Tag Archive: ACA

ACA’s individual, employer mandates aimed at frayed edges of U.S. private health coverage

Daniel Weintraub penned an opinion piece appearing in today’s Sacramento Bee that laments the likely continuation of employer-sponsored health coverage under the Affordable Care Act – notwithstanding the Obama administration’s decision this month to delay enforcement of penalties against employers of 50 or more who don’t offer their employees health coverage meeting minimum standards of quality and affordability.  Weintraub argues – and many across the political spectrum would agree with him – that employers shouldn’t be in the business of providing health coverage to their employees (and might not be, but for a 1940s quirk of history) and that it should be left to individuals and families to buy what’s best for their needs. In this vein, Weintraub favors a 2011 proposal to amend the ACA to allow employees of companies with 100 or fewer workers to take their employer’s health care contribution and buy coverage in the state health benefit exchange marketplace.

That sounds a lot like an existing provision at Section 10108 of the ACA that allows employers to provide “free choice vouchers” to their employees to buy coverage on the exchange marketplace.  Employers however would still have to offer their employees minimum essential coverage and could only offer the vouchers to employees whose share would be between 8 and 9.8 percent of their household income. Plus the employee’s household income could not exceed 400 percent of the federal poverty limit.

The debate over both the employer and individual mandate is heating up again, a little more than a year after the U.S. Supreme Court upheld the constitutionality of the latter in NFIB v. Sebelius.  Both mandates are aimed at the frayed edges of the pre-ACA health insurance market and don’t affect the majority of Americans covered through their employers or government programs such as Medicare and Medicaid. In the large group market, the employer mandate is directed at a small minority of large employers that pay low wages and provide little in the way of health benefits. At the other end of the market, the individual mandate hopes to help restore that market segment to actuarial and functional health. Both are governmental market interventions intended to trim these rough, problematic margins of the current system of private health coverage.  Whether they are ultimately successful won’t be known for several 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. 

Credit unions partner with COOP plan in two Midwestern states

In two Midwestern states with a tradition of consumer cooperatives, credit unions will help enroll members in an Iowa-based consumer operated and oriented (CO-OP) health plan, CoOportunity Health, that will offer plans on the states’ health benefit exchange marketplaces. According to the CreditUnionTimes, CoOportunity Health will offer coverage in Iowa, which will operate a state partnership exchange with the federal government, and Nebraska, which has opted for a federally operated exchange. Group Benefits Ltd. will serve as the preferred broker, according to the story.

This is a noteworthy development because it shows interstate cooperation and the innovative use of an established and trusted distribution channel to drive enrollment in the exchange marketplace. It could also serve as a template for health plans to market across state lines via “health care choice compacts” starting in January, 2016 as authorized by Section 1333(a) of the Affordable Care Act. (The ACA specifies implementing regulations be issued by July 1, 2013, but the rules have not yet been promulgated). It could also pave the way for state exchanges to combine into “regional or other interstate exchanges” subject to approval by the participating states and the federal Department of Health and Human Services under ACA Section 1311(f).

 


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. 

Federal data hub IT readiness likely factor in delay of large employer health coverage offer mandate

Employer push back on the complexity of requirements for reporting information on employer sponsored health plans was cited by the Obama administration for this week’s announcement by the U.S. Treasury Department of a one year enforcement delay for the Affordable Care Act’s “shared responsibility” provision requiring employers of 50 or more workers to offer minimum, affordable health coverage to full time employees.

But there’s likely another and just as important factor. It’s the federal government’s IT integration project to create a “data services hub” that pulls together information from multiple federal agencies to help determine the eligibility of an applicant for health coverage in the state health benefit exchange marketplace.

The federal hub interfaces with state insurance assistance programs for the poor including Medicaid and the Childrens Health Insurance Program.  It also should include a dataset of employer-sponsored health coverage to help exchanges determine if an employed applicant for individual coverage is already offered qualifying employer-sponsored coverage and thus ineligible to purchase an exchange plan that comes with advance tax credit subsidies.

IT experts agree integrating all of these data sets as well as often outdated state program software platforms in order for state exchange eligibility workers to make a quick, “one touch” eligibility determinations is an IT integration challenge of enormous proportions that would normally take years to implement. However, in order for the system to be ready to go live when exchange enrollment opens October 1, all of these data sets would have to be integrated and operational in July for testing and debugging.  It’s now July and most likely that deadline isn’t going to be met.

