Monthly Archive: October 2015

ACA’s welfare-based means testing adds program complexity, risk for error

According to a Government Accountability Office report released Thursday, some individuals received subsidies to help them purchase exchange coverage while they were also enrolled in Medicaid. According to Carolyn Yocom, a director of health care studies at GAO, the duplicate coverage could mean the federal government is “paying twice — subsidizing exchange coverage and reimbursing states for Medicaid spending — for individuals enrolled in both types of coverage.”The House is expected to hold a hearing on the issue on Friday (Pear, New York Times, 10/22).The report noted that an estimated seven million U.S. residents have changing incomes that likely qualify them for Medicaid at some times and for the ACA’s subsidies at others. According to the report, it is difficult for the federal government to differentiate between the eligibility groups (Howell, Washington Times, 10/22). Further, the report noted that CMS “does not have procedures to automatically terminate subsidized exchange coverage when individuals are determined eligible for Medicaid.”

Source: GAO Finds Federal Gov’t Paid for Duplicate Coverage Under ACA – California Healthline

While broadening health coverage for Americans under age 65 not covered by predominant employer-sponsored health coverage, the Patient Protection and Affordable Care Act is not exactly seamless in its approach, leading to the kinds of problems the GAO identified. Largely because of its complexity in using monthly household income — the traditional means test for state welfare eligibility — and siloed forms of coverage.

The first seam is at 100 percent of household federal poverty level (FPL) — the minimum income in order to be eligible to purchase subsidized coverage on state health benefit exchanges. Then come six income tranches that determine the amount of the subsidy, topping out at another seam — 400 percent of FPL — above which subsidies are no longer available. Overlaying these at the lower household income range is yet another seam in states that have opted to expand Medicaid — a household income of 138 percent of FPL. With many lower income households frequently moving back and forth across this seam, it’s easy to see how state health benefit exchanges would be hard pressed to keep track to ensure these households are in the correct program at all times.

 


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. 

Public health exchange enrollments may fall short of insurer needs | Business Insurance

The projected number of enrollees in health care plans purchased through public health insurance exchanges likely will not be sufficient to absorb the costs incurred by insurers providing those plans, Moody’s Investors Service Inc. said in a report released Monday.

The New York-based credit rating agency said lower-than-expected enrollment growth in the public exchanges established under the federal health care reform law would be “credit negative” for participating U.S. health insurers, particularly smaller insurers without sufficient diversification in their books of business.

“These entities have been relying on increased volume to absorb fixed operating costs and introduce some healthier and younger enrollees to improve the overall risk profile of the insured pool,” Stephen Zaharuk, senior vice president at Moody’s, wrote in the report.

Source: Public health exchange enrollments may fall short of insurer needs | Business Insurance

This is a sobering outlook for one of the Patient Protection and Affordable Care Act’s keystone insurance market reforms: state health benefit exchanges. The exchanges are intended to bring a significantly larger volume of individuals and small employers into health coverage by bringing health plans together in a single marketplace, offering coverage on a baseline set of coverage requirements. As well as advance tax credit subsidies to individuals and families to make premiums more affordable.

Consequently, health insurance industry analysts were initially quite bullish in the 2011-12 period, believing the exchanges would be a growth bonanza for health plan issuers. This recent Moody’s analysis however takes a far more bearish view, particularly for smaller, less diversified players.

 


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. 

Many Low-Income Workers Say ‘No’ to Health Insurance – The New York Times

The Affordable Care Act requires employers with more than 50 full-time workers to offer insurance, but many find few low-income employees will buy it.

Source: Many Low-Income Workers Say ‘No’ to Health Insurance – The New York Times

The New York Times reports on a major weakness of the Patient Protection and Affordable Care Act. Even if low wage hourly employees work for large employers as defined under the law, contributing to coverage that costs them nearly 10 percent of their earnings simply isn’t economically viable with other household budget items competing for scarce dollars. The Affordable Care Act’s individual shared responsibility mandate that includes tax penalties for not enrolling in employer-sponsored coverage will only add to their financial pain, particularly as the penalty increases for not having minimum essential coverage in 2015 to the higher of $325 per adult or two percent of household income. That’s likely to result in another Times story in April 2016 on hourly workers complaining that their 2015 income tax refunds have been significantly diminished by the penalties.

