Yearly Archive: 2016

ACA provisions to restore individual health insurance market may have missed target

One of the major reforms of the individual health insurance market segment put in place by the Patient Protection and Affordable Care Act is pooling people into statewide risk pools to achieve greater spread of risk. In addition, the law reinforces the fundamental insurance principle of risk spreading by creating incentives for people to get into the pool. Those include advance tax credit premium and reduced cost sharing subsidies for individual plans offered on state health benefit exchanges and tax penalties applied to everyone not covered under some minimum form of coverage for hospital and physician care. Also, requiring health plans to accept all applicants for coverage regardless of medical history.

The goal is to restore what was a struggling market segment circling the drain of runaway adverse selection prior to the reforms going into effect in 2014. Few might have thought such a sweeping overhaul of the market wouldn’t restore it to a healthy, viable segment of the health insurance market. But as the reforms are about to enter their fourth year, it’s unclear whether they will achieve the goal of improved spread of risk. Health plan issuers complain the risk pool is imbalanced with too few young people and too many older and higher utilizing folks. They’ve openly expressed concern that’s driving adverse selection – the very problem the reforms intended to remedy.

Other factors that jeopardize the sustained actuarial viability of the individual market:

  • Poor overall population health status and low health education levels (i.e. how to stay healthy, minimize need for medical care), generally increasing utilization and cost trend.
  • Inadequate market forces exerting downward pressure on medical costs. The Affordable Care Act includes provisions to shift to value-based medical provider reimbursement reform for Medicare, but not the individual or small group market segments.
  • A high level of churn as people’s life situations change, moving them into and out of the individual health insurance market.

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. 

New Washington regime seeks to move from managed competition to more unfettered health care markets

Republicans take the reins of the federal government next month and are generally expected to repeal or at least revamp the Patient Protection and Affordable Care Act to harness market forces and competition to achieve the triple aim of better health care outcomes and patient satisfaction while lowering costs. Instead of the managed competition of the Affordable Care Act that put in place rules on the sell and buy sides of the health insurance market to promote competition and established government run markets for small group and individual coverage, the incoming Trump administration and new Congress will favor less managed competition with fewer market rules and constraints.

Achieving such a market environment is an enormous challenge given the heavily siloed health care system, with each silo having its own complex microeconomics. Cast as a market, health care has the essential element of many sellers and many consumers. Buyers ultimately drive the economics of all markets and determine their long term viability. But consumers generally don’t deal directly with health care providers given the large role of public and commercial health plans and employers. For the most part, people don’t plan to use health care, only doing so when accident or illness strikes. That precludes time for deliberate, considered comparison of providers and costs to determine the best value. Instead, consumers must deal with difficult to decipher bills filled with multiple, incremental charges after they consume health care services.

True market competition cannot function ex post facto transaction without some intermediary to negotiate terms and conditions on behalf of consumers. It remains to be seen how the new administration and Congress will finesse the complex microeconomics of health care as they seek to harness competitive forces to lower costs without resorting to even more extensive reforms than 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 or call 530-295-1473. 

November elections increase likelihood of California revisiting single payer

Various media accounts report that California of all states stands to lose the most federal funding for health care coverage under the Patient Protection and Affordable Care Act – 20 to 25 billion dollars annually – if the law’s health insurance reforms are repealed as expected next year. The large majority of that sum comes from enhanced federal cost sharing under the law’s Medicaid eligibility expansion, representing more than $18 billion this year, according to this issue brief by the State Health Reform Assistance Network. Accounting for the balance are advance premium tax credits and cost sharing subsidies to offset the cost of qualified health plans purchased on the state’s health benefit exchange, Covered California.

Other media accounts portray California’s state policymakers as circling the wagons to fight this substantial loss of federal dollars given the potential for many low and moderate income households not covered by employer group plans to lose health coverage as well as extensive fiscal damage the state budget. But they are unlikely to prevail against the political will of Washington under the new administration and Congress and will have to consider alternatives. One likely candidate would be some form of single payer coverage, perhaps utilizing an all payer Accountable Care Organization (ACO) structure to hold down rising health care costs and financed by income, payroll and self-employment taxes.

In the previous two decades, single payer failed to gain voter approval when proposed as a ballot measure or as legislation. This time, however, with a supermajority vote margin gained in the November elections, legislative Democrats along with incumbent Democratic Gov. Jerry Brown could enact a single payer measure with — or without — support from Republican lawmakers. It would represent a far more radical reform than the Affordable Care Act. However, among the states, California has a sufficiently large population base and economy to go single payer if it chooses. The Golden State may well have to if it wants to carve out its own health reform destiny in the post Affordable Care Act era.


