Monthly Archive: March 2017

California single payer bill would amalgamate federal, state health program funding

A California state lawmaker this week fleshed out proposed legislation that would create a single payer scheme of medical care financing in the Golden State named Healthy California. The proposed legislation would create Healthy California Trust Fund to fund medical care for all Californians and combine federal funding for health programs (Medicare, Medicaid, Children’s Health Insurance Program, Patient Protection and Affordable Care Act) as well as state funds. Waivers would be sought from the federal government as needed to redirect funding from the federal programs to the Healthy California Trust Fund.

A key part of the funding under the measure is federal approval of a waiver under Section 1332 of the Affordable Care Act that allows states to set up their own medical care financing schemes using federal dollars that would otherwise be available under the ACA such as subsidies for health plan premiums and out of pocket costs in the non-group market and expanded Medicaid eligibility. Vermont took a similar tack with a single payer plan but ultimately concluded it would require substantial state funding to an extent the program would not be politically feasible.


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. 

State health benefit exchanges not out of the woods yet

State health benefit exchanges dodged a legislative bullet last week that would have eliminated advance premium tax credit (APTC) subsidies to help low and moderate income households purchase non-group coverage. The nation’s largest exchange, Covered California, estimated the tabled budget reconciliation bill replacing the subsidies with an age-based tax credit beginning in 2020 would on average amount to only 60 percent of that provided under the APTC subsidies. That would have made coverage for less affordable for many households and potentially led to a dramatic drop in enrollment qualified health plans sold on the exchanges, shrinking the non-group risk pool and reducing spread of risk.

The exchanges now face a more immediate threat that could significantly disrupt plan year 2018 and potentially current year enrollees: the loss of cost sharing reduction (CSR) subsidies for silver level plans sold on the exchanges. The subsidies are available to households earning between 100 and 250 percent of federal poverty levels. By reducing out of pocket costs for eligible households, the subsidies effectively increase the actuarial value of silver plans that cover on average 70 percent of medical care costs.

A U.S. District court ruling issued last May found the Obama administration acted unconstitutionally in funding the subsidies without an explicit appropriation by Congress. The decision was put on hold pending appeal, where it sits pending possible action to resolve the underlying fiscal issue by the Trump administration and Congress. Without federal funding for the CSR subsidies, health plan issuers participating in the exchanges would incur billions in losses, according to an analysis prepared earlier this month by The Commonwealth Fund. There is no requested appropriation to cover the CSR subsidies in the Trump administration’s 2018 budget blueprint. As last week’s failed attempt to advance the budget reconciliation legislation illustrates, the Trump administration and Congress are unlikely to achieve a rapid agreement resolving the litigation as they struggle to form a majority party governing coalition.


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 essential challenge succinctly stated — and a path forward for those not offered employer health benefit plans

The two major issues that face us in healthcare reform are the cost of care and the payment mechanism for that care. Any proposed solution that does not meaningfully impact the cost of care (like Obama’s Affordable Care Act) cannot succeed in the end. Similarly, a proposed solution that does not include a practical method of assuring payment for that care (like Ryan’s American Health Care Act) does not provide a real opportunity to resolve the existing problem.

The question becomes, then, whether there is a way to impact both cost of care and method of payment, and I believe there is an option which meets these criteria: Medicaid should be offered to anyone wanting to be covered, with income-tiered premium contributions starting at a selected percentage of the Federal Poverty Level, and Medicare (and supplemental Medicare Advantage plans) should be able to be purchased by everyone 50 and over.

Source: AHCA? Obamacare? Isn’t there a better way forward? | Bruce Gilbert | Pulse | LinkedIn

The first paragraph sums up the enduring global challenge facing policymakers better than just about anything I’ve read in the blizzard of news and commentary of the past two weeks leading up to yesterday’s collapse of the House health care reform reconciliation bill.

In the second paragraph, Gilbert lays out a path to incorporate the working age population not covered by employer-sponsored benefit plans into the large government silos of Medicare and Medicaid. A seasoned insurance professional who has worked in both the public and private sectors including a stint as executive director of Nevada’s health benefit exchange, Gilbert rightly points out insurance (no matter the type) depends on the law of large numbers and spread of risk these programs offer.

The non-group individual market will continue to be challenged to comply with those basic principles regardless of whether the Patient Protection and Affordable Care Act or a successor reform plan is law since the long term viability of non-group medical coverage is ultimately governed by market dynamics and not public policy. Policymakers should be thinking about an alternative model like Gilbert suggests should the non-group market enter a terminal phase — which could very well happen over the course of the next two years.


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. 

