Monthly Archive: October 2013

Obama administration’s messaging on ACA’s individual health market reforms lacking

The Obama administration is suffering a political pillorying this week on the imminent rollout of new market rules governing the individual health insurance market and the government-created health benefit exchange marketplace that began selling the plans October 1.

In large part, the criticism stems from weak messaging to communicate the reforms and why they are needed. There should be more emphasis on conveying these reforms affect the individual market where about five percent of Americans purchase their health coverage, clearly distinguishing these health plans from those purchased by employers that cover the large majority of Americans. As individual health plan issuers revamp and discontinue old plans to comply with the new market standards, the administration now finds itself having to defend its claims that most Americans could keep their current coverage when the individual market reforms take effect January 1, 2014. Viewed in the context of employer group coverage, that is generally accurate. But not necessarily so when it comes to individual coverage, an entirely different insurance product.

Perhaps more importantly, the administration and members of Congress who supported the 2010 enactment of the Patient Protection and Affordable Care Act need to more clearly explain why the law’s substantial government intervention in the individual market was needed in the first place. Administration officials have described the market as out of control from a regulatory standpoint, terming it like the “wild west.” But more fundamentally, the ACA aims to rescue this market because it was falling into oblivion. Individual plan issuers and those who buy this coverage were finding it increasingly difficult to get together in the marketplace on terms and pricing.

That market failure occurred because the market fell into a downward spiral where health plans became overly risk averse and excluded too many potential customers, restricting the flow of membership fees and premiums to pay claims. Plan issuers also violated a fundamental principle of insurance by splitting their customer base into small pools and were consequently unable to share the cost of claims across a larger group of customers. Finally, premiums for some individuals and families began to equal the cost of a mortgage payment and grew unaffordable. No market can function if potential customers cannot afford to buy the product or service being offered.

Whether the ACA can restore the individual market to healthy functioning remains to be seen, particularly given continued upward pressure on premiums from rising medical costs. The law’s market interventions could prove ineffective if too few young adults opt to buy coverage. Also if too many older people not yet eligible for Medicare who earn too much to qualify for tax credit subsidies for plans sold in the state health benefit exchange marketplace find premiums unaffordable and don’t buy coverage or request affordability exemptions from the individual mandate.


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. 

Renewed debate over individual mandate

The individual health insurance market reforms of the Patient Protection and Affordable Care Act are designed to restore a dysfunctional market by forcing sellers and buyers together with mandates on health plans to accept all individuals who apply for coverage and individuals to have some form of health coverage.

The biggest obstacle to health plan issuers and consumers meeting in the marketplace is the cost of coverage. Surveys have shown the top reason individuals forgo buying coverage if they are not covered under an employer or government plan is difficulty affording monthly premiums. Jettisoning the ACA’s coverage mandate on individuals however is now a renewed point of discussion and debate just as the mandate is about to take effect early next year such as this one at the Yahoo! Finance Blog:

Virtually all experts agree that, without a mandate, fewer people would enroll in Obamacare. Yet the federal subsidies that cut the cost of insurance for enrollees, depending on income, would still be a strong incentive for people to sign up, provided their income was low enough to qualify. “In terms of people participating, subsidies are far more important than the mandate,” says economist Sara Collins of the Commonwealth Fund, which promotes research into a more efficient healthcare system. “The main reason uninsured people don’t have coverage is usually affordability.”

The dropoff in enrollees would still raise costs, however. In formal studies, estimates range from a mild 2.4 percent increase in the cost of premiums for those who remained in the program, to a more problematic 27 percent rise, according to an overview of studies conducted by the Rand Corp. The estimates vary because it’s hard to predict what mix of healthy and sick people would still get insurance through a state-run exchange if there were no law requiring them to be covered. A higher percentage of healthy people would lead to lower premiums, while premiums would rise if the sick were overrepresented in the pool of insured.

I tend to agree with Collins the carrot of subsidies for coverage purchased in the state health benefit exchange marketplace likely provides a stronger incentive than the stick of the penalties for going bare given the prominence of the premium affordability issue.  That incentive isn’t there, however, for more than half of Americans in the individual market who earn too much to qualify for the subsidies according to a Kaiser Family Foundation paper issued in August. For this cohort, the penalty itself would have to suffice as an incentive under the new market rules.