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. 

Democrats open to replacing Obamacare – POLITICO

Senate Democrats will never vote to repeal Obamacare. But once the deed is done, a surprising number of them say they’re open to helping Republicans replace it.“If it makes sense, I think there’ll be a lot of Democrats who would be for it,” said Sen. Claire McCaskill (D-Mo.).As Republicans aim to make good on their years-long vow to quash Obamacare and replace it with their own health care vision, they’ll have to do something Democrats were never able to: Bring members of the opposing party on board. Enacting any substantive alternative will take at least eight Democratic votes in the Senate.

Source: Democrats open to replacing Obamacare – POLITICO

This item points up the political reality that while one party — the GOP — can defund the Patient Protection and Affordable Care Act via budget resolution, it will take members of both parties to replace it in order to get the necessary 60 yes votes in the Senate to head off a long filibuster. That gives minority Democrats a large degree of influence over the law’s successor.

The pressure for a deal on that legislation during the first quarter of 2017 will be intense. Both parties will hear plenty from constituents concerned they will lose their health coverage. They will also hear from health plan issuers who fear a meltdown of the individual market segment and may demand a bailout to remain in the market. Health care providers and especially hospitals will also weigh in with urgency, concerned a loss of the individual market as well as more expansive Medicaid coverage in most states under the ACA will lead to a jump in uncompensated 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 or call 530-295-1473. 

House leaders survey states on ACA Section 1332 state innovation waivers

Instead of outright repeal of the Patient Protection and Affordable Care Act’s insurance market reforms, Republican House leaders are examining a key provision of the law that permits states to dispense with many of the reform requirements state innovation waivers starting in 2017. That indicates a possible strategy shift of using the law’s provisions to shape reforms more in line with GOP thinking to give more leeway to states rather than dispensing with it wholesale.

On Dec. 2, House Majority Leader Kevin McCarthy (R-CA), committee Chairmen Kevin Brady (R-TX), Fred Upton (R-MI), John Kline (R-MN) and Chairmen-elect Greg Walden (R-OR) and Virginia Foxx (R-NC) sent a letter to state governors and insurance commissioners asking if their states had requested or plan to request a Section 1332 waiver. The letter also inquires what could be done to facilitate a Section 1332 waiver as well as the impact of repealing state statutes implementing the ACA. The letter requests a response by Jan. 6, 2017, indicating House Republicans wish to move quickly.

Section 1332 of the Affordable Care Act allows states to opt out of most the law’s individual and small group health insurance market reforms including requirements to have a health benefit exchange, that plans provide specified essential health benefits as well as advance tax credit premium subsidies and reduced cost sharing for those households meeting income criteria. Also waivable are the individual and employer shared responsibility mandates.

To qualify for a waiver from the federal government, states must demonstrate their programs would ensure individual and small group plans would offer coverage at least on a par with plans providing the essential health benefits prescribed by the Affordable Care Act. State programs would also have to ensure individuals and small employers would 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 existing ACA plans. States granted Section 1332 waivers are eligible for “pass through” federal funding operating like an annual block grant. The funding would cumulatively represent what state residents would otherwise receive under ACA rules for premium tax credits, cost-sharing reductions and small business credits. Federal funding under the waiver cannot exceed that amount by adding to the budget deficit.

The ACA Section 1332 state innovation waiver dovetails with GOP House Speaker Paul Ryan’s “A Better Way” health care reform proposal that calls for state innovation grants. However, Ryan’s grant qualification benchmarks differ from the Affordable Care Act’s state innovation waiver, most notably reducing insurance premiums rather than merely ensuring they are affordable. According to a summary of Ryan’s proposal, states must achieve a targeted reduction of individual and small group premiums and the number of medically uninsured.


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. 

Newly enacted legislation could help stabilize individual health insurance market

The 21st Century Cures Act, an omnibus health care measure signed into law this week by President Obama, contains a provision that could help stabilize the individual health insurance market segment. It does so by paving the way for employers of 49 or fewer employees that do not offer group coverage to subsidize employee purchases of individual plans starting January 1, 2017.

Section 18001 of the measure authorizes tax deductible Qualified Small Employer Health Reimbursement Arrangements (HRAs), allowing small employers to fund up to $4,950 annually for single employees and $10,000 for an individual plan covering an employee and their family members. The reimbursement must be offered to all full time, permanent employees age 25 and older with at least 90 days of service and may not be offset by employee salary reduction contributions.

