Search Results for: 401 percenter

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401 percenters face another year of double digit premium hikes — with likely political consequences

ASHEVILLE, N.C. — Jane and Abe Goren retired here five years ago to escape the higher cost of living they had abided for decades in the suburbs of New York City. They did not anticipate having to write monthly checks for health insurance that would exceed their mortgage and property taxes combined. Ms. Goren, 62, is paying nearly $1,200 a month for coverage through the individual insurance market (her husband, 69, is on Medicare) and accumulating enough debt that her sons recently held a fund-raiser to help. For next year, her insurer, Blue Cross and Blue Shield of North Carolina, has proposed raising premiums by an average of 22.9 percent, a spike it is blaming squarely on President Trump.

Source: Middle Class, Not Poor, Could Suffer if Trump Ends Health Payments – The New York Times

The Gorens are part of what I’ve dubbed the 401 percenters — households with modified adjusted gross incomes in excess of the 400 percent of federal poverty cutoff for advance premium tax credit subsidies offered via state health benefit exchanges. For plan year 2018, the likely loss of reduced cost sharing reduction (CSR) subsidies for households with incomes between 100 and 250 percent of poverty levels is being blamed for another round of double digit premium increases. The cost sharing subsidies are tied up in litigation over which branch of the federal government has authority to allocate the CSR funding to health plan issuers.

There’s bound to be a political blowback in next year’s mid-term elections over steep premiums in the non-group segment, particularly among voters older than 50 but under age 65 and not yet eligible for Medicare, a demographic with strong voter turnout.

 


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. 

To “401 percenters” Affordable Care Act isn’t

WASHINGTON (AP) — Michael Schwarz is a self-employed business owner who buys his own health insurance. The subsidized coverage “Obamacare” offers protection from life’s unpredictable changes and freedom to pursue his vocation, he says.Brett Dorsch is also self-employed and buys his own health insurance. But he gets no financial break from the Affordable Care Act. “To me, it’s just been a big lie,” Dorsch says, forcing him to pay more for less coverage.Schwarz and Dorsch represent two Americas, pulling farther apart over former President Barack Obama’s health care law. Known as the ACA, the law rewrote the rules for people buying their own health insurance, creating winners and losers.Those with financial subsidies now fear being harmed by President Donald Trump and Republicans intent on repealing and replacing the ACA. But other consumers who also buy their own insurance and don’t qualify for financial help feel short-changed by Obama’s law. They’re hoping repeal will mean relief from rising premiums.

Source: News from The Associated Press

This is one of the major weaknesses of the Affordable Care Act’s reforms of the individual medical insurance market. Naturally, households earning in excess of 400 percent of federal poverty and who don’t qualify for subsidies are going to be unhappy since they bear the full brunt of premium increases as health plan issuers try to stabilize the market segment under the the law’s provisions by raising premiums. It’s no surprise these 401 percenters as I dubbed them aren’t in favor of keeping those rules in place since from their perspective, they’ve gotten a raw deal other than appreciating the rule requiring plans to accept them regardless of medical history.

The situation also points up the problem of a means-tested scenario of providing medical coverage to those not covered by employer-sponsored plans or Medicare. It’s far from seamless under the Affordable Care Act. The law created multiple categories of benefits and costs for this cohort keyed to household income: 1) Medicaid; 2) Qualified Health Plans offered on state health benefit exchanges with subsidies based on multiple income tranches; and 3) Unsubsidized plans, typically sold outside of the exchanges.

A more elegant, unified scenario is sorely needed, particularly given more households now rely on earnings outside of formal employment arrangements that come with medical benefits or are employed by small employers offering little or minimal coverage.

 


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. 

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 fpilot@pilothealthstrategies.com or call 530-295-1473. 

We are the 401%: Middle class households ineligible for exchange subsidies could reignite health reform

A little more than three years ago, steep premium increases in California’s individual market sparked outrage from Sacramento to Washington, providing a political tipping point for the enactment of the then-moribund Patient Protection and Affordable Care Act (PPACA). This fall and into 2014, those without government or employer-sponsored health coverage who earn more than 400 percent of the federal poverty level (FPL) ($45,960 for singles; $92,200 for a family of four) may find themselves outraged yet again by sharp double digit premium increases.  Under the PPACA, those earning in excess of 400 percent of FPL are ineligible for income tax subsidies available for qualified health plans purchased through state health benefit exchanges.  They will bear the full amount of higher premiums on their own.