The irony is the Affordable Care Act is designed to increase access to affordable coverage, which it clearly isn’t doing here. As the story notes, uninsured low wage hourly employees have access to low cost primary care via community health centers and retail outlets. But they’ll continue to contribute to the burden of uncompensated care — another problem the law was intended to address — for costlier forms of 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 fpilot@pilothealthstrategies.com or call 530-295-1473. 

Risk corridor element falls short as exchange QHP premium stabilization mechanism

Insurers can now expect to receive only 12.6% of 2014 risk corridor receivables in 2015, with the remainder to be potentially funded in future years. Last week’s announcement validates prior concerns regarding a 2014 risk corridor funding shortfall because of Cromnibus and higher-than-expected 2014 claim costs. This shortfall occurred despite two earlier injections of additional transitional reinsurance program recoveries into the Patient Protection and Affordable Care Act of 2010 (ACA) individual market.The shortfall will have a significant negative financial impact on insurers who find themselves in a risk corridor receivables position, not only for the 2014 benefit year but also possibly for 2015 and 2016. A 2014 funding shortfall puts the collectability of 2015 and 2016 payouts in increased jeopardy—2014 receivables that were not paid in 2015 will be first in line to receive payments in later years if funds are available.

Source: Headwinds cause 2014 risk corridor funding shortfall – Milliman Insight

Risk corridors — one of three elements of the Patient Protection and Affordable Care Act’s Premium Stabilization Programs designed to help ward off steep rate increases for plans sold on state health benefit exchanges — has proven problematic and is unlikely to significantly contribute to reducing rate volatility among exchange Qualified Health Plans (QHPs).

That’s the upshot of this Milliman analysis of the risk corridors component — a short lived financial mechanism that expires at the end of 2016. Risk corridors are designed to level claims experience among health plans offered on state health benefit exchanges. Plans that suffered greater than expected losses are partially compensated for them — and thus reducing their need to sharply boost premium rates — while those paying out less than expected transfer funds to plans with worse experience. While risk corridors have not yet expired and have another year of life, Milliman’s Scott Katterman offers a detailed post mortem of this troubled premium stabilization program component.

 


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. 

California exchange models managed competition in individual, small group health insurance markets

At the other end of the policy spectrum, the exchange serves as an “active purchaser” of health insurance on behalf of its clients, the individual consumers. In effect, the exchange seeks to move insurance from a let-the-buyer-beware retail market to a two-stage wholesale and retail market. The first (wholesale) stage uses supply chain management tools developed by corporate buyers of other services, while the second (retail) stage encourages consumers to select from a more narrow range of pre-contracted offerings.

Source: Whither Health Insurance Exchanges Under The Affordable Care Act? Active Purchasing Versus Passive Marketplaces

This article co authored by UC Berkeley School of Public Health economist James C. Robinson, the executive director of California’s health benefit exchange, Peter Lee, and exchange policy staffer Zachary Goldman effectively argues California exchange’s active purchaser role vis health plan issuers embodies the concept of managed competition in health insurance described in this January 1993 Health Affairs article by Alain C. Enthoven:

A sponsor (either an employer, a governmental entity, or a purchasing cooperative), acting on behalf of a large group of subscribers, structures and adjusts the market to overcome attempts by insurers to avoid price competition. The sponsor establishes rules of equity, selects participating plans, manages the enrollment process, creates price-elastic demand, and manages risk selection.

As the authors note, the Patient Protection and Affordable Care Act creates basic standards for health plans in terms of defining required covered services, actuarial value and annual out of pocket maximums. But to realize the full benefit of managed competition, they appear to assert that health benefit exchanges must function as demanding and exacting wholesale purchasers of health plans in order to achieve maximum comparable selection and value for their retail customers. By aggregating purchasing power for insurance buyers, the exchanges help balance out market power between buyers and health plan issuers in a market that due to high entry and operating costs tends to be oligopolistic.

 


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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