Fate of 2018 individual market could turn on plan issuer response to proposed Market Stabilization rulemaking

With efforts to enact a successor to the Patient Protection and Affordable Care Act bogging down in the legislative process as health plan issuers must soon make decisions on their participation in the individual market and state health benefit exchanges for plan year 2018, much could ride on the Trump administration’s pending Market Stabilization administrative rulemaking and whether it will instill sufficient market confidence among plan issuers worried about losses and adverse selection. Indeed, the outcome of the rulemaking could well determine whether an individual market exists at all in many states next year as Congress debates changes to the Affordable Care Act’s commercial medical insurance market reforms but also the scope and financing of the six-decade-old Medicaid program.

The Department of Health and Human Services is fast tracking the rulemaking and currently reviewing about 4,000 comments received by the March 7 comment deadline. The scope of the rulemaking would directly apply to plans offered on state health benefit exchanges in states where the federal government operates the exchange or provides the online enrollment platform. As for the dozen states that operate their own exchanges, HHS states in the proposed rulemaking it understands those exchanges may not be able to implement the rule in 2017. It asked for comment on an appropriate transitional period for state-based exchanges and whether the rule should be optional for them. HHS also sought comment on how the rulemaking should apply to plans sold outside the exchanges.

The proposed rule is aimed at reducing the likelihood of enrollee gaming and adverse selection by requiring verification of eligibility for special enrollment periods and supporting continuous enrollment. It would more closely conform individual coverage to employer-sponsored and Medicare coverage by establishing the plan year 2018 open enrollment period as November 1 to December 15, 2017. The rulemaking would require those seeking to enroll outside this period to provide documented evidence of life events such as a change in family status or loss of employer-sponsored coverage. It also would make it easier for health plan issuers to collect lapsed premium payments from the prior year upon renewal, liberalizes the actuarial value definitions of all but silver plans as affords states and plan issuers greater leeway for determining provider network adequacy.

“Continued uncertainty around the future of the markets and concerns regarding the risk pools are two of the primary reasons issuer participation in some areas around the country has been limited,” HHS stated in the preamble to the proposed rule. “The proposed changes in this rule are intended to promote issuer participation in these markets and to address concerns raised by issuers, states, and consumers. We believe such changes would result in broader choices and more affordable coverage.”

While the rulemaking is intended to provide a degree of certainty to plan issuers, it can’t provide a full remedy. The lack of quick legislative progress on an ACA successor has increased the likelihood a federal court ruling finding executive branch funding of out of pocket cost subsidies for silver plans sold on the exchanges unconstitutional will take effect. Implementation of the ruling is temporarily on hold pending legislative action. With both inter and intra party legislative gridlock on health care reform, the Trump administration is far less likely to appeal the decision, allowing it to stand.


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. 

Macroeconomics underlie debate over ACA successor

Set in the larger context, the current policy debate over a successor to the Patient Protection and Affordable Care Act is grounded in the long term macroeconomics of declining widely shared prosperity and how much federal and state government should chip in to finance the medical care of more lower income households. These are households:

  • Hard hit by the 2008 economic downturn that reduced middle class economic security as the nation seeks a new post-industrial, post-WWII prosperity economy.
  • Not covered by generous employee benefit plans that were commonplace in decades past while at the same time more working age Americans are self-employed and thus ineligible for employee benefit plans.
  • Currently eligible for subsidies for plans sold on state health benefit exchanges and potentially for Medicaid if they live in a state that adopted the Affordable Care Act’s liberalized Medicaid eligibility guidelines.

Members of these households at the low end of the income scale are often lack stable incomes and have members in poor health who utilize a lot of medical services, reinforced by negative social determinants of health. That has contributed to a multi-billion dollar black hole of Medicaid as the program enrollment expanded dramatically, owing to the Affordable Care Act’s expanded eligibility rules.

In a letter to state governors last week, the Trump administration last week explicitly acknowledged the underlying economic challenges contributing to burgeoning Medicaid enrollment. The administration cast Medicaid as complimenting programs to assist low-income adult beneficiaries “improve their economic standing and materially advance in an effort to rise out of poverty,” adding that “[T]he best way to improve the long term health of low income Americans is to empower them with skills and employment.” The letter encourages state Medicaid program proposals “that build on the human dignity that comes with training, employment and independence.”

Heavy medical utilization has also led commercial non-group plan issuers to set premiums so high that those households that purchase non-group coverage are being clobbered by high premiums that rival monthly housing costs. Adding to the sticker shock is the lingering memory of the more generous plans of the HMO salad days of the mid-1970s to the early 2000s as well as individual plans that came with relatively high deductibles in exchange for low premiums. That tradeoff that has since greatly diminished with both premiums and deductibles high, stoking righteous anger against the Affordable Care Act’s non-group market reforms as well as resentment of those who qualify for Medicaid or substantial subsidies for exchange plans.

