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Collapsing the silos: Structural challenges pose greatest obstacle to proposed California single payer system

Update: The Sacramento Bee reports today SB 562, the single payer measure discussed this post, has been designated a two-year bill to allow lawmakers more time to work out the details into 2018.


California is considering legislation that if enacted, would make the largest state the first in the nation to implement a single payer system for all medical care rendered to Golden State residents. It faces enormous obstacles.

The first is the deeply entrenched (since at least the 1940s) scheme of paying for medical care for most working age families though employee benefit programs. Both employers and employees complain about the rising cost of these programs. But they are heavily tax advantaged for employers, particularly larger ones who offer them to attract and retain employees despite the cost.

The second and related major challenge is America’s fractured medical care finance system with its numerous silos, each with separate eligibility, payment and reimbursement rules. The proposed Healthy California program is inherently radical in that it would have to somehow collapse all of those silos into a single one.

Easier said than done. When it comes to the federal Medicare program that covers those age 65 and older, that could require a change in federal statute to accommodate what would effectively be a state opt-out while retaining the federal program funding. It’s not clear the federal government would be inclined to allow states to do so since this is a federal – and not state – entitlement program. Medicaid is a different story. It’s a joint federal-state entitlement program. As such, the feds have historically accorded states substantial leeway on how they administer their Medicaid programs and set eligibility standards. Then there are program silos for veterans, active and retired military families and interstate employer and union plans.

Reshaping this fragmented landscape into a unitary scheme would require an enormous amount of shared political will both within California and the federal government in order to make single payer a reality. It’s far from clear that it exists. California policymakers may have to reduce the scope of the single payer legislation to cover those under age 65 who are:

  • Not offered employer group benefit plan (possibly with employer or employee option to select instead of employer plan)
  • Medicaid only eligible
  • Self employed.
 


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 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. 

Iowa files urgent ACA 1332 waiver request to preserve 2018 non-group market

Facing the prospect of no health plan issuers offering coverage in the individual, non-group medical insurance market in 2018, Iowa is urgently asking the federal government for a state innovation waiver under Section 1332 of the Patient Protection and Affordable Care Act. The proposed stopgap measure by the state’s Insurance Division requests federal premium and cost sharing subsidies be used to fund the Proposed Stopgap Measure (“PSM”) Plan. The plan would offer a single standardized benefit plan with an actuarial value of 68 to 72 percent with premium subsidies determined by age and household income. It also proposes the federal Affordable Care Act funding support a reinsurance program for individuals incurring medical expenses greater than $100,000.

 


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. 

Iowa may be first state with no health insurers on exchange – SFGate

DES MOINES, Iowa (AP) — Iowa could be the first state in the nation with no health insurance company willing to offer policies on its Affordable Care Act exchange next year unless President Donald Trump’s administration approves a stopgap proposal, Iowa Insurance Commissioner Doug Ommen said Monday.Ommen said he and officials from two major Iowa insurance carriers met last week with Centers for Medicare & Medicaid Services officials in Washington to pitch a proposal that would save the Iowa market from collapsing.Several counties in Missouri, Ohio and Washington state have no insurer for next year, but Iowa would be the first state to lose all insurers on an ACA exchange.

Source: Iowa may be first state with no health insurers on exchange – SFGate

The dreaded adverse selection death spiral appears to have gained a grip on Iowa’s non-group medical insurance market. The item reports Iowa Insurance Commissioner Doug Ommen is asking the federal government to redirect advance premium tax credit subsidies to improve the spread of risk in the state’s pool by attracting more younger individuals and using some of the those dollars to cover higher cost people.

 


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. 

Nevada joins with federal proposals to roll in non-group market

There are efforts at the federal level and now the state level to integrate the problem step child of non-group medical insurance into other forms of insurance to offering greater access at lower cost. The federal proposals would allow individuals not covered in the employer group or other government insurance programs to purchase employer group coverage via the District of Columbia health benefit exchange’s Small Business Health Options (SHOP) and the Federal Employees Health Benefits Program. Pending legislation recently sent to the desk of Nevada Gov. Brian Sandoval takes a different tack. It would authorize the state to seek federal waivers in order to allow Nevadans to purchase Medicaid managed care plan coverage though its health benefit exchange as Vox reported this week. Implicit in both of these moves is a lack of confidence that adequate spread of risk can be achieved in the non-group insurance segment, particularly in smaller states like Nevada.