Projections of the impact of the PPACA individual market reforms issued this week by the Society of Actuaries (on the medical cost impact of those newly insured under the law) and the actuarial consulting firm Milliman (on premiums in California) suggest premiums for plan year 2014 will rise significantly for these relatively higher income middle class households.  The Society of Actuaries estimates the PPACA individual market reforms will drive up claims costs by an average of 32 percent nationally by 2017 and by double digits in as many as 43 states.  The Milliman study commissioned by the California exchange, Covered California, estimates those currently insured with incomes exceeding 400 percent of FPL purchasing the lowest cost “bronze” rated plan covering 60 percent of expected costs can expect a 30.1 percent premium hike for 2014.   “Currently insured individuals with incomes greater than 400% of FPL will experience the largest increases,” the Milliman study notes.

Those in this income range likely to be hit with the biggest increases are middle class people in their 50s and 60s – the large Baby Boomer demographic not yet Medicare eligible and not covered by employer-sponsored plans.  A major potential implication of higher premiums on top of the already relatively high rates paid by this age group (new age rating rules under the PPACA will provide some relief) is many of them may find even bronze-rated coverage unaffordable and go uninsured, contrary to the policy goal of the PPACA to increase affordability and access to coverage.

If 2014 rate increases for 401+ percent FPL households boost the price of the cheapest plans too high, tax penalties built into the law for those without public or private coverage won’t provide incentive for these individuals to purchase coverage.  The PPACA’s individual mandate expressly exempts those who have to spend more than eight percent of their incomes to purchase the cheapest bronze plan offered in their geographic rating region. The law also provides for a financial hardship exemption.

Because of the sheer size of the Boomer demographic and Boomers’ willingness to seek political redress of their grievances, if the premium increases for the 401 percenters predicted indirectly by the Society of Actuaries and directly by Milliman materialize, it could create impetus for further reforms 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 fpilot@pilothealthstrategies.com or call 530-295-1473. 

Non-group segment clouded in uncertainty amid questions of market and actuarial sustainability

Four years after the start of open enrollment under the Patient Protection and Affordable Care Act’s reformation of the non-group medical insurance market, the market’s future is clouded in uncertainty. The biggest questions are whether it can sustain itself as a market and as a functional risk pool.

First the market. Alarm bells are being sounded that that the segment will undergo buy side market failure as households with incomes exceeding 400 percent of federal poverty levels that don’t qualify for premium subsidies on state health benefit exchanges will no longer be able to keep up with large premium rate increases. This is complicated by the fact that these households perceive low value in high deductible plans that have become commonplace. Their expectations of fair value are under assault by high premiums for high deductible plans. The expectation is high premiums should have an inverse relationship with out of pocket costs such as deductibles and co-insurance as they historically have. That’s no longer the case.

Many of these 401 percenters ineligible for premium assistance have income tax incentives to continue to purchase non-group plans. For all of them, there is the stick of the tax penalty for going without coverage. For the many that are self-employed, there is the carrot of being able to deduct premiums from taxable income on their Form 1040. Both of these incentives however can only go so far if premium costs are unaffordable. The perception of poor value due to high plan deductibles might be enough to push a vacillating 401 percent plus household to make the decision to go without coverage and pay the tax penalty instead. Particularly if that self-employed household has dependent children or is comprised of adults over age 50. Premiums hit these households particularly hard since household size and age are two key premium rating factors in the non-group market.

The out migration of the 401 percenters combined with the reluctance of under 30 “young invincibles” to purchase a plan and instead pay the tax penalty would shrink and distort the non-group risk pool, calling into question its actuarial sustainability. The primary members would be adults aged 30-50 and a declining number of those over age 50 who are high utilizers of medical care eligible for premium subsidies though the exchanges or willing and able to pay rising premiums in the off-exchange market. With these populations, there may not be enough people in the pool to achieve a sufficient spread of risk among high and low utilizers to keep the segment from falling into adverse selection, further accelerating premium rate hikes.