Simmering beneath the strum und drang of payer side policy is a coming pricing crisis on the provider side. With payers and households feeling pinched and even bankrupted by the cost of medical care and with dollars to pay for it in shorter supply and potentially being more restricted in the current administration and Congress (as well as by employers looking to cut employee benefit costs), substantial pressure will build on providers to reduce what they charge for services. That pressure will take on one or both forms as either falling demand based on the economic principle of price elasticity that holds as prices increase, demand falls — with high out of pocket costs aiding that dynamic. Or government expanding beyond Medicare its role as price arbiter or becoming a monopsony. It would easy to rationalize the latter since under the current split system of payers and providers negotiating reimbursement rates, price signals don’t pass directly between the providers and consumers of medical care and affords individual consumers little in the way of meaningful bargaining power.


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. 

If commercial non-group market cannot achieve continuous, year round enrollment, it may not be able to continue in its current form

Central to the Trump administration’s approach to reforming the non-group commercial medical insurance sector is assuring its actuarial stability by incentivizing those who obtain individual coverage remain continuously enrolled. Continuous enrollment is critical to a viable insurance market because it enables health plan issuers to assume a predictable flow of premium dollars to cover the cost of medical care events and predict the likelihood and cost of those events over a given period. That policy goal is contained in the American Health Care Act, the budget reconciliation measure currently pending in Congress that would authorize health plan issuers to surcharge applicants who had a break in coverage, as well as the Department of Health and Human Service’s proposed Market Stabilization rulemaking.

The question however is whether a continuous enrollment incentive will achieve its goal and meaningfully contribute toward creating a more actuarially stable individual risk pool. Particularly given that the segment serves as a relatively small remainder market for people not covered by employer-sponsored group plans that continue to dominate among working age individuals and the government programs Medicare and Medicaid.

Enrollment in the non-group segment is inherently volatile. People shift out of the non-group market as they become eligible for one of these other forms of coverage. Many young invincibles – those age 30 and under – don’t see much need coverage in the first place. Simply paying a 30 percent premium surcharge for a year doesn’t really offer much incentive to enroll in coverage. If the young invincibles lack incentive to enroll, that also works against another critical component in the individual (or any) insurance market – risk spreading – because the pool could tilt toward older members.

If continuous enrollment ultimately proves to have little impact in terms of improving the individual risk pool – and there’s a good chance that will be the case – policymakers will need to consider the larger issue of whether the non-group market can continue to function as a voluntarily enrolled form of insurance (like life insurance, for example). Will involuntary, automatic enrollment be necessary in order for it to be a viable risk pool for those not under the big tents of employer-sponsored or government coverage? And how might that work? Might all adults age 18 to 65 be automatically enrolled and subject to payroll and self-employment taxes as the financing mechanism such as with Germany’s universal coverage system? How might automatic enrollment as a government program comport with the commercial model used for non-group medical coverage? Would commercial non-group market players be content to relinquish the enormous challenge of maintaining an actuarially viable risk pool and transfer their risk bearing function to the government and act solely as plan administrators? Or might it be structured like Medicare, where commercial plans can assume some degree of risk to offer more generous plans such as Medicare Advantage 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. 

The American Health Care Act isn’t Trumpcare. It’s a big bargaining chip.

The House budget reconciliation bill that makes radical fiscal tweaks to the Patient Protection and Affordable Care Act is not Trumpcare. Rather, it’s a major element of the Trump administration’s negotiation strategy to replace the Affordable Care Act as President Trump promised during the presidential campaign last year. Having business but no public policy background, Trump approaches policymaking as a sale and negotiation. Various analyses such as this one in today’s New York Times have concluded older people – who vote in greater numbers than younger ones — will come out a lot worse under the House reconciliation bill than the Affordable Care Act’s means tested (versus age-based) premium and out of pocket cost subsidies.

Those electors are pissed at that prospect and they’re showing up at Congressional district town halls to let their representatives know. Majority Republicans in Congress and the Trump administration know they are – and that they vote — and apparently intend to leverage that circumstance. The Republicans are essentially telling minority Democrats play ball and give us some support on a broader omnibus reform measure to succeed the Affordable Care Act, or else we’ll push this albatross of a reconciliation bill through since you lack the votes to filibuster it in the Senate. Without some Democratic support, any omnibus reform measure introduced as a regular (and not budget reconciliation) measure could be talked to death in the Senate by opposition Democrats.

