Tag Archive: ACA

Small group most voluntary market segment under ACA – and faces unique viability risks

Of the three major health insurance market segments – large group, small group and individual – small group is the most voluntary market under Patient Protection and Affordable Care Act rules that take effect January 1, 2014.

Large employers, defined by the ACA as employing 50 or more full time workers, are subject to the employer shared responsibility requirement to offer coverage to nearly of these employees. All individuals must have some form of health coverage under pain of a tax penalty for going bare. Small employers on the other hand have the greatest degree of freedom of choice as to whether to play in the small group market.

The ACA strengthens the functionality of the small group market with several provisions. It eliminates risk rating of small employers by health plan issuers. The ACA also enhances the risk pooling power of small employers by combining them into single statewide risk pools. Finally, the law affords small employers the purchasing power of large employers through the Small Employer Health Options Program (SHOP) of the state health benefit exchange marketplace. The SHOP also serves as a benefit administrator of sorts for small employers, helping them select plans and billing them for monthly premiums.

The extent to which these reforms work as intended to shore up the small group market will become clearer over the next few years. There are several factors that could result in the leakage of potential covered lives out of the small group market, potentially adversely affecting the viability of the small group pool and the SHOP, particularly if a significant number of small employers now offering health coverage to their employees adopt them. They include:

  • Opting to participate in “private” exchanges set up by health benefit plan administrators and insurance brokerages instead of the SHOP
  • Offering a defined contribution benefit or stipend to help workers buy their own coverage on the state exchange individual marketplace instead of directly offering coverage
  • Self-insuring for employee health care costs.
 


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. 

States tell Obama: Let the market sort it out

The Patient Protection and Affordable Care Act intervenes massively in the individual and small group health insurance markets. Effective January 1, 2014, it establishes standards on what health plans must offer, who can buy them, when and where they can purchase coverage, and who is eligible for subsidies to defray monthly premiums.

With any market overhaul on the scale of the ACA’s, there is bound to be disruption of the existing marketplace and push back from those adversely affected. Among the first are those who have individual plans that don’t comply with the new ACA coverage standards issued after March 23, 2010 and are thus not grandfathered under the ACA’s grandfathering provision. They are being hit with a double whammy. Not only are these policies being shut down by the end of the year. People who have them are being informed they will have to replace them with richer plans that meet ACA standards – and those more robust plans will cost them more. Their displeasure prompted the Obama administration to accommodate their concerns by giving states the option to keep those plans well into 2015.

So far, a lot of the states including most recently, California, have instead decided they will carry on and let the market sort it out given so little remaining time for regulators, state-operated health exchanges and health plan issuers to make the needed adjustments during the year-end holiday period that would only confuse consumers. State insurance commissioners cited a lack of consensus on the issue in declining a White House meeting this week.

Moreover, some consumers will still have some options to keep their existing coverage if their plan issuer takes advantage of an ACA loophole that allows issuers to “early renew” coverage by December 31, 2013, thereby extending their coverage for as late as December 31, 2014. Still, not everyone with these plans will be happy as they too will likely come with higher premiums thanks to the relentless underlying trend of rising health care costs.

 


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. 

Potentially problematic issues in ACA 2014 rollout for exchanges, employers

There are a couple of potentially problematic issues as major components of the Patient Protection and Affordable Care Act roll out now and into 2014 for state health benefit exchanges and large employers.

For the exchanges, it’s verification of household income of applicants for individual coverage. Eligibility for both advance tax credits used to subsidize the purchase of qualified health plans (QHPs) and for Medicaid benefits are means tested based on family size and household income. The rub here is like that standard investment caveat: past performance does not necessary predict future performance. The same principle applies to household incomes, particularly in a sketchy economy still trying to regain solid footing five years after the 2008 economic downturn. What households earned in 2013 does not necessarily mean that’s what they will earn in 2014, the time frame that determines their eligibility for Medicaid and QHP premium subsidies. Timothy Jost describes the problem in this post at the HealthAffairs Blog:

[V]erification in advance of how much lower-income American families will earn over a year is a fantasy. Lower-income Americans often work in part-time, intermittent, or seasonal jobs and are paid hourly wages, making predicting income exactly a year in advance simply not possible.

