Tag Archive: Aetna

Return to high risk pools implies failure of ACA’s single statewide risk pool

The return to state high risk pools encouraged by Trump administration executive action and as proposed in the American Health Reform Act pending in the Senate — mechanisms phased out with the Patient Protection and Affordable Care Act reforms of the non-group segment effective in 2014 — carries with it a critical implication. Specifically, the individual market even with single statewide risk pools mandated by Section 1312(c) the Affordable Care Act are too small —  in some less populous states at least — to achieve a sufficient spread of risk. Therefore, the logic implies, individuals with conditions who use largely disproportionate amounts of medical care must be excluded from the statewide pool and cordoned off in high risk pools in order to maintain the pool’s actuarial viability and ward off adverse selection in the individual market.

That cuts against a core assumption of the Affordable Care Act — that by having all individuals and family members in a given state treated as one large risk pool, a sufficient spread of risk would be achieved. In addition, the law’s premium stabilization programs and an ongoing risk adjustment mechanism to compensate health plan issuers who take on members with costly, complex chronic conditions would act as buffers to ensure the actuarial integrity of the pool and reduce the likelihood of adverse selection. The proposed revival of high risk pools would suggest that’s not the case and the amount of medical care utilized by some pool members is so costly that it skews an entire state’s risk pool.

This in turn leads to a far larger implication. If 5 percent of the pool population account for 50 percent of the costs — or 1 percent accounting for 20 percent to use another expression of the ratio cited in this National Institute for Health Care Management data brief — then medical care may not be an insurable risk due to insufficient spread of risk. If that’s the case, it could result in plan issuers ceding most or all of the loss risk to the government as is currently the case in Medicare and Medicaid managed care. Notably, Aetna CEO Mark Bertolini reportedly suggested just that, according to this account at Reason.com, with nominal insurers taking on the role of plan administrators handling “back room” transactions:

The government doesn’t administer anything. The first thing they’ve ever tried to administer in social programs was the ACA, and that didn’t go so well. So the industry has always been the back room for government. If the government wants to pay all the bills, and employers want to stop offering coverage, and we can be there in a public private partnership to do the work we do today with Medicare, and with Medicaid at every state level, we run the Medicaid programs for them, then let’s have that conversation.

Note the second condition in Bertolini’s statement: If employers want to stop offering coverage. Complain as they may about rising premiums in group coverage, there’s no indication that the highly entrenched employee benefit model of covering medical care for the non-elderly is going to be abandoned by employers anytime soon. Even if the Affordable Care Act’s mandate on employers of 50 or more to offer coverage is repealed given favorable tax treatment of employer-sponsored medical care 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. 

Aetna CEO, analyst offer differing assessments on health of individual market

Bertolini drew a portrait of the health insurance landscape caught in a deteriorating cycle. With too many sick people and not enough healthy ones buying insurance, he argued, the premiums have to keep going up. The more the premiums increase, the fewer healthy people want to sign up for care. They opt to pay the penalty instead of buying insurance with a massive deductible. That causes the balance of sick and healthy people buying insurance to worsen, prompting more rate increases and causing people – and insurers – to drop out.He said that Aetna’s heaviest utilizers of health care – the top 1 percent to 5 percent – are driving half of the costs in the exchanges.”My anticipation would be that in ’18, we’ll see a lot of markets without any coverage at all,” Bertolini said.But health policy experts argue that, so far, there aren’t clear signs that Bertolini’s assessment is accurate.

Cynthia Cox, associate director of a program focused on health reform and private insurance at the Kaiser Family Foundation said that in a true death spiral, the people buying insurance on the exchanges should be a progressively sicker group of people each year. Although the people buying insurance have been sicker than insurers projected, Cox said there isn’t evidence that the pool of people is getting sicker.One sign of a death spiral would be fewer young adults, who tend to be healthier, signing up — something that Cox says hasn’t happened. Another protection against a death spiral is that roughly 85 percent of the people who buy insurance through the exchanges are insulated from premium increases by subsidies, she said.

Source: Aetna CEO says Obamacare in ‘death spiral,’ debates leaving health care exchanges | OregonLive.com

 


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. 

Aetna CEO warns of adverse selection in individual health insurance market — what the ACA intended to cure

Healthier people will avoid buying Affordable Care Act health insurance plans as premiums climb, threatening the stability of the market, Aetna Inc. Chief Executive Officer Mark Bertolini said.