But it may not be enough given these individuals would have to bear the full cost of the premiums without government assistance. Many might thus opt to instead pay the penalty or request an exemption from the mandate if premiums for the lowest cost “bronze” plans exceed 8 percent of their incomes. Remove the mandate and penalties and there’s even less incentive aside from the prospect of facing high list charges if misfortune puts them in a hospital – a gamble many might be willing to take. That prospect would likely frighten health plan issuers worried about adverse selection even with the mandate in place — and who insisted on the mandate as a keystone of the political compromise leading to the 2010 enactment of the Affordable Care Act to achieve a better spread of risk in state risk pools.


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. 

401 percenters face sticker shock of higher premiums without subsidization

Earlier this year, I blogged about a potential backlash against the individual market reforms of the Patient Protection and Affordable Care Act emanating from what I dubbed the 401 percent – those who earn too much to qualify for advance tax credit subsidies for plans purchased through the state health insurance exchange marketplace. Subsidies are offered in six sliding scale tranches ranging from households earning 100 percent of the federal poverty level to 400 percent. Those with incomes above 400 percent must bear the full cost of the premium.

Now that some plan issuers are issuing plan year 2014 premium rates for comprehensive coverage that per the ACA must now include 10 categories of “essential health benefits,” some of the 401 percenters in California are experiencing predicted sticker shock. Today’s Los Angeles Times has the story. Here’s the money quote:

Although recent criticism of the healthcare law has focused on website glitches and early enrollment snags, experts say sharp price increases for individual policies have the greatest potential to erode public support for President Obama‘s signature legislation. “This is when the actual sticker shock comes into play for people,” said Gerald Kominski, director of the UCLA Center for Health Policy Research. “There are winners and losers under the Affordable Care Act.”

There is a saving grace in this for self employeds who earn too much to qualify for a subsidized exchange plan. They can take a federal income tax deduction for premiums paid.


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. 

Streamlined enrollment in state health subsidy programs hobbled by federal exchange web portal problems

One of the goals of the Patient Protection and Affordable Care Act (ACA) is to integrate eligibility and enrollment for applicants for both commercial health plans sold in the state health benefit exchange marketplace as well as state subsidy programs for poor and low income households including Medicaid and the Children’s Health Insurance Program (CHIP). The idea is to reduce the ranks of the medically uninsured by making it easier for people to get covered with a single, streamlined application process referred to as “no wrong door.” Applicants are more likely to sign up for coverage if they don’t have to contact multiple entities to get it.

The requirement is set forth in Section 1413 of the ACA. Section 1413(c)(1) requires each state to “develop for all applicable State health subsidy programs a secure, electronic interface allowing an exchange of data (including information contained in the application forms described in subsection (b)) that allows a determination of eligibility for all such programs based on a single application.”

In the three dozen states where the federal government is operating the state exchange marketplace, online eligibility and enrollment is being handled by the federal web portal. Problem is according to today’s Washington Post, the portal isn’t yet able to integrate with the state subsidy programs:

But in a phone call Tuesday with the nation’s state Medicaid directors, Marilyn Tavenner, director of the Centers for Medicare and Medicaid Services (CMS), the agency overseeing the exchange, said that this part was still not working and did not predict when it would be ready, said Matt Salo, executive director of the National Association of Medicaid Directors. In the meantime, the Web site simply tells low-income Americans whether they appear to be eligible and then advises them to contact their state’s Medicaid agencies, where they must start applications from scratch.

The Post story details the implications of this glitch:

The Web site’s Medicaid problems matter because, under the health-care law, about half of the 32 million Americans who stand to gain insurance are expected to be covered through the state-federal health program for the poor and the disabled. The Web site is designed to tell people, depending on their income, whether they are likely to qualify for Medicaid or new federal tax credits to help them pay for private insurance. The site steers consumers in one direction or another after they enter information, including their family size and income. That part works.

Here’s the snag: If the Web site determines that a consumer probably qualifies for Medicaid, it cannot communicate with a state Medicaid program for quick enrollment. Instead, the site gives the person a message to contact the state’s Medicaid program. Then the person has to “start all over again,” said Salo of the Medicaid directors association. He added that the malfunction is “a frustration…It can turn [consumers] off and make them angry about how government works.”

Likely complicating enrollment for those eligible for state subsidy programs is a crazy quilt patchwork of Medicaid eligibility standards, dependent upon whether the state has opted to expand Medicaid eligibility as authorized by the ACA as well as varying income eligibility levels in states that have opted out of the Medicaid expansion as detailed in Table 1 of this recent Kaiser Family Foundation report (.pdf)


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. 

