Monthly Archive: June 2013

Risky Health Insurance Bets Could Backfire for Small Employers – Businessweek

Risky Health Insurance Bets Could Backfire for Small Employers – Businessweek

Small employers lacking bargaining power with insurers have in recent years fled the small group health insurance market to escape rising premium costs by opting to self insure their workforces’ medical costs.  That trend is colliding with Affordable Care Act reforms designed to make small group coverage more accessible and affordable, in turn reducing the number of medically uninsured small business employees.  The two primary ACA reforms aimed at boosting the health and viability of the small group market: 1)Mandating insurers underwrite all small employers as a single risk pool and; 2) Requiring states to create separate small business marketplaces within their health benefit exchange marketplaces in order to aggregate small employers’ purchasing power.

Insurance market reforms such as these won’t be as effective if small employers don’t participate in the small group insurance market.  Less participation reduces the size of the small group pool — and potentially the ability of the Small Business Health Options Program (SHOP) in state exchanges to concentrate sizable numbers of small employers to drive a better deal with insurers on premium rates.

There’s another even more worrisome risk facing policymakers as this Businessweek article points out.  Small employers playing in both the insurance and self-insured markets and moving in and out of each depending on the health status and claims experience of their employees.  Doing so would provide them a means to create adverse selection against the insurance market by opting to insure when their medical claims costs rise and self insuring when claims costs are low.

State policymakers are addressing this concern by making self insurance a less palatable option for small employers based on model law adopted by the National Association of Insurance Commissioners limiting the use of stop loss coverage that covers self insured employers once medical costs reach a specified amount such as the Colorado measure mentioned in the Businessweek story and SB 161 pending before the California Legislature.

 


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

ACA provides options for smaller states to create larger risk pools

Individual and small group health insurance markets will be the ultimate deciders of whether the Affordable Care Act’s market reforms and exchange marketplaces make coverage more affordable and valuable. Their experience over 2014 and 2015 will serve as a litmus test.

A major determinant of premium affordability will be a state’s ability to create large and diverse pools of individuals and small employers that enable payers to spread risk. Beginning in January, 2014, the ACA establishes two pools: one comprised of individuals and families and another made up of small employers. The size of those pools is naturally a function of a given state’s population and the heft of those pools has an impact on premiums. Large states like California have a natural advantage in creating sizable risk pools better able to spread out the cost of medical care. Accordingly, California has opted to leverage the market power of its population to actively negotiate with health plans over terms of coverage and rates for plans sold on its health exchange marketplace, Covered California. Smaller, less populated states, however, don’t have the law of large numbers on their side.

The Affordable Care Act appears to recognize this circumstance and has built in mechanisms that would enable smaller states to create larger, more robust risk pools:

  • Section 1312(c)(3) allows states to combine their individual and small employer markets into a single risk pool;
  • Section 1331(b)(3)(B) authorizes states to negotiate regional compacts with other states to cover low income individuals not eligible for Medicaid in “standardized health plans.”  (The federal Department of Health and Human Services (HHS) has held off issuing regulations for these plans until at least 2015);
  • Section 1333(a) provides a mechanism for health insurers and plans to pool risk and sell across state lines via “health care choice compacts” starting in January, 2016. Two or more states could enter into an agreement under which health plans could be offered in state individual markets, subject to regulation by the state in which the plan was written or issued, provided plans comply with the other states’ rules regarding market conduct, unfair trade practices, network adequacy, and consumer protection standards including standards relating to rating and handling of disputed claims.  (The statute requires HHS issue regulations governing health care choice compacts by July 1, 2013);
  • In addition to authorizing interstate plans, the ACA also appears to contemplate such plans being marketed in multiple state exchange marketplaces. Section 1311(f) allows state exchanges to combine into “regional or other interstate exchanges,” subject to approval by the participating states and HHS.

Given the large number of states where HHS will fully or partially operate exchanges, it’s possible the federal government will press the affected states to exercise some of these options to create larger purchasing pools in order to gain greater bargaining power with payers.

 


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

Absence of rules means Direct Primary Care Medical Home QHPs unlikely to be offered on exchange marketplace in 2014

An innovative type of health plan that bundles pre-paid primary and preventative care with catastrophic insurance coverage isn’t likely to be sold on state health benefit exchange marketplaces in 2014.

The reason is the federal Department of Health and Human Services (HHS) has not yet developed rules governing Direct Primary Care Medical Home Plans, recognized at Section 1301(a)(3) of the Affordable Care Act as qualified health plans (QHPs) eligible to be sold through the exchanges. However, Section 1301(a)(3) requires such plans meet HHS criteria. HHS has not yet issued regulations defining those standards nor any guidance indicating when the rules will be forthcoming.

In April of this year, the California HealthCare Foundation issued an issue brief on Direct Primary Care Medical Home Plans authored by Dave Chase noting these plans offer significant potential health care cost savings over all inclusive plans such as HMOs while providing economic incentive for primary care physicians – many of whom will be needed to care for new patients obtaining health coverage 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 fpilot@pilothealthstrategies.com or call 530-295-1473. 

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