The aversion of the young invincibles to comprehensive standard non-group plans would be reinforced under a Trump administration that’s exploring relaxing the rules governing short term “gap” policies. That liberalization would create a large degree of parity between short term and standard non-group plans. Both would have annual terms and be renewable. That would shrink the individual risk pool by providing a lower cost replacement for non-group plans for young adults and those who use little medical care, even when tax penalties for lacking comprehensive coverage are taken into account.

In sum, these factors leave the non-group market segment vulnerable to a relatively rapid unwinding over the next three or so 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 fpilot@pilothealthstrategies.com or call 530-295-1473. 

Non-group market faces decidedly mixed outlook for plan year 2018 — and possible demise in 2019.

Several recent positive developments point toward plan issuers staying in the non-group or individual market next year.

  • The Trump administration finalized its Market Stabilization rulemaking intended to build confidence among plans by affording them more predictability and reducing the possibility of consumer gaming that plans say have increased their loss exposure.
  • On April 7, Standard & Poor’s opined that the individual market is showing signs of stabilizing in its fourth year based on its analysis of Blue Cross Blue Shield plans that found loss ratios declined from 106 and 102 percent for 2015 and 2014, respectively, to 92 percent for 2016.
  • This week in a closely watched move, Anthem tentatively committed to the individual market in 2018, but warned it could change its mind or raise premium rates by 20 percent or more depending on the outcome of pending litigation over cost sharing reduction subsidies that the Patient Protection and Affordable Care Act makes available to households earning between 100 and 250 of federal poverty levels for silver actuarial value plans sold on state health benefit exchanges.

Which brings us to the negatives. If the litigation, House v. Price, is not resolved by early June, Anthem could execute the aforementioned steep rate increases and possible state market withdrawals. The likelihood is high. The reason is neither the House of Representatives nor the Trump administration has sufficient motivation to resolve the case. The House prevailed when the U.S. District Court where the case was brought issued a ruling one year ago agreeing with the House that the Obama administration unconstitutionally infringed on the House’s appropriation powers by funding the cost sharing reductions administratively.

The district court held the ruling in abeyance pending appeal by the administration. That decision is likely to become final and go into effect following a status conference with the parties late next month. The Trump administration isn’t likely to appeal the decision and would be happy to see a final ruling “blow up” the Affordable Care Act’s individual insurance market reforms in President Trump’s words. The House for its part isn’t likely to dismiss the case because it sees the ruling in its favor as an important precedent to check executive branch authority from impinging on its powers of appropriation.

In addition, Congress and the Trump administration are unlikely to moot the case by enacting their own health care reform legislation in place of the Affordable Care Act’s insurance market reforms in the current congressional term due to heavy reliance on the limited scope budget reconciliation process, intra-party squabbling, lack of bi-partisan support and the inability or unwillingness of the Trump administration to articulate clear guiding policy principles.

The loss of the cost sharing subsidies would blow a hole estimated at $10 billion in exchange finances. That could well prompt Anthem and other plan issuers to head for the exits just as their plans must be finalized for 2018. That could effectively end the exchanges and the individual market as a whole next year. The more likely scenario is the plans as Anthem indicated it would price in the loss of the cost sharing subsidies in their final premium rates.

That would keep the individual market alive and on life support for 2018. But it would face a possible demise in 2019, with shrunken statewide risk pools and increased risk of the dreaded death spiral of adverse selection. The number of covered lives would decline both inside and outside of the exchanges. Outside the exchanges, the 401 percenters – households earning more than 400 percent of federal poverty levels and ineligible for premium tax credit subsidies for qualified health plans sold on the state exchanges – would likely bolt from the individual market after getting notice of another 20 plus percent premium increase for the second consecutive year. (California’s exchange, Covered California, estimates the loss of reduced cost sharing subsidies would boost premiums for silver level plans double that amount, 42 percent on average and as many as 340,000 Californians would drop out of the individual market in 2018.) They will file for exemptions from the individual mandate based on unaffordable premiums, seek alternatives such as health sharing ministries or simply go bare in the hope the Internal Revenue Service under the Trump administration won’t enforce the individual mandate penalties for not having coverage.