Previously, guidance issued by the federal government disallowed employer subsidies of employee individual coverage. Since the subsidies are paid by employers, they trigger requirements governing employer group plans, the guidance stated, drawing a bright line between individual and employer group health benefits.

If a significant number of small employers — many of which are feeling pressure from rising small group health insurance premiums — subsidize employee purchases of individual coverage under this provision, it could help improve the spread of risk and age diversity of state individual risk pools. Individual health plan issuers are concerned over the quality of the individual risk pool and many have significantly increased premium rates for plan year 2017.


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. 

Political realignment calls into question future of individual health insurance market, could boost “public option”

Behind vows by the new Congress and incoming administration to revisit and potentially undo at least some of the Patient Protection and Affordable Care Act is the question of the future commercial viability of the individual health insurance market segment. The Affordable Care Act intended to restore the segment to functionality by effectively forcing sellers and buyers together with mandates to offer and purchase coverage, respectively, along with a mix of incentives and disincentives.

Health plan issuers aren’t confident the reforms have worked as intended, concerned over less than optimal spread of risk among healthy and less healthy individuals and gaming of enrollment rules that result in people not being continuously covered, playing havoc with their actuarial calculations. But despite their misgivings that led some to pull back their presence in the individual market for plan year 2017, health plan issuers are also concerned policymakers will leave the market even more unbalanced and uncertain than under the Affordable Care Act. That combined with a rapid rise in medical utilization could spark a crisis of confidence sending plan issuers scrambling for the exits, effectively throttling the individual market and sending it into a rapid, fatal death spiral.

That in turn will lead to an even bigger policy question at time when self-employment is growing faster than expected. Where will the self-employed get protection from large, unexpected medical expenses with no commercially viable individual market? One possibility is a government operated individual plan like that outgoing President Barack Obama initially opposed but earlier this year endorsed to increase choice and access to individual coverage in states with few individual plan offerings. Now the so-called public option may end up being the only option — if the new Congress and administration go along — for those not in government or employer sponsored coverage if the individual health insurance market cannot remain commercially viable without retaining the Affordable Care Act mandates on both the sell and buy sides.


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. 

Action on ACA individual market reforms successor must come in Q1 2017 to avoid messy market meltdown

Heading into this year’s elections, the individual health insurance market segment developed signs of instability as health plan issuers were pulling back their market presence for 2017 and reassessing their plans for 2018 and beyond. The election that sent Donald Trump headed to the presidency and afforded his party the opportunity to implement their stated policy to quickly repeal the Patient Protection and Affordable Care Act piled uncertainty on top of uncertainty for health plan issuers.

It’s unclear how much of the Affordable Care Act the incoming Trump administration and Congress will gut. However, it is clear that first in their sights are the individual health insurance market reforms contained in Title I of the expansive law. With these reforms first in line for the chopping block, there is no luxury of time to contemplate a gradual transition for the individual market. Congress and the new administration will have to quickly come to a consensus in the first quarter of next year.

As has been widely reported, Congress and the Trump administration could defund the bulk of the reforms using a budget reconciliation bill requiring a simple majority vote, thereby avoiding a Democratic filibuster. But that would only create more market uncertainty, crashing the old Affordable Care Act market rules before new ones could be put in place. Even more comes from the House’s successful court challenge this year of the Obama administration’s funding of out of pocket cost sharing subsidies for many lower income households buying coverage on state health benefit exchanges. It would take effect very early in the Trump administration if the administration as expected opts not to pursue an appeal, prompting health plan issuers to bail from state health benefit exchanges in 2017 and leave millions without coverage. These circumstances underscore the fact that under the Affordable Care Act, health plan market participation is voluntary. If plan issuers can’t predict their finances with any degree of certainty, all bets are off.

Health plan issuers need to begin pulling together their individual market offerings for plan year 2018 early next year. It will be difficult if not impossible for them to do so with the market rules up in the air. Lacking any certainty in the first quarter of 2017, a transition to a new scheme won’t happen in 2018. New policy will have to be nailed down in that critical first quarter. With the Affordable Care Act individual market rules well established, it’s now impossible to quickly unscramble the Obamacare omelet and turn the calendar back to 2009.


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. 

Microeconomic mismatch undermines concept of interstate health insurance market for non-integrated plan issuers

Creating an interstate market for individual health insurance is a component of President-elect Donald J. Trump’s healthcare policy. “To maximize choice and create a dynamic market for health insurance, the Administration will work with Congress to enable people to purchase insurance across state lines,” according to the Trump administration’s transition website.