Troubled launch of federal online exchange marketplace shows importance of IT project risk management

One of the essential elements of prudent project management is to have a plan to manage risks that can derail a project from getting done. Project managers everywhere are likely asking what kind of plan, if any, did the U.S. Department of Health and Human Services have in place to mitigate the risk of the online federal health insurance exchange marketplace that serves nearly three dozen states suffering a serious, systemic failure at launch. If the online marketplace simply bogged down due to heavy traffic during the first week after it opened for 2014 enrollment October 1, that would be a minor risk that could be mitigated by leasing more server capacity or simply by the passage of time as the initial rush died down.

According to today’s New York Times, however, the situation appears more serious than that. The Times quoted people working to get the online system functioning as saying it might not be ready by the December 15 deadline for individuals to enroll for coverage effective January 1, 2014. That would be a catastrophic start to the marketplace since the federal Affordable Care Act and conforming state laws contemplate the new individual health insurance market rules and exchange marketplace effective as of New Year’s Day.

Aware of the time pressure, the Obama administration is crashing the project, pouring in a team of IT experts to work 7/24 to get the online marketplace up and running properly. Many seasoned project managers would likely suspect that wasn’t in the risk management planning but is instead a last ditch response to a crisis.

One option that could have been in the risk management component of the project would have been a team developing a parallel system. If the site didn’t come up, IT staff could then switch over to the parallel site. Yes, it would cost more to have multiple development teams working in tandem. But given the novelty, complexity and high stakes of a functional online exchange marketplace project serving more than half the states, the higher costs would be justifiable.

If the crash fix doesn’t yield rapid relief as The Times story suggests, it’s possible administration officials have a contingency plan to effectively privatize the online federal exchange marketplace by outsourcing it to a commercial entity with experience running an online health insurance marketplace. If it did so, a possible candidate would be EHealth. The company, which operates the online insurance brokerage, was awarded a $19.3 million contract in July to help develop the federal online marketplace.


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. 

Debt deal tightens oversight of state health benefit exchange marketplace subsidy eligibility

The continuing appropriation measure to reopen the partially shuttered U.S. federal government and extend the federal debt ceiling approved by Congress today and expected to be approved by President Barack Obama contains provisions aimed at better ensuring state health benefit exchange enrollee eligibility for premium and cost sharing subsidies.  They require the federal Department of Health and Human Services (HHS) to do the following:

  • Require state health benefit exchanges pre-verify the eligibility of individuals applying for premium tax credits and cost sharing reductions and certify it has done so to Congress
  • By January 1, 2014, detail the procedures used by the exchanges verify eligibility for premium tax credits and cost-sharing reductions in a report to Congress
  • Report to Congress by July 1, 2014 on the effectiveness of the procedures and safeguards provided for preventing the submission of inaccurate or fraudulent information by applicants for enrollment in a qualified health plans offered through the exchange marketplace.

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 than a quarter of nation’s medically uninsured to remain so under ACA

The Patient Protection and Affordable Care Act is described as the most comprehensive overhaul of the U.S. health care system in the nearly 50 years since the enactment of Medicare and Medicaid to serve the elderly and poor, respectively. However as far reaching as it is, it fails to achieve its public policy goal of ensuring all Americans have access to an affordable health plan, concludes a Kaiser Family Foundation report.

The ACA and the Supreme Court’s June 2012 ruling in NFIB v. Sebelius invalidating the law’s mandate on states to expand Medicaid eligibility requirements means 5.2 million Americans residing in states that have not voluntarily opted to expand Medicaid eligibility – an estimated 27 percent of the medically uninsured – will remain without any form of public or private coverage.

The primary reason is in 22 of those 26 states, families earning less than 100 percent of the Federal Poverty Level (FPL) are under the ACA ineligible to purchase subsidized private coverage in the state health benefit exchange marketplace. But in most of those states, many families are also not eligible for Medicaid because their household income exceeds state Medicaid eligibility levels. (See Table 1 of the KFF issue brief, showing nearly all of those states cutting off Medicaid eligibility at 75 percent of FPL and most around half of FPL for a family of three). Also remaining uncovered in nearly all of those states (except Wisconsin) are low income childless adults earning less than 100 percent of FPL.


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 limits stop loss coverage for self-insuring small employers

After legislation in the previous legislative session limiting the use of medical stop loss insurance by self-insured small employers failed to advance to the governor’s desk, a measure that would do so was signed into law this week by California Gov. Jerry Brown.