It short, it’s a high stakes game of partisan chicken. The GOP is effectively saying to the Dems, unless you work with us and call off the Senate filibuster dogs, we’ll both potentially face the wrath of the voters in the 2018 midterm elections. The Trump administration is also developing a BATNA (Best Alternative to a Negotiated Agreement) if Democrats won’t come to the table. It’s the administration’s proposed Market Stabilization rulemaking intended to bolster the individual health insurance market and keep plan issuers in the market for plan year 2018.


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. 

Feds encourage states to consider ACA Section 1332 waiver to fund reinsurance and high risk programs

The federal government is adopting a more flexible stance on state applications for waivers under Section 1332 of the Patient Protection and Affordable Care Act, particularly for states that want to create state reinsurance programs and high risk pools. Citing President Donald Trump’s January 20, 2017 executive order directing federal agencies to exercise maximum discretion possible within the law to reduce economic burdens imposed by the Affordable Care Act, the Health and Human Services Agency today encouraged states to utilize the Section 1332 state innovation waiver process to fund state reinsurance plans and high risk pools. “If a state’s plan under its waiver proposal is approved, a state may be able to receive pass through funding to help offset a portion of the costs for the high risk pool/state-operated reinsurance program,” HHS Secretary Tom Price wrote in a letter to state governors today.

Few states have shown interest in pursuing a Section 1332 waiver given the burdens of providing coverage on a par mandated by the Affordable Care Act while not requiring more federal funding than would otherwise be available under the law. Section 1332 allows the federal government to authorize 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. A budget reconciliation bill pending before Congress would zero out the penalties for noncompliance with those mandates.


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. 

Reforms creating winners and losers among consumers jeopardize viability of individual market

As the new congress and the Trump administration look to put in place their own brand of reform of the individual medical insurance market, they face a delicate task not unlike defusing a bomb. Cut the wrong wire or throw the wrong switch and the market could quickly go critical and explode. Just ask House Speaker Paul Ryan, who is facing significant and immediate blow back to his party’s reform proposal released earlier this week in the form of a budget reconciliation bill that restructures the individual market rules and Medicaid.

The individual market was intricately rewired by the Patient Protection and Affordable Care Act of 2010 to bail it out of an adverse selection death spiral and restore it to healthy and predictable functioning on both the sell and buy sides. Implicit in the reforms is the recognition that despite employer sponsored plans covering the vast majority of working age people and their families, both employment and employer sponsored coverage aren’t as prevalent as they once were.

A policy keystone of the Affordable Care Act is a commercial market should offer accessible, affordable coverage to those not covered by existing government plans or though employer sponsored plans. Plan issuers in the individual market must also have assurance their plans will remain actuarially viable so they can continue to offer them. Hence, the law’s disliked individual mandate requiring those not covered in other plans to get coverage in the individual market to promote a larger risk pool and the spread of risk necessary for any insurance product.

The House Republican proposal has quickly drawn criticism that rather than improve the consumer access and affordability, it will make individual coverage more affordable for some and less affordable for others. Creating winners and losers when it comes to affordability is perilous because without widespread affordability, there is a potentially smaller universe of individuals and families in the risk pool. Fewer belly buttons to use an insurance industry term means less spread of risk. Less spread of risk is never good when it comes to insurance, no matter what variety: homeowners, life, auto, commercial — you name it.

This is the essential challenge policymakers face. They have to ensure broad affordability of individual coverage to head off both adverse selection borne of out poor spread of risk as well as buy side market failure due to unaffordable offerings. People won’t buy a product they cannot afford. That’s simple economics. And without widespread affordability, the risk spreading mechanism of insurance will sooner or later break down and the market will collapse.

If policymakers determine they are unable to achieve long term viability in the individual medical insurance market, they’ll need to consider other means of providing access to medical care for the large and growing cohort of people not covered by employer sponsored plans. That includes reviewing how other nations provide medical care to their citizens and determining best practices that could be employed in the United States.


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 reconciliation measure aims at getting young invincibles into individual risk pool

To help stabilize the individual medical insurance market, a critical provision of the House budget reconciliation measure concentrates its carrots and sticks on the so-called young invincibles aged 30 and younger to encourage them to get into state risk pools. First the carrot. It would allow individual (and small group) medical plans issuers to charge most senior members up to five times more than the most junior versus the current limitation of three times. That would reduce premiums paid by younger members. The stick? A 30 percent surcharge on premiums if a member has not maintained continuous medical coverage when they apply. Sign up late, pay extra.

If enacted, it will take some time to determine whether these two mechanisms will ensure the actuarial viability of the individual segment, the most fraught of the two plan types. Health plan issuers have complained that the individual risk pool is imbalanced with too many people over age 50 as well as an excess of those in poor health and utilizing a lot of medical care. A continuous enrollment incentive would theoretically get younger and presumably healthier and lower utilizing people into the risk pool.


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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