“As the rates rise, the healthier people pull out because the out-of-pocket costs aren’t worth it,” Bertolini said at Bloomberg’s The Year Ahead Summit in New York. “Young people can do the math. Gas for the car, beer on Fridays and Saturdays, health insurance.”

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“What happens is the population gets sicker and sicker and sicker and sicker,” Bertolini said. “The rates keep rising to try and catch it. It’s a fruitless chase, and ultimately you end up with a very bad pool of risk.”

Source: Aetna CEO Says Young People Pick Weekend Beer Over Obamacare

That “fruitless chase” as Bertolini terms it refers to adverse selection. In plain words, adverse selection means risk pooling and risk spreading — the essential functions of insurance — fundamentally break down. As time goes on, the pool shrinks and those left in it are increasingly adverse risks more inclined to need payments for losses. The demand for coverage dollars paid out of the risk pool outpaces premium dollars flowing in. Premiums must increase substantially to restore balance, driving away those the pool needs to remain viable.

If Bertolini’s characterization of the individual health insurance market segment holds true going forward, it would mean the Patient Protection and Affordable Care Act’s reforms have failed since they were specifically designed to restore an individual health insurance market trapped in the death spiral of adverse selection and rising premiums. The goal of the reforms is to restore the functionality and stability of the individual market risk pool by enhancing the spread of risk and ensuring members remain in the pool year round.

 


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. 

Diminished premium stabilization safety net possible factor in UnitedHealth Group’s decision to reevaluate exchange participation 2017 forward

UnitedHealth Group’s announcement this week that it’s reassessing its participation in state health benefit exchange markets for plan year 2017 cites deteriorating loss experience and increased risk. There’s another factor not mentioned by UnitedHealth that warrants discussion and analysis.

For plan years 2014-2016, health plan issuers participating in state exchanges are shielded from losses by a triple safety net built into the Patient Protection and Affordable Care Act known as premium stabilization programs. The three programs were put in place recognizing health plan issuers had no prior experience calculating premiums using new community rated statewide risk pools put in place by the law. Also, there’s the expectation that people who were previously medically uninsured are likelier to come with pent up needs for medical care and thus be costly to cover. The programs include:

  • Risk corridors, which level losses among health plan issuers so that issuers with lower than expected claims make payments to plans with higher than expected claims;
  • Reinsurance, which essentially insures health plan issuers when a covered individual’s medical costs exceed a set dollar amount and;
  • Risk adjustment, which like risk corridors also levels the field among health plan issuers by taking money from plan issuers with lower-risk enrollees and transferring it to plan issuers with higher-risk enrollees.

The first safety net, risk corridors, developed a huge hole out of the box and faces an uncertain future. The federal government announced this year that due to federal budget cuts in the program and higher than expected claims, health plan issuers would receive just 12.6 percent of what they requested for plan year 2014 claims experience.

Come plan year 2017, both risk corridors and the reinsurance programs expire, leaving only one safety net intact: risk adjustment. By placing expiration dates on two of the programs, the Affordable Care Act implies the exchange marketplace is expected to have achieved a degree of financial stability after three years of operations. UnitedHealth Group’s announcement suggests the company isn’t so confident. That said, it could opt to remain in more populous states such as California where there are more “covered lives” in the exchange marketplace. With a greater number of enrollees, the insurance principle works to naturally spread the risk of losses and is less dependent on the premium stabilization programs to keep the market financially viable.

Meanwhile, Aetna and Anthem reacted to the UnitedHealth development by emphasizing their commitment to the exchanges. Anthem is “continuing our dialogue with policymakers and regulators regarding how we can improve the stability of the individual market,” Chief Executive Officer Joseph Swedish said in a statement. Aetna has slightly pared back the number of state exchanges that it will offer plans in 2016 (15 versus 17), according to this Forbes item by Bruce Japsen.

 


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. 

Aetna, Hill Physicians Medical Group and Dignity Health’s Hospitals and Medical Foundation Form Accountable Care Collaboration in Northern California

The agreement features a new payment model to reward Hill Physicians and Dignity Health for meeting quality, efficiency and patient satisfaction measures, including:

  • The percentage of Aetna members who get recommended preventive care and screenings;
  • Better management of patients with chronic conditions, such as diabetes and heart failure;
  • Reductions in avoidable hospital readmission rates; and
  • Reductions in emergency room visits.

via Aetna, Hill Physicians Medical Group and Dignity Health’s Hospitals and Medical Foundation Form Accountable Care Collaboration in Northern California – The Health Section.