The federal government’s announcement noted proposed rules are forthcoming this summer governing employer sponsored health plan reporting requirements. It hinted the regulations will allow for self certification (the key word is “voluntarily”) by employers of their sponsored employee health coverage for 2014, while at the same time giving IT integrators another year to prepare the federal data hub to include this data set in time for 2015:

Once these rules have been issued, the Administration will work with employers, insurers, and other reporting entities to strongly encourage them to voluntarily implement this information reporting in 2014, in preparation for the full application of the provisions in 2015.  Real-world testing of reporting systems in 2014 will contribute to a smoother transition to full implementation in 2015.

Update:  On 7/5/13, the federal Department of Health and Human Services published in the Federal Register an extensive final rulemaking that allows exchanges that do not have information on employer-sponsored coverage obtained from electronic data sources or the SHOP exchange to accept an individual applicant’s self attestation that their employer does not offer them minimum affordable coverage (subject to possible future reconciliation of advance tax credits) and authorizes exchanges to investigate inconsistencies for individual plans covering 2014.

The final rule also gives exchanges the option of relying on HHS to verify an employed applicant’s eligibility for advance tax credit and cost sharing subsidies in 2015 and later.  The relevant provisions are effective September 15, 2013 and codified at 45 CFR 155.320(d), Verification related to enrollment in an eligible employer-sponsored plan and eligibility for qualifying coverage in an eligible employer-sponsored plan.

 


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. 

Congressmen call on feds to look into exchange participation mandates in Vermont, DC

This item today from the California HealthCare Foundation’s California Healthline reports on the effort by some members of Congress to call out two small jurisdictions – Vermont and the District of Columbia – for mandating participation in their health benefit exchange marketplaces.  In so doing, the lawmakers have spotlighted a point of tension between the letter of the Affordable Care Act and its policy intent in requiring states to set up exchanges.  In asking the federal government to crack down on the two jurisdictions, they correctly note that the ACA does not compel participation in the exchange marketplaces for neither health plans nor individuals and small businesses.

On the other hand, the exchanges are intended to aggregate the market – particularly on the buyer side – in order to restore functionality to the distressed individual and small group health insurance market segments.  In small jurisdictions like Vermont and the District of Columbia, attracting the market into their exchanges is harder because there are fewer residents to draw from.  And with fewer residents, statistically speaking there are smaller numbers of individuals and small employers to potentially participate in the exchange marketplaces.  Which makes them less attractive to health plans since with fewer insureds, they can less easily spread the risk of high cost “covered lives.”  That in turn increases the risk of adverse selection, which can leave the individual and small group markets at least as dysfunctional and unaffordable as they were before the exchanges opened for business.

To some degree or another, smaller state exchanges are likely to face the challenge of attracting and retaining sufficient numbers of individuals and small employers – particularly the latter.  The problem is particularly acute in the least populous states, a point made in this previous blog post where I discuss ACA provisions that allow smaller states to create bigger risk pools to help ward off the specter of adverse selection.

 


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 provides options for smaller states to create larger risk pools

Individual and small group health insurance markets will be the ultimate deciders of whether the Affordable Care Act’s market reforms and exchange marketplaces make coverage more affordable and valuable. Their experience over 2014 and 2015 will serve as a litmus test.

A major determinant of premium affordability will be a state’s ability to create large and diverse pools of individuals and small employers that enable payers to spread risk. Beginning in January, 2014, the ACA establishes two pools: one comprised of individuals and families and another made up of small employers. The size of those pools is naturally a function of a given state’s population and the heft of those pools has an impact on premiums. Large states like California have a natural advantage in creating sizable risk pools better able to spread out the cost of medical care. Accordingly, California has opted to leverage the market power of its population to actively negotiate with health plans over terms of coverage and rates for plans sold on its health exchange marketplace, Covered California. Smaller, less populated states, however, don’t have the law of large numbers on their side.