The agreement to end last month’s federal government shutdown requires state health benefit exchanges pre-verify the eligibility of individuals applying for premium tax credits and cost sharing reductions. By January 1, 2014, the federal Department of Health and Human Services must describe to Congress the procedures used by the exchanges verify eligibility for premium tax credits and cost-sharing reductions. This summer, HHS issued guidance informing exchanges to attempt to verify income using Internal Revenue Service and Social Security income data provided state exchanges via the federal data services hub.

The income verification issue could end up further complicating an already difficult first year rollout of the exchange marketplace. It may also be overblown in terms of concern that those seeking premium and cost sharing assistance and Medicaid will get more than they are entitled. There are well established income tax planning practices enrollees can keep in mind when they sign up for coverage through the exchange marketplace. Employees know if they claim too many withholding exemptions, they could get stuck owing taxes when they file. Most err on the side of caution and declare too few in order to get a refund of what amounts to an interest free loan to the government. Self employeds pay quarterly estimated taxes and know if they pay too little, they face a big tax bill the following year and possible penalty for underpayment of quarterly amounts due. Enrollees can be counseled to keep these comparative examples in mind to avoid a big tax bill as well as potential penalties if they fraudulently misrepresented their incomes in order to qualify for subsidies or Medicaid.

Employers face potential legal hazard in 2014 as they prepare for the large employer mandate that takes effect in 2015. Those that reduce employees’ average weekly hours to less than 30 in order to avoid having them counted as full time employees for the purposes of the Affordable Care Act’s requirement that employers of 50 or more full time employees provide them health coverage could find themselves in court. Employment law firms warn these employers could face legal exposure under Section 510 of the Employee Retirement Income Security Act of 1974 (ERISA), which bars employers from firing, disciplining or discriminating against employees for the purpose of interfering with their access to employee benefit plans. Adam C. Solander and Elizabeth B. Bradley of the law firm Epstein Becker Green explain at Law360:

In the context of the employer mandate, plaintiffs are likely to argue that an employer’s workforce management efforts interfered with an employee’s right to health coverage. The most likely ERISA 510 claim would seem to involve an employee who averaged 30 hours a week previously. If such an employee’s hours were capped below 30 hours a week, arguments could be made that such a change was made with the intent to deny that individual a right to which he or she would have been entitled. While this scenario seems to be the most likely Section 510 claim, arguments could be made that an employer’s workforce management practices could violate Section 510, regardless of the number of hours the employee worked previously.

Provider networks. For health plan issuers, maintaining networks that offer access to a sufficient number of medical providers to people in their communities could prove challenging, particularly as plan issuers narrow their networks in order to hold down premium rates. Exchanges will also be put to the test to ensure revamped provider listings for Qualified Health Plans are accurately listed on the exchanges.

 


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. 

Overpromising – not mendacity – likely behind the “you can keep your coverage” messaging breakdown

The Obama administration is now in damage control mode as the media piles onto the flap over President Obama’s statements that individuals can keep their current health plans if they choose once new individual health insurance market rules take effect this coming January. Obama is being cast as a prevaricator who lied when he said this.

Rather than attempting to deceive, Obama more likely promised to deliver something over which he may have truly desired but has no control. While Section 1251 of the Patient Protection and Affordable Care Act affords individuals the right to maintain their coverage as it existed prior to the March 23, 2010 enactment of the ACA, there’s no requirement health plan issuers must continue to offer these plans or retain their current provider networks.

Obama’s declaration also failed to take into account plans with limited shelf lives issued after March 23, 2010 that don’t meet the ACA’s requirements such as offering specified benefits or minimum actuarial value. Those plans are effectively outlawed by the ACA starting next year.

 


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. 

ACA individual, small group market reforms curb underwriting in hopes of restoring risk spreading function

Since the individual and small group market reforms of the Patient Protection and Affordable Care will become effective in less than two months, many Americans and especially those who buy their own health plans or who work for small enterprises are now becoming much more aware of them.

Many do not however understand what brought them about.

Insurance is based on two essential functions: risk spreading and underwriting. Insurers spread the risk of losses across a large number of people or enterprises. Underwriting is selecting those that will be offered coverage and on what terms.

The ACA reforms came about because in recent years health plans experienced increasing difficulty spreading the risk of claims for medical services. Without adequate spread of risk, insurance simply doesn’t work anymore than, for example, fire insurance if the insurance company insures 100 homes and several are on fire while many others are firetraps.