 

This agreement affects Aetna’s group market; the insurer withdrew from California’s individual health insurance market as of 2014.

The move follows by two weeks the unveiling of an individual market Accountable Care Organization (ACO) formed by Anthem Blue Cross and 6,000 doctors and 14 hospitals across seven Southern California health systems.

 


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. 

Insurance Commissioner Worried About United’s Departure From Individual Market – California Healthline

United has a limited presence in the state’s individual market, according to Jones, with about 8,000 people currently insured in its subsidiary PacifiCare. And, he said, Aetna also casts a relatively small shadow in the individual market, with approximately 50,000 people insured in the state.

Dave Jones mentioned a little-known detail about a tax break for other insurers that might have placed United and Aetna at a competitive disadvantage.

According to Jones, a $100 million tax break enjoyed by two other insurers, Anthem and Blue Shield, gives them a competitive break and led to the withdrawal from the individual market by United and Aetna.

via Insurance Commissioner Worried About United’s Departure From Individual Market – California Healthline.

Jones is California’s elected insurance commissioner. While not specifically detailed in the story, the “tax break” refers to a difference between what a health plan issuer pays to sell an indemnity health insurance plan regulated by the California Department of Insurance (CDI) and a managed health care service plan regulated by the state’s Department of Managed Health Care (DMHC).  California’s Constitution subjects insurance policies to a 2.35 percent premium tax, while managed care plans are assessed a $2,000 base fee plus $0.0048 per enrollee under California Health & Safety Code Section 1356(c).

One year ago, CDI revealed Blue Shield of California would have only three individual insurance plans open for enrollment after it closed nearly two dozen existing plans effective July 2012.  At the time, CDI noted Blue Shield had filed applications with DMHC to nearly double its roster of managed care plans to 20.

Given the shift toward managed care plans dominated by California’s market share leaders Kaiser Permanente, Blue Shield and Anthem Blue Cross along with the move by the state’s exchange marketplace, Covered California, to require HMO-like standardized benefit designs for plans it sells, Aetna and United likely concluded they could not economically pick up a sufficient number of new policyholders via the exchange marketplace to justify remaining in the Golden 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. 

Wall Street Journal article details how employers could continue offering “tin” coverage next year

Today’s Wall Street Journal via Yahoo News reports large employers of 50 or more employees may opt to offer mini-med or “tin” metal value health plans to workers since the Patient Protection and Affordable Care Act mandates only individual and small group plans provide coverage for hospitalization and nine other categories of essential health benefits. Moreover, the WSJ article notes, some large employers with large numbers of low wage workers may risk paying a $3,000 penalty for each employee who opts out of this coverage and instead buys richer, subsidized coverage through a state health benefit exchange that includes all essential benefits.

Limited plans may not appeal to all workers, and while employers would avoid the broader $2,000-per-worker penalty for all employees not offered coverage, they could still face a $3,000 individual fee for any employee who opts out and gets a subsidized policy on the exchanges.

But the approach could appeal to companies with a lot of low-wage workers such as retailers and restaurant operators, who are willing to bet that those fees would add up slowly because even with subsidies, many workers won’t want to pay the cost of the richer exchange coverage.

Small employers of fewer than 50 employees could also continue offering low value “tin” plans for nearly all of 2014 if payers exploit a previously reported loophole enables payers to continue offering individual and small group plans that fall short of providing essential health benefits and actuarial “bronze” metal tier value of at least 60 percent.

The low-benefit plans are just one strategy companies are exploring. Major insurers, including UnitedHealth Group Inc., Aetna Inc. and Humana Inc., are offering small companies a chance to renew yearlong contracts toward the end of 2013. Early renewals of plans, particularly for small employers with healthy workforces, could yield significant savings because plans typically don’t need to comply with some health law provisions that could raise costs until their first renewal after Jan. 1, 2014.

