrity of that state’s yet to be formed SHOP that he wants legislation that would require higher attachment points for self-insured small employer health stop loss coverage.  That would also make self-insurance a less attractive option for small employers than getting coverage through the Golden State’s SHOP, reducing the SHOP’s spread of risk.  The California Health Benefit Exchange issued a solicitation last month seeking bids to help it design its SHOP.


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. 

PPACA expected to “barely bend” health care cost curve, challenging affordability of health insurance

The Patient Protection and Affordable Care Act (PPACA) will be unable to significantly slow the rising cost of health care.  As a result, the price of health coverage will soon become unaffordable for low and moderate income Americans, concludes a projection prepared by Richard A. Young, MD, and Jennifer E. DeVoe appearing in the March/April Annuals of Family Medicine.

The authors predict based on the current rate of increase in health insurance premiums and wages and barring significant structural changes in the health care system, the average cost of a family health insurance premium will equal half of household income by 2021 and surpass the average household income by 2033.  When out-of-pocket costs are added to premiums, the 50 percent threshold would be reached by 2018 and exceed household income by 2030, they forecast.

Based on their prognostication of a “barely bending” health care cost curve, Young and Devoe suggest America’s health care landscape could undergo major change.  The shift away from all in employer-paid group insurance coverage in favor of defined contribution health plans could accelerate.  They speculate that lower income workers could determine they can’t afford to participate in these plans and instead attempt to qualify for Medicaid under PPACA provisions expanding the government paid health coverage.

This point coincides with a Congressional Budget Office (CBO) estimate issued this month reducing the amount of people expected a year ago to obtain commercial insurance as the PPACA is implemented.  “Fewer people are now expected to obtain health insurance coverage from their employer or in insurance exchanges; more are now expected to obtain coverage from Medicaid or CHIP or from nongroup or other sources,” the estimate states.  “More are expected to be uninsured.”  The updated estimate is based on a revised CBO economic forecast of lower wages and higher unemployment during the 2012-2021 forecast period than projected in March 2011.


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. 

California ballot measures to cap hospital prices, regulate health insurance rates emerge out of perennial conflict of trial bar and unions versus business groups

Even though they have not yet qualified for California’s general election in November and are still in the signature gathering stage, proposed ballot initiatives to limit hospital profits and subject health insurance and managed care plan premium rates to prior regulatory approval are already generating considerable political heat and smoke.

Both measures are playing not so much as health care reform measures designed to apply brute governmental force to hold down rapidly rising health care costs and premiums.  More accurately, they represent new battlefronts in California’s perennial conflict between plaintiffs attorneys and labor unions on one side and tort reform and business interests on the other.  Health payers and providers are aligning in the latter camp to oppose the measures.

Hospitals argue the proposed Fair Healthcare Pricing Act of 2012 that would cap hospital profit margins at 25 percent is an attempt by unions representing health care workers to gain leverage at the bargaining table.  Meanwhile, health care providers this week announced a coalition to oppose the proposed insurance rate regulation measure, the Insurance Rate Public Justification and Accountability Act.  It would add health insurance to existing law put in place by a 1988 ballot measure, Proposition 103, that subjected most property/casualty insurance rates to prior approval by the state’s elected insurance commissioner and subsidizes costs of those who intervene on behalf of the public to contest proposed rate increases.  A similar proposal stalled in the current legislative session.


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. 

Health reform seen as unstoppable in California — notwithstanding U.S. Supreme Court ruling on PPACA

While constitutional soundness of the Patient Protection and Affordable Care Act (PPACA) is to be decided this year by the U.S. Supreme Court, health care reform will continue to move along a rapid trajectory of change in California regardless of the high court’s ruling.  That’s the view of health care industry panelists at a recent symposium hosted by the Sacramento Business Journal, according to this item from the California HealthCare Foundation’s California Healthline.

Michael Taylor — senior vice president of operations for Dignity Health’s Greater Sacramento-San Joaquin area — said, “We believe we need to drive health care reform whether it’s legislated or not.” He added, “Health care costs are out of control and we need to bend the curve.”

According to the California Healthline item, the panelists agreed reforms must address a shortage of primary care physicians, the need to refocus health care on prevention instead of treatment of preventable conditions, and a transition away from employer-based health coverage to a new model where individuals dictate plan purchases instead of employers. I’ve lately read suggestions by some observers that shift could take the form of a defined contribution health plan.


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. 

U.S. wants ideas on collecting commuter health data

The U.S. Office of the National Coordinator for Health Information Technology (ONC) has issued the first of its Health Innovations in Commuting Challenge series dedicated to encouraging innovations that support improving the health of American commuters.