Since risk spreading was no longer working very well, plans relied more on selective underwriting to ensure they were covering individuals and small employers the least likely to incur high medical costs. But that presented a Catch 22. The more they tightened medical underwriting standards, the fewer individuals and small employers could qualify for or afford coverage. That generated fewer insureds to share medical costs for the plan though their premiums and membership fees. Plans were collapsing in on themselves in a process known as adverse selection.

The ACA hopes to restore these market segments by significantly paring back the role of underwriting in determining who gets coverage and under what price and conditions. Beginning January 1, 2014 health plans must accept all individuals who apply for coverage and cannot base premiums on the health status of a small enterprise’s employees. Underwriting factors are limited to age, residence, and family status and in states that permit it, tobacco use.

The idea is by limiting the use of underwriting, the risk spreading function can be restored to health by getting more individuals and small employers into the risk pool. To enhance the spread of risk, the ACA also puts all individuals and small employers into two separate, single statewide risk pools.

Whether these reforms will achieve adequate spread of risk and restore these market segments to healthy functioning won’t be known for at least several years since they represent a radical rejiggering of how these markets have operated for decades.

 


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. 

Obama administration’s messaging on ACA’s individual health market reforms lacking

The Obama administration is suffering a political pillorying this week on the imminent rollout of new market rules governing the individual health insurance market and the government-created health benefit exchange marketplace that began selling the plans October 1.

In large part, the criticism stems from weak messaging to communicate the reforms and why they are needed. There should be more emphasis on conveying these reforms affect the individual market where about five percent of Americans purchase their health coverage, clearly distinguishing these health plans from those purchased by employers that cover the large majority of Americans. As individual health plan issuers revamp and discontinue old plans to comply with the new market standards, the administration now finds itself having to defend its claims that most Americans could keep their current coverage when the individual market reforms take effect January 1, 2014. Viewed in the context of employer group coverage, that is generally accurate. But not necessarily so when it comes to individual coverage, an entirely different insurance product.

Perhaps more importantly, the administration and members of Congress who supported the 2010 enactment of the Patient Protection and Affordable Care Act need to more clearly explain why the law’s substantial government intervention in the individual market was needed in the first place. Administration officials have described the market as out of control from a regulatory standpoint, terming it like the “wild west.” But more fundamentally, the ACA aims to rescue this market because it was falling into oblivion. Individual plan issuers and those who buy this coverage were finding it increasingly difficult to get together in the marketplace on terms and pricing.

That market failure occurred because the market fell into a downward spiral where health plans became overly risk averse and excluded too many potential customers, restricting the flow of membership fees and premiums to pay claims. Plan issuers also violated a fundamental principle of insurance by splitting their customer base into small pools and were consequently unable to share the cost of claims across a larger group of customers. Finally, premiums for some individuals and families began to equal the cost of a mortgage payment and grew unaffordable. No market can function if potential customers cannot afford to buy the product or service being offered.

Whether the ACA can restore the individual market to healthy functioning remains to be seen, particularly given continued upward pressure on premiums from rising medical costs. The law’s market interventions could prove ineffective if too few young adults opt to buy coverage. Also if too many older people not yet eligible for Medicare who earn too much to qualify for tax credit subsidies for plans sold in the state health benefit exchange marketplace find premiums unaffordable and don’t buy coverage or request affordability exemptions from the individual mandate.

 


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. 

Streamlined enrollment in state health subsidy programs hobbled by federal exchange web portal problems

One of the goals of the Patient Protection and Affordable Care Act (ACA) is to integrate eligibility and enrollment for applicants for both commercial health plans sold in the state health benefit exchange marketplace as well as state subsidy programs for poor and low income households including Medicaid and the Children’s Health Insurance Program (CHIP). The idea is to reduce the ranks of the medically uninsured by making it easier for people to get covered with a single, streamlined application process referred to as “no wrong door.” Applicants are more likely to sign up for coverage if they don’t have to contact multiple entities to get it.

The requirement is set forth in Section 1413 of the ACA. Section 1413(c)(1) requires each state to “develop for all applicable State health subsidy programs a secure, electronic interface allowing an exchange of data (including information contained in the application forms described in subsection (b)) that allows a determination of eligibility for all such programs based on a single application.”