Low value coverage offered by large employers with sizable numbers of low wage workers runs counter to an underlying policy assumption baked into the Affordable Care Act that large group plans tend to provide relatively expansive coverage compared to small group and particularly individual plans.  Hence, the law prescribed minimum coverage standards for these plans, but not for the large group segment of the health insurance market.

 


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. 

Aetna Offers Individual Plans to Costco Members in California | Aetna News Hub

WALNUT CREEK, Calif.–(BUSINESS WIRE)–Aetna (NYSE: AET) is now offering individual health insurance plans to Costco members in California. The Costco Personal Health Insurance program, of which there are five plans to choose from, offers broad major medical benefits; dental options; an extensive network of doctors and hospitals; and a variety of helpful services, tools and information, tailored to meet the needs of Costco members.

In addition to California, the Costco Personal Health Insurance program is also available to Costco members in Arizona; Connecticut; Georgia; Illinois; Michigan; Nevada; Pennsylvania; Texas; and Virginia. Aetna plans to expand the program to other markets in the coming months.

via Aetna Offers Individual Plans to Costco Members in California | Aetna News Hub

This is a shrewd strategy.  According to some media accounts, Costco members in 2012 had average household incomes of $96,000 — slightly above the $92,200 that equated to 400 percent of the federal poverty level of a family of four that year.  That’s a critical threshold because it’s the eligibility cutoff for advance income tax credits the Affordable Care Act authorizes to subsidize premiums for coverage purchased on state health benefit exchange marketplaces.  Aetna clearly sees Costco as a key distribution channel for its plans that will not be sold on the state exchange marketplaces.

Update: California Costco members won’t have this option.  In mid-June 2013, Aetna announced it would pull out of the individual market in California 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. 

Market failure in individual, small business health insurance market segments forces insurer to act

Aetna CEO Mark Bertolini reveals to Sarah Kliff of The Washington Post’s Wonkblog that a strategic review Aetna undertook in 2005 showed the individual health insurance market segment failing and the small group segment in decline.  Market failure can be a strong motivator to act — and will remain a mortal threat notwithstanding how the U.S. Supreme Court opines this week on the constitutionality of the Patient Protection and Affordable Care Act.

Some excerpts from Kliff’s post:

 “We saw an individual market in inexorable decline and, on the small group side, fewer were offering benefits and costs were rising. We knew we had to change something,” Bertolini said.

Aetna has a strong business reason to create a cheaper insurance product: Namely, getting more people to buy it. That motivation stays in place regardless of what happens with the Supreme Court this month.

“We’re really working right now on the underlying cost of health care,” he says. “These investments we’re making are about finding a different way to make models work. We’re committed to fixing that, and feel like we need to fix that.”

 


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. 

Aetna CEO: Health insurance business model no longer viable

In 2011, some health insurers were conceding the individual market was failing, entering the dreaded death spiral of adverse selection.  But none went as far as Aetna CEO, Chairman and President Mark Bertolini at a Las Vegas conference this week in proclaiming the business model of health insurance broken and facing extinction.

“The system doesn’t work, it’s broke today” Bertolini was quoted as saying by HealthData Management in remarks to attendees of the HIMSS12 conference. “The end of insurance companies, the way we’ve run the business in the past, is here.”

A fundamental function of any form of insurance is underwriting the selection and rating of risks. With medical underwriting ending January 1, 2014 under the Patient Protection and Affordable Care Act (PPACA), it’s no wonder Bertolini sees the end of health insurance as we have known it.

The PPACA as well as other factors are forcing health insurers to reinvent themselves.  But as what?  Since Accountable Care Organizations (ACOs) being created by the reform law are risk sharing mechanisms that reward better patient outcomes and reduced treatment costs though more coordinated, more holistic patient care, Bertolini sees a role for insurers to help manage that risk.  “We need to move the system from underwriting risk to managing populations,” Bertolini was quoted as saying. “We want to have a different relationship with the providers, physicians and the hospitals we do business with.”

What about state health benefit exchanges created by the PPACA that open for business in 2014?  The exchanges are to serve as purchasing pools to help individuals and small businesses aggregate purchasing power to get better deals on health insurance than they would otherwise get negotiating on their own behalf.  If health insurance is becoming a thing of the past as Bertolini predicts, what will they be buying?  Bertolini foresees all-inclusive, branded “health systems” (perhaps similar to California-based Kaiser Permanente) that leverage health information technologies to put patients in charge of their health.

 


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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