The concept’s not new. It’s been around for decades as a reform element favored by conservative health policy wonks. It’s even baked into the Patient Protection and Affordable Care Act. Section 1333 of the law provides a mechanism for health insurers and plans to pool risk and sell across state lines via “health care choice compacts” starting this year. The provision allows two or more states to enter into an agreement under which health plans could be offered in state individual markets but subject to regulation by the state in which the plan was written or issued. The Affordable Care Act even provides for interstate health benefit exchanges. Section 1311(f) provides for “Regional or Other Interstate Exchanges” operating in more than one state with federal government approval.

On its face, enabling the marketing of health insurance across state lines appears appealing. After all, insurance is all about large numbers — and the bigger the better. More people in multiple states covered in health plans translates to enhanced spread of risk and potentially operating economies of scale. It’s a particularly appealing reform as individual health plan issuers worry about adverse selection, particularly in less populous states and those with poorer population health status. With health plan issuers able to offer plans in multiple states, the buy side of the market also benefits with more competition and consumer choice, proponents contend.

But undermining the concept is a microeconomic mismatch. Health coverage is far more portable than provider networks, which are geographically fixed by metropolitan areas and the brick and mortar physician offices, clinics and hospitals within them. Provider charges are not uniform, varying considerably from one metro area to another, even within a given state. Health plan issuers negotiate locally with providers because nearly all health care is provided locally and not across state lines except for those living near state borders.

An interstate model currently only favors integrated health plans such as California-based Kaiser Permanente and Molina Healthcare, which each operate health care facilities in a half dozen states and have fared better in the state health benefit marketplace environment than traditional non-integrated health plans.


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. 

Individual health insurance segment will continue to face existential crisis post-election

Source: Health Affairs Blog.


Regardless of what the incoming Trump administration and Congress opt to do with the Patient Protection and Affordable Care Act’s reforms of the individual health insurance market, the segment will continue to face an existential crisis. The individual market remains the problem stepchild of health coverage, playing an important but relatively minor role in a siloed scheme dominated by employer sponsored coverage for a solid majority of those under age 65 and the big government entitlement programs of Medicare and Medicaid for most of the rest. Not to mention the other integrated government run care systems for active duty military members and their dependents and military veterans.

Given its place in the overall scheme of things, individual health insurance is the remainder market of last resort for those not covered by the dominant private and public systems. It functions as a high turnover, temporary segment that’s inherently unstable. People move in and out of coverage due to changing life circumstances or obtaining eligibility for coverage under one of the dominant systems. Others possess a deeply ingrained “culture of coping” as some have termed it to get medical care where it’s the most easily accessible and affordable such as hospital emergency departments, community clinics and free care events. That coping culture includes avoiding paying for individual health insurance, a pattern in place decades before the Affordable Care Act’s individual market reforms went into effect in 2014. It’s not going to be changed quickly even as health plan issuers are required to accept all applicants without regard to medical history and the law provides subsidies for premiums and out of pocket expenses to low and moderate income households.

That instability makes it very challenging for the basic insurance principle of risk spreading since the risk being insured against is highly dynamic. Actuaries base their projections on relatively stable risk pools and flows of premium dollars into the pool. As long as “covered lives” are moving in and out of the individual market, that desired actuarial predictability will remain elusive, the Affordable Care Act’s carrots and sticks aimed at stabilizing the pool notwithstanding.

As policymakers reassess the Affordable Care Act health insurance market reforms in the post-election period, they might well reexamine an assumption of the law that small group coverage would be eclipsed by the reformed individual market. It was expected that by making individual market coverage more like small group coverage by establishing small group plans as benchmark plans, that along with the individual market reforms would drive more people into individual coverage.

It hasn’t quite worked out that way. Even though the Affordable Care Act does not mandate they do so, small employers are continuing to offer group coverage, albeit less generous than the recent past and more akin to major medical, catastrophic plans with high deductibles. If they are offered coverage under them, employees have little incentive to enroll in individual coverage since they would not qualify for subsidized coverage sold on state health benefit exchanges.

That circumstance reduces the potential size of the individual segment and in so doing, degrades the individual market risk pool. While the Obama administration’s health insurance reforms are based on keeping employer-sponsored health benefits as the bedrock of coverage for most pre-retirement Americans, they also were aimed at revitalizing the struggling individual market. Given that employer-sponsored coverage cuts against a robust individual health insurance space, it may not be possible to have both.


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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