ONC is seeking the best ideas for collecting data on the health of commuters. Specifically, ONC wants ideas on:

  • How health data may be appropriately collected from commuters in a safe and secure manner during the overall commute or during key milestones or events of the commute, both routine and unique.
  • How health data may be transmitted in a secure and standardized manner.
  • How health data may be analyzed, either at an individual or population level, to the commuter or appropriate stakeholders, such as care professionals, public health agencies, emergency services, and researchers.

The website announcing the challenge notes “commuting has been shown to correlate with a variety of health factors, as long commutes are associated with health problems such as high cholesterol, recurring neck and back pain, and higher stress levels.”

I believe commuting combined with sedentary information and knowledge work has far broader and more deleterious effects on working age adults.  Commuting to an office and putting in long hours there makes for a lifestyle that leaves little time and energy for exercise, increasing the risk for preventable chronic diseases.  Most importantly, it’s no longer necessary on a five day a week basis.  With the shift toward an information anywhere, anytime society with the adoption of the Internet and personal communications devices, it’s getting more difficult to justify the adverse health and cost impacts of daily commuting.


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. 

Insurers form health benefit exchanges to compete with government-operated exchanges

I recently came across this interesting article published at the website of the American Medical Association discussing how large insurers are forming their own insurance exchanges to compete with state run exchanges.  State/regional health benefit exchanges are a critical component of the Patient Protection and Affordable Care Act (PPACA).  They are intended to aggregate purchasing power for individuals and small employers by providing them a single marketplace to purchase coverage from a variety of insurers and managed care plans.  The policy goal as stated in the PPACA is to increase consumer choice and competition among payers.

But perhaps an unforeseen consequence is that competition would entail payers competing not just against each other in government-operated exchanges but also directly against the exchanges themselves.  According to the article, motivating payers is the desire to retain a degree of control and independence from state-run exchanges:

Large insurers have invested in private exchange start-ups with the idea that they can offer a better insurance marketplace for employers and workers than a public exchange, keeping private plans dominant in the commercial market.

Moreover, the article continues, payers believe they can do a better job at attracting individuals and small businesses with their own exchanges.  Rob Panepinto, managing director for the Client Practice and Exchange Solutions at Connextions, tells that “government is not a good marketer.”  In California, however, the California Health Benefit Exchange is gearing up in the apparent hope to prove that assessment wrong.  The Sacramento Bee this week reported the Golden State’s HBEX tapped Ogilvy Public Relations to begin creating a marketing and public outreach and education strategy.

Looking back to the Clinton administration’s unsuccessful reform proposal of 1993-94, the emerging market dynamic of competing public and private exchanges wouldn’t likely have occurred.  The Clinton reform plan would have created government run regional purchasing alliances that would have controlled the entire universe of payer and provider markets with both payers and providers competing within the alliances under the reform plan’s “managed competition” principle.


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. 

Health reform forcing insurers to retool from risk selection to risk management

With the coming end of medical insurance underwriting in 2014 under the Patient Protection and Affordable Care Act (PPACA), payers are retooling their business models to enable them to manage medical risk posed by high utilization patients.  These are people with complex, chronic conditions whose needs for care and medications rank them in the top one percent of all patients.  In risk management terms, these are “catastrophic” risks payers will soon no longer be able to avoid.  Instead, these patients will have to be managed to minimize utilization.  Daniel Malloy of the healthcare consultancy IMS Health explains in this New York Times article earlier this week:

Insurance companies will be required to enroll millions of new customers without the ability to turn them away or charge them higher premiums if they are sick. They will prosper only if they are able to coordinate care and prevent patients from reaching that top 1 percent, Mr. Malloy said. “The insurance model is fundamentally changing,” he said.

The Times article notes insurers are becoming increasingly sophisticated at identifying high utilization patients and those likely to develop serious complications. “It’s important to know who they are and manage their conditions,” Dr. Pat Courneya, the medical director for the health plan offered by HealthPartners, told the newspaper.

Managing costs posed by these high risk patients could also require a holistic medicine approach that treats the whole person — both body and psyche.  The Times article reports that “insurers are also still grappling with their understanding of human nature — why some people simply don’t take care of themselves or take their medicine or go to the doctor, even when it is clear that they should.”


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. 

Optum Health acquisition of California physician group sparks litigation

When a large vertically integrated health care insurer that also has a health utilization and wellness consulting unit takes over a physician group that has a pre-existing relationship with a payer, that payer may well feel threatened.  Enough so to motivate it to sue the physician group.

That’s what has happened following the acquisition of California-based Monarch HealthCare last year by UnitedHealth Group’s Optum Health unit.  Blue Shield of California’s breach of contract lawsuit against Monarch shows the transition from traditional payer-provider relationships to broader-based relationships aimed at reducing patient medical utilization and improving health outcomes will encounter some speed bumps along the way.

California HealthLine has the story here.


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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