Tag Archive: age rating

House reconciliation measure aims at getting young invincibles into individual risk pool

To help stabilize the individual medical insurance market, a critical provision of the House budget reconciliation measure concentrates its carrots and sticks on the so-called young invincibles aged 30 and younger to encourage them to get into state risk pools. First the carrot. It would allow individual (and small group) medical plans issuers to charge most senior members up to five times more than the most junior versus the current limitation of three times. That would reduce premiums paid by younger members. The stick? A 30 percent surcharge on premiums if a member has not maintained continuous medical coverage when they apply. Sign up late, pay extra.

If enacted, it will take some time to determine whether these two mechanisms will ensure the actuarial viability of the individual segment, the most fraught of the two plan types. Health plan issuers have complained that the individual risk pool is imbalanced with too many people over age 50 as well as an excess of those in poor health and utilizing a lot of medical care. A continuous enrollment incentive would theoretically get younger and presumably healthier and lower utilizing people into the risk pool.

 


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. 

Individual market reform goals of spread of risk, affordability showing strains at extremes of age continuum

Two fundamental policy goals of the Patient Protection and Affordable Care Act reforms of the individual health insurance market are improving the spread of risk – the essential risk pooling element of any form of insurance – and affordability. Each complements the other. Having more affordable forms of individual coverage brings more people into the risk pool. That in turn improves the spread of risk. Better spread of risk means health plan issuers can set premium rates lower because there are more premium dollars being paid in to cover the costs of those who need medical care. A virtuous cycle in economic terms.

Four years after most of the reforms began to take effect, it remains unclear if these two policy goals will be achieved, with strains appearing at both ends of the age continuum of working adults not covered by employer sponsored health plans. At the lower end are the so-called “young invincibles” who as this Heath Affairs Blog post posits are opting not to purchase coverage. Its authors suggest the Affordable Care Act’s age rating rules designed to make coverage more affordable for older adults deter young adults – who may not see the need — from enrolling in coverage.

That has frustrated the policy goal of achieving greater spread of risk by shifting the risk pool toward older adults, the authors write, reinforced by the law’s bar on medical underwriting that previously kept these older adults who tend to use more medical services out of the pool. Consequently, they note, the risk pool faces the danger of adverse selection, with a surplus of older adults who consume more medical care and too few younger adults who tend to use less.

But despite the age rating rules that stipulate that the relative weight of age in setting premium rates cannot exceed a three to one ratio between the oldest and youngest adults in the pool, older adults with household incomes exceeding 400 percent of federal poverty and thus ineligible for premium tax credits for coverage sold on state health benefit exchanges are facing an affordability crisis. Shela Bryan, a 63-year-old maintenance supervisor from Hull, Georgia, is a typical example. She’s shopping for coverage for 2017 and told Kaiser Health News:

“They cost a thousand, $1,200 [a month], and they have a deductible of $6,000,” she said. “I don’t know how they think anyone can afford that.”

There also a very real perception of poor value at work here that can deter older consumers from purchasing coverage. High deductible plans shift what’s known in insurance terminology as “first dollar” or “burning layer” risk to insureds. Consumers in age rating bands of 55 and older naturally wonder why they are being asked to pay so much for what is essentially catastrophic coverage. Particularly older adults who are relatively healthy and are committed to leading healthy lifestyles, knowing they are not bulletproof 29-year-olds anymore. Unlike other forms of insurance where an insured can earn lower premiums and discounts for mitigating risk, the Affordable Care Act prohibits use of such incentives that could improve the individual risk pool.

 


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. 

Amid slower growth, California’s Obamacare exchange cuts proposed spending – LA Times

Many Californians who signed up in 2014 were closer to the federal poverty line and often paid just a few dollars a month for health insurance, thanks to generous federal subsidies.The remaining uninsured were closer to the cutoff for those federal dollars, meaning they had to pay more of the premium themselves.”Those people may just be doing the math, and they simply cannot afford the premiums,” (Caroline) Pearson, senior vice president at Avalere said. (Covered California Executive Director Peter) Lee said the exchange is planning to survey consumers who have left the exchange to get a clearer picture of what’s happening in the market.

Source: Amid slower growth, California’s Obamacare exchange cuts proposed spending – LA Times

Lee told The Times his organization’s impression is few people are shunning exchange plans due to cost concerns. The survey should scrutinize a potential financial pain point: those in 50+ age rating bands who pay higher premiums and who earn more than 250 percent of federal poverty level (FPL) and particularly those earning between 300 and 400 percent of FPL.

Under Section 1401(b)(3) of the Patient Protection and Affordable Care Act, these households must pay between 8.05 and 9.5 percent of their incomes toward the premium cost of the index plan (second lowest silver-rated plan for a given plan year) compared to between 3.0 and 8.05 percent at lower income levels. The subsidies may be working well for those earning 250 percent or less of FPL but not as well for older Californians earning between 250 and 400 percent of FPL. Nearly half of Covered California enrollees for plan years 2014 and 2015 were age 45 and older. Also, some older Californians near the 400 percent FPL cut off for advance premium tax credit subsidies might have been offered subsidies too small to keep them in a Covered California plan and opted to purchase plans sold in the off-exchange 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. 

Healthcare Town Hall » Insurers adjust to paradigm shift

Milliman’s Tom Snook

via Healthcare Town Hall » Insurers adjust to paradigm shift.

Milliman’s analysis suggests the key to keeping the individual market actuarially viable isn’t only about getting enough so-called young invincibles into individual market state risk pools. It’s also about bringing in older people in good health — and keeping them healthy.

 


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. 

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