Monthly Archive: November 2015

Diminished premium stabilization safety net possible factor in UnitedHealth Group’s decision to reevaluate exchange participation 2017 forward

UnitedHealth Group’s announcement this week that it’s reassessing its participation in state health benefit exchange markets for plan year 2017 cites deteriorating loss experience and increased risk. There’s another factor not mentioned by UnitedHealth that warrants discussion and analysis.

For plan years 2014-2016, health plan issuers participating in state exchanges are shielded from losses by a triple safety net built into the Patient Protection and Affordable Care Act known as premium stabilization programs. The three programs were put in place recognizing health plan issuers had no prior experience calculating premiums using new community rated statewide risk pools put in place by the law. Also, there’s the expectation that people who were previously medically uninsured are likelier to come with pent up needs for medical care and thus be costly to cover. The programs include:

  • Risk corridors, which level losses among health plan issuers so that issuers with lower than expected claims make payments to plans with higher than expected claims;
  • Reinsurance, which essentially insures health plan issuers when a covered individual’s medical costs exceed a set dollar amount and;
  • Risk adjustment, which like risk corridors also levels the field among health plan issuers by taking money from plan issuers with lower-risk enrollees and transferring it to plan issuers with higher-risk enrollees.

The first safety net, risk corridors, developed a huge hole out of the box and faces an uncertain future. The federal government announced this year that due to federal budget cuts in the program and higher than expected claims, health plan issuers would receive just 12.6 percent of what they requested for plan year 2014 claims experience.

Come plan year 2017, both risk corridors and the reinsurance programs expire, leaving only one safety net intact: risk adjustment. By placing expiration dates on two of the programs, the Affordable Care Act implies the exchange marketplace is expected to have achieved a degree of financial stability after three years of operations. UnitedHealth Group’s announcement suggests the company isn’t so confident. That said, it could opt to remain in more populous states such as California where there are more “covered lives” in the exchange marketplace. With a greater number of enrollees, the insurance principle works to naturally spread the risk of losses and is less dependent on the premium stabilization programs to keep the market financially viable.

Meanwhile, Aetna and Anthem reacted to the UnitedHealth development by emphasizing their commitment to the exchanges. Anthem is “continuing our dialogue with policymakers and regulators regarding how we can improve the stability of the individual market,” Chief Executive Officer Joseph Swedish said in a statement. Aetna has slightly pared back the number of state exchanges that it will offer plans in 2016 (15 versus 17), according to this Forbes item by Bruce Japsen.


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. 

Employers struggle to engage employees in wellness | Benefit News

“Employers recognize that employees are leaving a lot of money on the table,” said Steven Nyce, senior economist at Towers Watson. “The good news is, employers are doubling down on their commitment to build a culture of health and improve the employee experience through technology and personalized communication. They can also be heartened by the progress some employers are making.”

Echoing Nyce’s thoughts, Shelly Wolff, senior health care consultant at Towers Watson says shifting the focus from paying employees to supporting people at the worksite can make a bigger impact and may even cost less in the long run.

“Creating a culture that values health and changes like incorporating walking/standing meetings, providing healthy foods and pushing employees to be physically active in a sedentary role … all of those things at the workplace are probably more important than spending $900, and you’d probably get more return on that,” she says.

Source: Employers struggle to engage employees in wellness | Benefit News

In the context of knowledge and information organization, the primary problem is the workplace-centric view of wellness such as expressed here. Wellness encompasses all places were staff members spend their time: at the office, at home and for all too many, the sedentary hours spent each week traveling between the two locations.

There is no magic bullet at the office for encouraging health promoting behaviors to ward off preventable, lifestyle-related chronic conditions that cost organizations billions in health care costs and lost productivity. Having standing meetings and offering healthy snacks are largely symbolic measures.

A better and more holistic approach to is to afford staff members the ability to work — and work out — where they spend most of their time: right in their communities. That can be achieved by better leveraging information and communications technology (ICT) to shift away from the centralized commuter office culture to one that treats staff as adults and allows them to manage where and when they get their work done.

That way, they’ll have more freedom to take charge of their wellness and be freed of the time suck of the daily commute (a big contributor to the lack of regular exercise among office workers) to hit the gym, walk, run, swim, and cycle on their own schedules. If organizations want their members to be more engaged in wellness and adopt health promoting behaviors, they need to give them maximum freedom and support to do so. In doing so, they’ll benefit from reduced office and health care costs, lower turnover and higher staff attraction and retention.


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. 

Many Say High Deductibles Make Their Health Law Insurance All but Useless –

But in interviews, a number of consumers made it clear that premiums were only one side of the affordability equation.“Our deductible is so high, we practically pay for all of our medical expenses out of pocket,” said Wendy Kaplan, 50, of Evanston, Ill. “So our policy is really there for emergencies only, and basic wellness appointments.”Her family of four pays premiums of $1,200 a month for coverage with an annual deductible of $12,700.