In the three dozen states where the federal government is operating the state exchange marketplace, online eligibility and enrollment is being handled by the federal web portal. Problem is according to today’s Washington Post, the portal isn’t yet able to integrate with the state subsidy programs:

But in a phone call Tuesday with the nation’s state Medicaid directors, Marilyn Tavenner, director of the Centers for Medicare and Medicaid Services (CMS), the agency overseeing the exchange, said that this part was still not working and did not predict when it would be ready, said Matt Salo, executive director of the National Association of Medicaid Directors. In the meantime, the Web site simply tells low-income Americans whether they appear to be eligible and then advises them to contact their state’s Medicaid agencies, where they must start applications from scratch.

The Post story details the implications of this glitch:

The Web site’s Medicaid problems matter because, under the health-care law, about half of the 32 million Americans who stand to gain insurance are expected to be covered through the state-federal health program for the poor and the disabled. The Web site is designed to tell people, depending on their income, whether they are likely to qualify for Medicaid or new federal tax credits to help them pay for private insurance. The site steers consumers in one direction or another after they enter information, including their family size and income. That part works.

Here’s the snag: If the Web site determines that a consumer probably qualifies for Medicaid, it cannot communicate with a state Medicaid program for quick enrollment. Instead, the site gives the person a message to contact the state’s Medicaid program. Then the person has to “start all over again,” said Salo of the Medicaid directors association. He added that the malfunction is “a frustration…It can turn [consumers] off and make them angry about how government works.”

Likely complicating enrollment for those eligible for state subsidy programs is a crazy quilt patchwork of Medicaid eligibility standards, dependent upon whether the state has opted to expand Medicaid eligibility as authorized by the ACA as well as varying income eligibility levels in states that have opted out of the Medicaid expansion as detailed in Table 1 of this recent Kaiser Family Foundation report (.pdf)

 


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. 

More than a quarter of nation’s medically uninsured to remain so under ACA

The Patient Protection and Affordable Care Act is described as the most comprehensive overhaul of the U.S. health care system in the nearly 50 years since the enactment of Medicare and Medicaid to serve the elderly and poor, respectively. However as far reaching as it is, it fails to achieve its public policy goal of ensuring all Americans have access to an affordable health plan, concludes a Kaiser Family Foundation report.

The ACA and the Supreme Court’s June 2012 ruling in NFIB v. Sebelius invalidating the law’s mandate on states to expand Medicaid eligibility requirements means 5.2 million Americans residing in states that have not voluntarily opted to expand Medicaid eligibility – an estimated 27 percent of the medically uninsured – will remain without any form of public or private coverage.

The primary reason is in 22 of those 26 states, families earning less than 100 percent of the Federal Poverty Level (FPL) are under the ACA ineligible to purchase subsidized private coverage in the state health benefit exchange marketplace. But in most of those states, many families are also not eligible for Medicaid because their household income exceeds state Medicaid eligibility levels. (See Table 1 of the KFF issue brief, showing nearly all of those states cutting off Medicaid eligibility at 75 percent of FPL and most around half of FPL for a family of three). Also remaining uncovered in nearly all of those states (except Wisconsin) are low income childless adults earning less than 100 percent of FPL.

 


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. 

ACA mandates, exchange marketplace could be temporary, 3-year phenom under state waiver provision

Partisan disagreement over the Affordable Care Act’s individual and employer mandates and state health benefit exchange marketplace has jammed the gears of the federal government machinery, leading to a partial government shutdown that began this week. All the strum und drang over these ACA provisions, however, could end up being over a temporary circumstance lasting only three years in at least some states.

Beginning in 2017, ACA Section 1332 titled Waiver for State Innovation allows states to petition the U.S. Department of Health and Human Services for — as the title suggests — a waiver allowing them to opt out of these requirements. The waiver also extends to premium tax credit subsidies and cost sharing reductions for plans sold on the exchange marketplace.

That means states that don’t like the ACA’s approach to restoring their individual and small group markets to functioning can devise their own programs after three years of complying with federal mandates.

The Section 1332 waiver comes with some provisos. States opting out of the ACA rules would have to demonstrate their programs would ensure individual and small group plans would offer coverage at least on a par with plans providing the 10 essential benefits prescribed by the ACA. State programs would also have to ensure residents and small employers 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 ACA plans.

Section 1332 also provides federal funding to aid states opting out of the ACA rules to set up their own programs. States receiving a Section 1332 waiver would be eligible for “pass through” funding operating like an annual block grant. The funding would cumulatively represent what state residents would otherwise be eligible to receive under ACA rules for premium tax credits, cost-sharing reductions and small business credits if they are ineligible for them under the state programs.

 


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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