The Affordable Care Act appears to recognize this circumstance and has built in mechanisms that would enable smaller states to create larger, more robust risk pools:

  • Section 1312(c)(3) allows states to combine their individual and small employer markets into a single risk pool;
  • Section 1331(b)(3)(B) authorizes states to negotiate regional compacts with other states to cover low income individuals not eligible for Medicaid in “standardized health plans.”  (The federal Department of Health and Human Services (HHS) has held off issuing regulations for these plans until at least 2015);
  • Section 1333(a) provides a mechanism for health insurers and plans to pool risk and sell across state lines via “health care choice compacts” starting in January, 2016. Two or more states could enter into an agreement under which health plans could be offered in state individual markets, subject to regulation by the state in which the plan was written or issued, provided plans comply with the other states’ rules regarding market conduct, unfair trade practices, network adequacy, and consumer protection standards including standards relating to rating and handling of disputed claims.  (The statute requires HHS issue regulations governing health care choice compacts by July 1, 2013);
  • In addition to authorizing interstate plans, the ACA also appears to contemplate such plans being marketed in multiple state exchange marketplaces. Section 1311(f) allows state exchanges to combine into “regional or other interstate exchanges,” subject to approval by the participating states and HHS.

Given the large number of states where HHS will fully or partially operate exchanges, it’s possible the federal government will press the affected states to exercise some of these options to create larger purchasing pools in order to gain greater bargaining power with payers.

 


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. 

Health plans concerned ACA’s age rating rule could spawn adverse selection

Health plans worry the limitation on using age as a basis for setting premiums in the individual health insurance market come January 2014 could jeopardize its financial viability and lead to adverse risk selection the Patient Protection and Affordable Care Act is intended to alleviate.

The ACA requires individual health insurers to deemphasize age as a rating factor by reducing the current five or six age rating bands currently used to a maximum of three, meaning the oldest plan members would pay premium rates not exceeding triple those of the youngest.  The goal under the ACA’s modified community-based rating scheme is to flatten out premiums to make them more affordable to middle aged people who over the past several years have seen them rise to a level rivaling the amount of a modest mortgage payment.

According to this Washington Post article, while older people would enjoy lower rates, younger people would consequently experience rate increases.  Particularly those under age 30 that modified community-based rating envisions balancing out state risk pools by bringing in a typically healthier population with lower medical utilization.

The Post article contains contrasting analyses on the how this so-called “young invincible” demographic will respond to higher premiums.  Consulting firm Oliver Wyman – which the article notes has been retained by the health plans’ dominant trade association – predicts the age rating limitation will result in 80 percent of those in their 20s paying more for tax subsidized coverage purchased through state health benefit exchanges than they now pay for even basic, low cost coverage.  But economist Jonathan Gruber – who consulted in the drafting of the ACA – expects plans sold on the exchanges notwithstanding higher premium rates will appeal to this cohort when income tax credits to offset premiums are taken into account. More so than going bare and paying a penalty — and even more than low cost, high deductible catastrophic plans available only to those under age 30.

Which prognostication ends up being more on target won’t be known until plan issuers release premium information this summer and the exchanges gear up for open enrollment in the fall for coverage effective in January 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. 

ACA definition of full time work: Twilight of the Industrial Age work week?

In 1938, the U.S. Fair Labor Standards Act (FLSA) set the full time work week at 40 hours. The 40-hour work week became a hallmark of the modern Industrial Age. Over the decades since then and especially since 1985, our socio-economy has shifted toward the next phase: a more automated and sedentary Information Age economy.

In this new economy, people move around a lot less.  Consequently, many health experts agree, the health of the population has worsened, expanding waistlines and health care costs to treat complex and chronic conditions that are largely preventable with more activity and exercise. As a society, we are negotiating the transition from the Industrial to the Information Age with a large degree of difficulty as shown by the deteriorating overall health status of the population.

It is therefore interesting to note the Patient Protection and Affordable Care Act (ACA) at Section 4980H(c)(4) reduces the 40-hour work week standard to 30 hours for the purpose of defining a full time worker under ACA’s large employer “shared responsibility” mandate requiring large employers to provide employer-sponsored health coverage. While the policy intent is likely to get large employers (defined as having 51 or more workers) to cover a greater portion of their work forces and thus expand health coverage, this little noticed provision could offer a larger, longer term benefit if it becomes a new standard work week in the emerging Information/Internet socio-economy. Especially if it is accompanied by a widespread social realization and acceptance of the notion that people would greatly benefit from one to two hours of sustained activity on most days – especially for those engaged in knowledge and information work that has them mostly seated for the balance of their waking hours.