SB 161 bars stop loss policies issued or renewed on or after January 1, 2014, and prior to January 1, 2016 that cover losses with attachment points of $35,000 or less for any individual employee or losses for all employees exceeding $5,000 times the number of employees, 120 percent of expected claims or which provide direct rather than excess of loss coverage.  After January 1, 2016, the measure outlaws stop loss policies having aggregate or total limits of less than $40,000. The bill grandfathers policies in effect as of September 1, 2013 provided the stop loss limits of those in-force policies remain unchanged.

SB 161 sparked division within the insurance industry and business groups. Supporters including Blue Shield of California, Kaiser Permanente and Health Access California see the measure as necessary in order to give the Patient Protection and Affordable Care Act’s and state small group rules including a single statewide small group risk pool and exchange marketplace, the Small Business Health Options Program (SHOP), a chance to work. Otherwise, they argue, it would be too easy for small employers with relatively younger and healthier workforces to retain their own risk for employee health coverage with the safety of relatively accessible stop loss coverage with low attachment points. Also of concern is by making self-insurance a more viable option, small employers could more easily move between self-insurance and the insured market based on their claims experience, potentially producing adverse selection against the small group insurance market and the SHOP exchange marketplace.

Opponents of the bill including CIGNA Life and Health Insurance Company, the National Federation of Independent Business and brokers view self-insurance as a useful market option for small employers struggling with high insurance premiums. However one opponent, the American Association of Preferred Provider Organizations, contends SB 161’s attachment points (which were about three times higher in the original version of the bill) are “unaffordable for small businesses who already take on the calculated risk in administering a complex stop-loss self-insurance program,” according to a Senate analysis of the bill.


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 mandates, exchange marketplace could be temporary, 3-year phenom under state waiver provision

Partisan disagreement over the Affordable Care Act’s individual and employer mandates and state health benefit exchange marketplace has jammed the gears of the federal government machinery, leading to a partial government shutdown that began this week. All the strum und drang over these ACA provisions, however, could end up being over a temporary circumstance lasting only three years in at least some states.

Beginning in 2017, ACA Section 1332 titled Waiver for State Innovation allows states to petition the U.S. Department of Health and Human Services for — as the title suggests — a waiver allowing them to opt out of these requirements. The waiver also extends to premium tax credit subsidies and cost sharing reductions for plans sold on the exchange marketplace.

That means states that don’t like the ACA’s approach to restoring their individual and small group markets to functioning can devise their own programs after three years of complying with federal mandates.

The Section 1332 waiver comes with some provisos. States opting out of the ACA rules would have to demonstrate their programs would ensure individual and small group plans would offer coverage at least on a par with plans providing the 10 essential benefits prescribed by the ACA. State programs would also have to ensure residents and small employers 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 ACA plans.

Section 1332 also provides federal funding to aid states opting out of the ACA rules to set up their own programs. States receiving a Section 1332 waiver would be eligible for “pass through” funding operating like an annual block grant. The funding would cumulatively represent what state residents would otherwise be eligible to receive under ACA rules for premium tax credits, cost-sharing reductions and small business credits if they are ineligible for them under the state programs.


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. 

Multi-State plans roll out in 30 states, including some large ones and those operating state-based exchanges

The federal Office of Personnel Management (OPM) this week announced a pact with the Blue Cross and Blue Shield Association to offer more than 150 Multi-State Plan (MSP) options in 30 States and the District of Columbia on the Health Insurance Marketplace for plan year 2014.

Section 1334 of the Affordable Care Act creates a federally chartered (via OPM) Multi-State health plan (MSP) that must be offered in 60 percent of the state health benefit exchange marketplace in 2014 and all state exchanges by 2017. Section 1334 requires each state exchange to offer at least two MSPs (one must be a nonprofit) in their individual and small business exchanges. The policy intent is to bolster competition and consumer choice, particularly in states with smaller populations and fewer payers. The Affordable Care Act deems MSPs qualified health plans, according them presumptive eligibility for listing on state exchange marketplaces.

I expected to see MSPs first introduced in federally facilitated and partnership exchanges for 2014 and particularly in less populated states having fewer health plan issuers. Turns out the federal government decided otherwise, opting to initially roll out MSPs in some large states such as Pennsylvania, New York, Illinois and Texas as well as on state-based exchange marketplaces such as California, Maryland, Washington and Nevada. A staggering three dozen MSP options will be offered in Alaska.


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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