Noticing the close household income eligibility nexus between its subsidized health benefit exchange and Medicaid populations, Nevada provides Medicaid managed care plans incentive to offer qualified health plans (QHPs) on its exchange to ensure adequate availability of QHPs as Vox’s Sarah Kliff reported in May. With Medicaid enrollments strongly outpacing commercial QHP enrollments in state health benefit exchanges, a number of factors began aligning in 2015 to set the stage for policymakers to allow Medicaid managed care plans to be offered on the exchanges alongside individual Qualified Health Plans (QHPs).

A major question is whether those who enroll in Nevada’s proposed “Medicaid for all” Nevada Care Plan will be able to find medical providers who will accept their plan given the historical shortfall between state Medicaid reimbursement levels and those of Medicare and commercial 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 fpilot@pilothealthstrategies.com or call 530-295-1473. 

Anthem’s exit from Ohio non-group is a shot across the bow of official Washington

The Anthem exit in Ohio is especially worrying, however, given the massive swath of the country in which it is the sole insurer in the exchanges, according to Cynthia Cox, associate director at nonpartisan health policy think tank The Kaiser Family Foundation.”Anthem’s exit from Ohio could be the tip of the iceberg,” Cox told Business Insider on Tuesday. “Their reasons for leaving don’t appear to be specific to Ohio, rather about political and regulatory uncertainty coming from the White House and Congress. If Anthem leaves the market nationally, there could be hundreds of thousands of people without any exchange insurer.” In a statement to Business Insider, Anthem cited a number of uncertainties that could impact the market coming from the Trump administration and Congress. “The individual market remains volatile and the lack of certainty of funding for cost sharing reduction subsidies, the restoration of taxes on fully insured coverage and, an increasing lack of overall predictability simply does not provide a sustainable path forward to provide affordable plan choices for consumers,” said the statement.

Source: Anthem Obamacare exchange exit from Ohio – Business Insider

Cox raises an excellent point that suggests Anthem’s withdrawal from the Ohio non-group market is less about Ohio than national policy. Anthem is likely firing a shot across the bow of Washington, warning it to quickly provide a degree of certainty going forward — or all bets are off nationwide.

That’s bound to get attention given Anthem’s major presence in the non-group medical insurance market. In late April, Anthem tentatively indicated it would sell coverage in state health benefit exchanges for plan year 2018, but reserved the right to reverse course lacking clear federal policy direction, particularly with regard to reduced cost sharing subsidies offered to low income households and the Affordable Care Act’s tax on health plan issuers.

As some observers have noted, Anthem could simply raise premium rates by 20 percent on its silver level plans to make up for the potential loss of cost sharing reduction subsidies for income qualifying households as Anthem indicated in April. However, that would potentially accelerate adverse selection among households that don’t qualify for significant advance premium tax credits to offset higher premiums, particularly coming after steep increases for 2017 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 fpilot@pilothealthstrategies.com or call 530-295-1473. 

Growth in self employment points to need for non-group medical coverage

Another reason insurers will likely return or work to remain in the individual market is that it’s part of the future of health care, says Counihan. With so many people now working for themselves in the “gig economy,” he says, selling insurance “is going to be more business-to-consumer than business-to-business.””This market could grow,” agrees Giesa. “And I don’t think [insurance companies] want to be left out completely from this market if there’s an opportunity to break even, or make a little money. “In the end, says Counihan, regardless of what he considers the Trump administration’s “disorganized neglect, I think this market is here to stay.”

Source: What Happens If The Individual Health Insurance Market Crashes? : Shots – Health News : NPR

Kevin Counihan served as head of the Department of Health Service’s insurance exchange program in the Obama administration. Kurt Giesa is an actuarial expert at the consulting firm Oliver Wyman.

While most working age Americans are covered by employer medical benefit plans that have dominated since the 1940s, there are indications this is changing and pointing to the need for a viable method of financing medical care outside of employer group coverage. The executive summary of a recent McKinsey Global Research survey reports 20 to 30 percent of the working-age population in the United States and the EU-15 countries are engaged in some form of non-employment vocation.

 


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. 

Measures would allow individuals to purchase small group plans sold by DC health benefit exchange and federal employee plan to fill gaps in state individual markets

Two measures were recently introduced in Congress to address gaps in the non-group medical insurance market by allowing individuals and their family members to buy into small group plans sold through the District of Columbia’s health benefit exchange’s Small Business Health Options Program (SHOP) if their state health benefit exchange offers no plans where they live.