But would the 10 fewer hours worked each week translate into lost productivity that would truly harm the economy and standard of living? Or would the 30 hours that are spent working be more productive ones such that working 10 less hours would be largely offset?  And if people used the extra time for daily activity (yes, housework counts) and exercise, how much savings could be realized in bending the infamous health care utilization cost curve and would they outweigh any cost associated with working a shorter work week? This is an enormously important question considering the high cost of poor health to the U.S. economy. Finally, for knowledge workers is measuring the hours worked even the right metric to gauge their productivity given the view that the results are what really count?

 


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. 

Health benefit exchanges: A market intervention mechanism aimed at preserving individual, small group health coverage

State health benefit exchanges mandated by the federal Patient Protection and Affordable Care Act of 2010 have been commonly described as online marketplaces where buying a health insurance policy or managed care plan can be done as easily as booking a flight or vacation.  Ease of purchase, however, is not the driving policy rationale behind the exchanges.  They came about in response to market failure in the individual and small group market segments, particularly in the former.  In insurance terms, market failure means the dreaded death spiral of adverse selection.

Insurance fundamentally is about spreading costs across a group of insureds, known as the insurance principle.  The principle is based on the law of large numbers.  If too few people purchase an insurance or health plan, the law of large numbers is violated and the insurance principle breaks down.  For those insureds left in the group, their share of the group’s costs – paid as premiums or membership dues – must be sharply increased.  The pool shrinks and only those most likely to use medical services remain since they need coverage, putting further upward pressure on premiums.

There is a limit what any insured can afford to pay.  Eventually market failure results and the insurance or managed care plan becomes economically unviable.  As plans close, the fewer remaining health plans pass along relentlessly rising medical care costs and the unvirtious cycle proliferates until the entire marketplace is at risk.  That was — and still is — the situation the individual and small group health insurance markets leading up to the enactment of the ACA in 2010.  Ultimately, health benefit exchanges are an attempt to preserve these markets by concentrating plan issuers and purchasers into a government-sponsored marketplace with incentives and disincentives for individuals to participate in the form of tax credit subsidies and tax penalties, respectively.

Whether the exchanges are able do so won’t be known for several years after the exchanges begin pre-enrolling individuals and small businesses for 2014 coverage starting in October 2013.  What is certain is the exchanges as insurance marketplaces – like the failed market they seek to remedy — are also subject to the insurance principle. They must attract sufficiently large numbers of individuals and small businesses if they are to successfully achieve the market aggregation solution that led to their inclusion in the ACA.

 


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 provides regulatory, market framework for sale of health insurance across state lines

The sale and regulation of commercial health insurance is essentially an intrastate affair.  States serve as discrete markets and each have their own rules governing health insurers and managed care plans.  However, several provisions of the Patient Protection and Affordable Care Act (ACA) are apparently intended to give the industry a more interstate flavor starting in 2014 when state health benefit exchanges chartered by the ACA open for business in each state.

Section 1334 of the ACA establishes a shared federal-state regulatory regime requiring health benefit exchanges to offer two “multi-state plans” (one must be a nonprofit) in their individual and small business exchanges.  These plans would be established under federal charter through the Office of Personnel Management (OPM) and licensed in all states.  The idea behind multi-state plans is to bolster competition in state markets, particularly those with smaller populations and fewer payers, as well as to create a larger risk pool to help assure affordability of premiums and ward off adverse selection.  At the same time, multi-state plans could raise fears among payers since by virtue of their large size (and thus their potential ability to offer more favorable coverage terms and rates), they could “crowd out” smaller, state-based players.

However, the Section 1333 of the ACA also provides a mechanism for health insurers and plans to pool risk and sell across state lines via “health care choice compacts” starting in January, 2016.  It allows two or more states to enter into an agreement under which health plans could be offered in state individual markets but subject to regulation by the state in which the plan was written or issued.  Plans sold outside their state of domicile would still however be subject to licensure and rules in the state in which the purchaser resides relative to market conduct, unfair trade practices, network adequacy, and consumer protection standards including standards relating to rating and handling of disputed claims.  The ACA requires the federal Department of Health and Human Services (HHS) to issue regulations governing health care choice compacts by July 1, 2013 and additionally mandates that states must enact legislation authorizing their formation.

Finally, the ACA allows the exchanges themselves to operate across state lines.  Section 1311(f) provides for “Regional or Other Interstate Exchanges” operating in more than one state if the involved states and the federal HHS approve.

 


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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