 


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. 

Trump Promises On Health Insurance Appealed To Family Struggling With Cost : Shots – Health News : NPR

Source: Trump Promises On Health Insurance Appealed To Family Struggling With Cost : Shots – Health News : NPR

Pocketbook issues can determine the outcome of elections. In this case, National Public Radio did a piece today profiling a young Pennsylvania family that perceives it is getting poor value in the individual health insurance market. They are among what I dubbed a few years back as the 401 percenters, households who earn more than 400 percent of federal poverty levels and thus ineligible for premium and cost sharing subsidies under the Patient Protection and Affordable Care Act.

Premiums for catastrophic coverage with high deductibles appear to this family more in line with those one might expect for a very generous plan with little or no out pocket costs. That’s the economic disconnect and sense of unfairness that Trump tapped into and was likely a major issue in his victory over Hillary Clinton. In 2013, I predicted the 401 percenters could seek political redress, feeling the Affordable Care Act has left them worse off than before. In 2016, at least a sizeable portion of that voter cohort did just that, donning red Trump hats and voting for what they hope will be a better deal under a Trump administration. It remains to be seen whether Trump and the new Congress can deliver one.

 


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. 

Sharp premium increases could boost tax penalty exemptions, undermining ACA goal to enhance individual health insurance market risk pool

Steep premium increases next year could potentially shrink state individual health insurance risk pools, particularly among individuals and families whose household incomes are too high to qualify them for premium and cost sharing subsidies on state health benefit exchanges. That in turn would undermine a goal of the Patient Protection and Affordable Care Act to boost the viability of the individual market by enhancing the spread of risk among a larger pool of people. Fewer people in the pool means less premium dollars to cover the cost of medical care for those who use it.

Big premium hikes for this cohort that I’ve dubbed the 401 percenters (the subsidies end at 401 percent of federal poverty levels) could result in more constituents seeking exemptions from the individual shared responsibility mandate to have some form of health insurance coverage in place throughout the year under pain of an income tax penalty for going bare.

One category worth watching for a possible bump as 2017 open enrollment begins is health sharing ministries. Like insurance plans, they are based on risk spreading but technically aren’t health plans and thus don’t have to meet Affordable Care Act provisions such as offering 10 essential health benefits and disallowing consideration of pre-existing health conditions. As faith-based nonprofit organizations, they can exercise a large degree of discretion as to who they wish to offer coverage – something Affordable Care Act compliant individual plans cannot. If health sharing ministries take off in 2017, advantage will go to those that have the best reputations and largest number of members since like insurance, the law of large numbers is paramount. More sharing members equates to greater risk sharing and greater likelihood of remaining solvent (having enough money to cover members’ medical care) to use insurance industry terminology.

 


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. 

Bill Clinton criticizes ACA gaps

At a campaign event for his wife in Flint, Mich., Bill Clinton had praised the law for insuring millions of Americans, but noted that many middle-class Americans were still unable to afford coverage and talked up his wife’s plan to allow those close to retirement age to buy into Medicare.

“The people who are getting killed on this deal are small business people and individuals who make just a little too much to get any of these subsidies because they’re not organized,” he said. “They don’t have any bargaining power with insurance companies so they’re getting whacked.

“So you’ve got this crazy system where all of a sudden 25 million more people have health care and then the people who are out there busting it, sometimes 60 hours a week, wind up with their premiums doubled and their coverage cut in half. It’s the craziest thing in the world.

Source: Bill Clinton’s Obamacare remarks put Hillary on the hot seat

The former president’s talking about shortcomings in the Patient Protection and Affordable Care Act relative to making health coverage more accessible and affordable for individuals and small employers. Regarding the former, I’ve referred to them as the “401 percenters” — those who exceed the household income cutoff of 400 percent of federal poverty for advance premium tax credits for individual qualified heath plans sold on state health benefit exchanges. There have been numerous accounts that even those with household incomes between 300 and 400 percent of federal poverty levels get too little in the way of subsidies to make coverage affordable or even worthwhile, federal income tax penalties for going bare notwithstanding.

