Tag Archive: America’s Health Insurance Plans

Health plan issuers concerned individual mandate being weakened

The Patient Protection and Affordable Care Act aimed to remedy market failure in the individual health insurance market segment by effectively forcing sellers and buyers to get together. On the sell side by requiring health insurers to accept all applicants for coverage regardless of their medical condition or history and providing premium subsidies to make coverage more affordable. And on the buy side by mandating all U.S. citizens obtain individual coverage if they are not covered by a private or public health plan under pain of a tax penalty.

However, individual health plan issuers worry that the mandate is being weakened by a growing list of exemptions, according to this Wall Street Journal item. In particular, they are concerned that too many younger individuals who tend to use fewer medical services and cost less to cover will be exempted from the mandate, undermining the actuarial viability of the market.

“To make these new reforms work, there needs to be broad participation in the system,” Karen Ignagni, president and CEO of America’s Health Insurance Plans, told the newspaper.

 


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. 

California bill mandating standard benefit designs for plans sold outside exchange marketplace conflicts with existing state law

Earlier this year, California’s health benefit exchange marketplace, Covered California, exercised an option under its enabling legislation to standardize benefit designs for health plans sold on the exchange, consistent with its active purchaser role.

Pending legislation, SB 639, would require individual market plans sold off the exchange marketplace to also employ standard benefit designs. SB 639 would do so by adding new law mandating standardized product designs for all individual plans at each of the metal tier actuarial value rating levels.  It does so with language barring the sale of any product at each of the metal tier levels “unless it is a standardized product” consistent with current law (Health & Safety Code Section 1366.6 and Insurance Code Section 10112.3).

But therein lay a conflict.  These statutes require plan issuers not participating in the exchange “offer at least one standardized product that has been designated by the Exchange in each of the four levels of coverage,” provided the Exchange exercises its authority to require standardized benefit designs. At least one obviously does not encompass all plans offered outside the exchange marketplace.  (Emphasis added)

SB 639 awaits a vote by the full California Senate.  Meanwhile, a Senate floor analysis of the bill shows opposition from health plans and their trade associations.  America’s Health Insurance Plans (AHIP) complains that “the standardization of health products is not only unnecessary but also impedes the ability of carriers to provide benefit packages aimed at meeting the preferences and needs of consumers,” and that benefit design flexibility “is an important element to assuring affordability and high-quality care.”

Update 5/30/13: The bill was approved by the California Senate on a 28-11 vote on May 29 and now goes to the Assembly.

 


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. 

Changes in the individual market, adverse selection to have largest impact on 2014 premiums, Milliman projects

One month after it produced a projection of factors affecting 2014 premiums in California’s individual health insurance market segment for the Golden State’s health benefits exchange, Covered California, the actuarial consulting firm Milliman has issued a similar study with a national focus.  Like its analysis of the California market, Milliman’s review examined the impact of new coverage requirements under the Patient Protection and Affordable Care Act as well as individuals opting to “buy up” to plans with richer benefits, premium and benefit subsidies and the underlying upward trend in the cost of medical treatment.  It was commissioned by America’s Health Insurance Plans.

Milliman’s national study took into account additional factors including new taxes and fees on health plan issuers and premium stabilization programs including a transitional reinsurance program to protect plans from unexpectedly high care costs.  It concludes “average individual market pre-subsidy premiums are anticipated to increase significantly from what standard rates are today.”  It adds advance tax credit premium subsidies for coverage purchased through state benefit exchanges for those earning 400 percent or lower of the federal poverty level will produce “significant reductions from current premium levels.”

The Milliman study projects that Affordable Care Act changes in the individual risk pool and adverse selection — largely due to the law’s ban on medical underwriting of individuals looking to purchase or upgrade coverage — will have the largest impact on premiums.  Those factors including the potential for younger, healthier individuals to remain in plans issued prior to 2014 and sicker people opting for 2014 plans with more extensive coverage could increase premiums by 20 to 45 percent, according to Milliman.