The Health Care Options for All Act (S.1201, McCaskill) would require the Office of Personnel Management (OPM) to establish a mechanism for their enrollment. A companion measure to S.1201, H.R. 2770 (Loebsack) was introduced in the House June 2; text for the bill is not yet available. The DC SHOP currently offers coverage to members of Congress and their staffs as required by the Patient Protection and Affordable Care Act. The District of Columbia health benefit exchange, DC Health Link, is reportedly opposed fearing the proposal if enacted would turn the DC exchange into a de facto national high risk pool.

Section 1334 of the ACA authorizes OPM to contract with health insurance issuers or a group of affiliated plan issuers to offer plans in all states as of this 2017. While the intent is to ensure exchanges can offer plans in all areas, the “multistate plans” authorized by Section 1334 are available in less than half of the states.

The bills could raise objections from health plan issuers since they broadly organize their product lines as employer group or non-group (individual) coverage and risk rate, price and establish provider networks separately for each. In addition, the Affordable Care Act segregates small group and individual coverage into separate statewide risk pools. However, states may merge their individual and small group markets under Section 1312(c)(3) of the law “if the State determines appropriate.” ACA Section 1311(b)(2) also affords states the option to merge their individual and SHOP exchanges.

Another measure introduced in early May, (H.R. 2400, Issa) also disregards the distinction between the group and non-group market segments by allowing individuals who are not federal employees to enroll in the Federal Employees Health Benefits 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. 

Generous health insurance plans encourage overtreatment, but may not improve health — ScienceDaily

Offering comprehensive health insurance plans with low deductibles and co-pay in exchange for higher annual premiums seems like a good value for the risk averse, and a profitable product for insurance companies. But according to a forthcoming study in a leading scholarly marketing journal, the INFORMS journal Marketing Science, such plans can encourage individuals with chronic conditions to turn to needlessly expensive treatments that have little impact on their health outcomes. This in turn raises costs for the insurer and future prices for the insured.

Srinivasan (study co-author) noted that health insurance has unique challenges compared to autos and home insurance when offering a menu of insurance plans. Said Srinivasan,”People won’t go out of their way to get into accidents or burn their homes, simply because they have more comprehensive insurance, but they do tend to get more expensive treatments with more comprehensive coverage.”

Source: Generous health insurance plans encourage overtreatment, but may not improve health — ScienceDaily

This goes to the heart of the problem of treating medical care as an insurable risk. Consumers don’t necessarily see it that way, particularly when it comes to non-catastrophic care. Rather, the study suggests, they can view their medical plans like a menu of pre-paid care. The more generous the plan, the greater number of items and more higher priced treatments are on the menu for ordering. And worse, it reinforces the mindset that health can be bought through higher cost medical care.

As the study authors note, the findings point to a strong need for better health literacy among consumers so they choose medical care wisely based on value and most likely outcomes. I would add in lifestyle changes to alleviate chronic conditions most amenable to health promoting behaviors that might have prevented many chronic conditions from developing in the first place.

 


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. 

Study: Single-payer plan would save California $37 billion per year

The new study estimates it would cost California $331 billion to provide health care to everyone living in the state — less than the $368.5 billion spent today in a system that leaves millions without coverage. To pay for it, they say, the state needs to find $106 billion in annual tax revenue — far less than the Senate committee’s estimate of $200 billion. The figures are probably on the optimistic side, said Laurence Baker, a professor of health research and policy at Stanford, because they hinge upon California’s ability to negotiate lower costs with the powerful pharmaceutical industry and other key players, such as hospitals and doctors. “It may be that they could do that,” Baker said, “but getting from where we are now to there would be a tricky, difficult proposition.”

Source: Study: Single-payer plan would save California $37 billion per year

California’s proposed single payer legislation would create a state monopsony that could flex considerable market power with providers of medical services as Baker suggests. But in order to obtain the potential savings it could bargain, the Golden State would have to blow up the current payment pie (illustrated in this post) that carves out slices for different populations and bake a whole new one covering everyone. That’s nothing short of reshaping the entire payer side of the state’s medical care system — a heavy lift considering most people are happy with their slice of the pie with the possible exception of those in the non-group market ineligible for meaningful premium subsidies under the Affordable Care Act.

Then as others have pointed out, there’s the obstacle of getting the Trump administration to approve federal waivers allowing California to redirect those subsidies and Medicare and Medicaid funding to the proposed Healthy California program. The administration is quite favorable to states devising their own schemes for covering those not eligible for group plans and Medicare. But it’s not clear if would go so far as to approve combining all federal medical dollars into a single pot in one state.

 


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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