As for Bill Clinton’s reference to small business, the Affordable Care Act envisioned small businesses organizing to gain some degree of bargaining power in the health benefit exchange’s Small Business Health Options Program known as SHOP. In theory, the SHOP was to enable small business to aggregate their market power, aided by the law’s creation of a single statewide risk pool for the small group market segment. In reality, it didn’t work out that way. SHOP turned out to be a flop, with little interest among small employers and insurance brokers in participating in the program.

 


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. 

3 predictions on California’s Proposition 45

In November, California voters will decide whether to subject individual and small group health insurance premium rates to prior regulatory approval. California requires property/casualty insurance rates to be approved by the state’s elected insurance commissioner under a ballot initiative approved in 1988, Proposition 103. If voters approve the initiative statute, titled the Insurance Rate Public Justification and Accountability Act (Proposition 45), California would join the majority of states that require prior regulatory approval of health insurance rates before they can be used. Although the November General Election seems a long way off in the middle of summer, it will arrive quickly enough. Accordingly, here are some predictions on what’s likely to happen with Proposition 45:

1) Proposition 45 will be approved by at least a 55 percent yes vote margin. Like rising auto insurance rates in the 1980s that provided impetus to Proposition 103, rapidly rising health insurance rates since the early 2000s have set the stage for voter approval. This time around, the voters are in a far crankier and distrustful mindset following the 2008 economic downturn than they were in 1988, which is likely to result in a larger margin of yes votes than for Proposition 103 that squeaked by with a tiny margin of approval. Demographics will also play a role. Members of the boomer generation who rebelled against rising auto insurance rates in the 1980s are now in their 50s and 60s and pay the highest rates for health coverage under Affordable Care Act provisions that permit health plan issuers to base premium rates on age. Many boomers are also what I’ve dubbed “401 percenters” who earn above the 400 percent federal poverty level eligibility cutoff for income tax credits to defray premiums for plans purchased through the state’s health benefit exchange, Covered California. They must bear the full brunt of higher premiums on their own.

2)  Proposition 45 will serve as a de facto 6.9 percent cap on premium increases. Increases of 7 percent or greater would entitle the public to petition the California Department of Insurance to hold a hearing proposed increases to determine if they would result in charges that are excessive, inadequate or unfairly discriminatory. There are a host of consumer groups waiting in the wings that would likely petition for a hearing, particularly since they stand to be compensated if the insurance commissioner determines they have made a substantial contribution to the proceeding including but not limited to Health Access California, the Western Center on Law and Poverty, Consumers Union, the Greenlining Institute and Proposition 45’s proponent, Consumer Watchdog. As long as the underlying health care utilization cost trend stays around 7 percent, health plan issuers will be able to pass along higher costs in premium rates and cost sharing. If the trend exceeds that amount, plan issuers will likely argue that they need higher rates in order to remain solvent and to continue to do business in the state.

3) Because of the uncertainly of intervenor challenges of premium rate increases at or exceeding 7 percent, health plan issuers that want to sell Covered California Qualified Health Plans (QHPs) will negotiate premium increases below that amount. They will do so with two negotiating partners, each with the power to make or break the deal: the exchange as well as the insurance commissioner. Since both Covered California and the elected regulator share an interest in holding down premiums and cost sharing, health plan issuers could find themselves double teamed in a tough negotiating dance. As with now, the dance will begin in early summer once plan issuers have a reasonable amount of data on the prior year’s claim experience and the expected cost trend for the upcoming plan year. The negotiations will culminate in late summer. If they are successful, health plan issuers will make formal 60-day advance filing of rates as required by current California law. If they are not, health plan issuers will have to decide whether they can go without the increase or forgo offering a given plan or plans through the exchange marketplace. That could result in some plan issuers opting to instead offer the proposed plans in the off-exchange market but with the downside of sacrificing access to individuals eligible for advance income tax premium tax credits.

 


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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