The study raises a red flag over the law’s restriction on the use of age as a rating factor for older individuals, predicting it will boost premiums for younger people and thus potentially drive adverse selection if they opt to forgo coverage until they need it — notwithstanding the Affordable Care Act’s tax penalties for not having some form of health coverage. “For the individual market risk pool to remain a stable market in 2014 and beyond, it is vital that young and healthy individuals enter and remain in the insurance market in addition to individuals with an immediate need for healthcare services,” the study concludes.

 


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. 

“Loophole” has potential to delay health insurance market rules, disrupt exchange marketplace in 2014

Health insurers could have the option to take an extra year to overhaul their individual and small group offerings to meet Patient Protection and Affordable Care Act requirements effective in 2014 and to decide if they want to participate in the state exchange marketplace. Such are the startling implications of a Los Angeles Times story early this month that reported that some health plan issuers are considering waiting until 2014 to revamp their plans to comply with the law.  The Times story cites “a little-known loophole” in the Affordable Care Act “that enables health insurers to extend existing policies for nearly all of 2014.”  The story quotes Timothy Stoltzfus Jost, a law professor and health policy expert at Washington and Lee University as saying that insurers have discovered the loophole, raising the question of “how many will try to game the system.”

The likely loophole?  The Affordable Care Act qualifies certain health plan requirements as applying in “plan years beginning on after January 1, 2014.”  So when does a plan year – the key operative term – begin?  45 Code of Federal Regulations 144.103 defines “plan year” relative to employer-sponsored coverage (such as would be offered through the exchange marketplace Small Business Health Options Program) as follows:

Plan year means the year that is designated as the plan year in the plan document (emphasis added) of a group health plan, except that if the plan document does not designate a plan year or if there is no plan document, the plan year is—

(1) The deductible or limit year used under the plan;

(2) If the plan does not impose deductibles or limits on a yearly basis, then the plan year is the policy year;

(3) If the plan does not impose deductibles or limits on a yearly basis, and either the plan is not insured or the insurance policy is not renewed on an annual basis, then the plan year is the employer’s taxable year; or

(4) In any other case, the plan year is the calendar year.

For individual coverage:

Policy Year means in the individual health insurance market the 12-month period that is designated as the policy year in the policy documents (emphasis added) of the individual health insurance coverage. If there is no designation of a policy year in the policy document (or no such policy document is available), then the policy year is the deductible or limit year used under the coverage. If deductibles or other limits are not imposed on a yearly basis, the policy year is the calendar year.

Here’s my read on how the loophole might come into play.  The italicized text basically allows plan issuers to define the plan or policy year as they choose.  Theoretically, they could issue coverage on December 31, 2013 and designate it for plan or policy year 2013, thereby avoiding Affordable Care Act requirements for plan years beginning on or after January 1, 2014.

If health plan issuers opt exploit the loophole, there could well be litigation over how the relevant provisions of law are to be interpreted and applied, creating uncertainty and delay in the application of the Affordable Care Act’s health insurance market rules as well as the planned rollout of the exchange marketplace in 2014.  The uncertainty also has the potential to complicate contract negotiations currently underway between “active purchaser” state exchanges and health plans seeking qualified health plan status with those exchanges. Plan issuers could opt to exercise the so-called loophole and issue “plan year 2013” coverage as late as December 31, 2013 if they are unable to reach negotiated contracts with these exchanges.

A study prepared for the health plan industry group America’s Health Insurance Plans by the actuarial consulting firm Milliman would appear to support the notion of having plans designated plan year 2013 still in force in 2014 and exempt from Affordable Care Act provisions such as offering essential health benefits (EHB) and minimum actuarial value of 60 percent of projected claims costs. “The final market and rating regulation released by the (federal) HHS at the end of February made clear that individual policies can stay in place until their scheduled renewals in 2014 instead of requiring all individual plans to convert to an ACA-compliant EHB plan on January 1, 2014,” Milliman opined in its projection of factors affecting premium rates in 2014 dated April 25, 2013.

 


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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