Source: Many Say High Deductibles Make Their Health Law Insurance All but Useless –

Americans are having a difficult time adjusting to the new, old “major medical” health coverage of the 1950s and 1960s characterized by high deductible health plans that are rapidly increasing among individual and employer-paid health coverage. For decades starting in the 1970s, “health insurance” was managed care HMO plans that functioned as pre-paid medical care for lower cost care as well as insurance in the traditional sense of the word cover unexpected, high cost events such as accidents and heart attacks requiring surgery and hospital stays. (The California HealthCare Foundation recently issued an updated interactive chart showing the shift from cash to private insurance paid physician and clinical services from 1960 through 2013.)

Now it’s more just plain insurance as it was in the pre-HMO days. Americans are once again paying directly out of pocket for routine and minor care. And they’re not happy about it as this story illustrates. It doesn’t jibe with their expectations relative to the fourth word of the Patient Protection and Affordable Care Act: affordable.

Aside from the difficulties associated with going “back to the future” with major medical plans, people are likely to have a difficult time grasping the value of paying a high premium for catastrophic coverage. They are naturally going to figure if they’re covering what’s known in health insurance as “first dollar” care costs until the deductible limit kicks in, then the premium should be quite low since that is where most of the utilization occurs. It shouldn’t approximate the amount of a monthly housing payment as in the example above. What’s telling here is Ms. Kaplan’s age. The Affordable Care Act allows the use of age as a factor in setting premiums. Once people reach age 50, premium rate-wise the individual health insurance market can be nearly as unfriendly to over 50s as it was before the Affordable Care Act market reforms took effect in 2014.


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 fines top health insurers for overstating Obamacare networks – LA Times

California regulators fined two insurance giants for overstating their Obamacare doctor networks, and said the companies will pay out millions of dollars in refunds to patients.The errors by Blue Shield of California and Anthem Blue Cross caused major frustration for consumers statewide during the rollout of the Affordable Care Act in 2014.The inaccuracies in their provider networks led to big unforeseen medical bills for some patients who unwittingly went out of network for care. The California Department of Managed Health Care said Tuesday that it has levied fines of $350,000 against Blue Shield and $250,000 for Anthem.

Source: California fines top health insurers for overstating Obamacare networks – LA Times

Among the moving parts of the Patient Protection and Affordable Care Act’s health insurance market reforms there are bound to be friction points. One such problematic interface exists between payers and providers participating in California’s health benefit exchange, Covered California, as this report illustrates.

In non-integrated, narrow network health plans like these where payers and providers function as separate entities (unlike integrated care systems like Kaiser Permanente), it’s critical that interface function properly lest it threaten to bring the entire reform mechanism to a grinding halt. Continuing the mechanical metaphor, the narrowness of the provider networks has little tolerance space — and room for error– between the working components. One area where the gears frequently grind in narrow networks is hospital care where the hospitals and physicians are contracted with disparate plans and not necessarily participating in the same plan covering a patient as this Modern Healthcare article explains in detail.


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. 

The paradox of Affordable Care Act individual health coverage affordability

The Patient Protection and Affordable Care Act at Section 1401(b)(3)(a) provides advance individual health plan premium tax credit subsidies within six household adjusted gross income tranches between 100 and 400 percent of the current year federal household poverty levels. At the low end, the subsidies are calculated so that households with incomes between 100 and 133 percent of federal poverty pay no more than two percent of their incomes for a health plan. At the upper end, tax credits are applied so that households earning between 300 and 400 percent of federal poverty levels would pay no more than 9.5 percent of income. The subsidies are only available for health plans sold on state health benefit exchanges.

While designed to make individual health coverage more affordable to low and moderate income households, the subsidies employ a one size fits all approach that doesn’t easily achieve that goal in some parts of the nation such as those with high housing costs. Particularly for those over age 50, given the law allows health plan issuers to base premiums in part on age, and who earn close to or slightly above the 400 percent household income subsidy cutoff. And when their individual plan premiums rival or equal a significant portion of their monthly mortgage or rent payment. When that happens, the house payment is going to win out over the health insurance premium every time.

Case in point is San Jose, California resident Miguel Delgadillo, as reported by the San Jose Mercury News:

Until the price of health insurance comes way down, he said, don’t bother him.

“What little income there is after taxes goes to my house payment — that’s my top priority,” said the 55-year-old part-time teacher.

He said he likes the idea of a national health care law, but not the $451 he would have to pay each month for health insurance. That’s the cost of the lowest price plan available to him.

Delgadillo, who has been uninsured for seven years, shares a dilemma with tens of thousands of other Californians: He’s a middle-class person who narrowly misses the income threshold that would qualify him for a subsidized health plan.

That leaves Delgadillo potentially subject to the Affordable Care Act’s individual shared responsibility penalty for not having some form of minimum essential health coverage, which for 2016 is the higher of 2.5 percent of adjusted gross income or $695 per adult and $347.50 for children under 18, up to a household maximum of $2,085. Similarly situated individuals might do the math and figure it would cost less to pay the penalty than purchase coverage. Delgadillo and other similarly situated households may be able to avoid paying the penalty when filing their income tax returns if they can show that the lowest cost plan available to them would exceed 8 percent of actual household income.


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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