Tag Archive: Covered California

Federal Judge Skeptical Of Claims That Dropping Subsidies Hurts Consumers | California Healthline

In California, 1.4 million people buy their own coverage through the state marketplace, and 90 percent receive federal subsidies that reduce what they pay. During the hearing, Chhabria read from a Covered California press release that predicts how the changes will affect consumers in 2018. It notes that even though silver plan premiums will rise as a result of the surcharge, the federal tax credits will also increase to cover the rise in premiums. That will leave 4 out of 5 consumers with monthly premiums that stay the same or decrease.

Source: Federal Judge Skeptical Of Claims That Dropping Subsidies Hurts Consumers | California Healthline

The judge’s skepticism stems from the fact that most consumers who purchase coverage though California’s health benefit exchange, Covered California, are protected from higher premiums since their maximum premiums are limited to a percentage of the adjusted gross household income.

In fact, some purchasing bronze plans could pay even less or nothing at all since their premium subsidies are based on the premium rate for the second lowest cost silver individual plan sold in the state. When the premium rate for that plan increases, the amount of the subsidy available for bronze and other plans also rises since the subsidy amount is based on that higher rate as a percentage of household income. Since the higher premium represents a greater proportion of household income, the subsidy level to make it more affordable increases accordingly.


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. 

Non-group market faces decidedly mixed outlook for plan year 2018 — and possible demise in 2019.

Several recent positive developments point toward plan issuers staying in the non-group or individual market next year.

  • The Trump administration finalized its Market Stabilization rulemaking intended to build confidence among plans by affording them more predictability and reducing the possibility of consumer gaming that plans say have increased their loss exposure.
  • On April 7, Standard & Poor’s opined that the individual market is showing signs of stabilizing in its fourth year based on its analysis of Blue Cross Blue Shield plans that found loss ratios declined from 106 and 102 percent for 2015 and 2014, respectively, to 92 percent for 2016.
  • This week in a closely watched move, Anthem tentatively committed to the individual market in 2018, but warned it could change its mind or raise premium rates by 20 percent or more depending on the outcome of pending litigation over cost sharing reduction subsidies that the Patient Protection and Affordable Care Act makes available to households earning between 100 and 250 of federal poverty levels for silver actuarial value plans sold on state health benefit exchanges.

Which brings us to the negatives. If the litigation, House v. Price, is not resolved by early June, Anthem could execute the aforementioned steep rate increases and possible state market withdrawals. The likelihood is high. The reason is neither the House of Representatives nor the Trump administration has sufficient motivation to resolve the case. The House prevailed when the U.S. District Court where the case was brought issued a ruling one year ago agreeing with the House that the Obama administration unconstitutionally infringed on the House’s appropriation powers by funding the cost sharing reductions administratively.

The district court held the ruling in abeyance pending appeal by the administration. That decision is likely to become final and go into effect following a status conference with the parties late next month. The Trump administration isn’t likely to appeal the decision and would be happy to see a final ruling “blow up” the Affordable Care Act’s individual insurance market reforms in President Trump’s words. The House for its part isn’t likely to dismiss the case because it sees the ruling in its favor as an important precedent to check executive branch authority from impinging on its powers of appropriation.

In addition, Congress and the Trump administration are unlikely to moot the case by enacting their own health care reform legislation in place of the Affordable Care Act’s insurance market reforms in the current congressional term due to heavy reliance on the limited scope budget reconciliation process, intra-party squabbling, lack of bi-partisan support and the inability or unwillingness of the Trump administration to articulate clear guiding policy principles.

The loss of the cost sharing subsidies would blow a hole estimated at $10 billion in exchange finances. That could well prompt Anthem and other plan issuers to head for the exits just as their plans must be finalized for 2018. That could effectively end the exchanges and the individual market as a whole next year. The more likely scenario is the plans as Anthem indicated it would price in the loss of the cost sharing subsidies in their final premium rates.

That would keep the individual market alive and on life support for 2018. But it would face a possible demise in 2019, with shrunken statewide risk pools and increased risk of the dreaded death spiral of adverse selection. The number of covered lives would decline both inside and outside of the exchanges. Outside the exchanges, the 401 percenters – households earning more than 400 percent of federal poverty levels and ineligible for premium tax credit subsidies for qualified health plans sold on the state exchanges – would likely bolt from the individual market after getting notice of another 20 plus percent premium increase for the second consecutive year. (California’s exchange, Covered California, estimates the loss of reduced cost sharing subsidies would boost premiums for silver level plans double that amount, 42 percent on average and as many as 340,000 Californians would drop out of the individual market in 2018.) They will file for exemptions from the individual mandate based on unaffordable premiums, seek alternatives such as health sharing ministries or simply go bare in the hope the Internal Revenue Service under the Trump administration won’t enforce the individual mandate penalties for not having coverage.


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. 

Loss of ACA cost sharing reduction subsidies means higher spending on premium assistance, California exchange analysis finds

SACRAMENTO, Calif. — Covered California on Friday shared with the Congressional Budget Office (CBO) an analysis that shows that a decision not to provide ongoing direct federal funding for cost-sharing reductions would have immediate and dramatic effects on rates, federal spending and the viability of exchanges across the nation.“The impact of not providing direct federal funding of cost-sharing reductions is enormous, and not only puts the viability of the individual market in many states in peril, but would be a bad deal for the federal budget — costing more than $47 billion over the next 10 years,” said Peter V. Lee, executive director of Covered California.“Without the direct federal support for cost-sharing reductions, some health plans will leave the individual market entirely, and those who stay will raise rates significantly,” Lee said. “While the market in California is likely to be relatively stable, for other states there is grave uncertainty. But what is certain is that not funding cost-sharing reductions would actually cost the federal government billions more because of the interplay between rising premiums and subsidies.”

Source: Covered California Daily News: Options to Stabilize the Individual Market Can Reduce Federal Spending and Lower Premiums


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. 

State health benefit exchanges not out of the woods yet

State health benefit exchanges dodged a legislative bullet last week that would have eliminated advance premium tax credit (APTC) subsidies to help low and moderate income households purchase non-group coverage. The nation’s largest exchange, Covered California, estimated the tabled budget reconciliation bill replacing the subsidies with an age-based tax credit beginning in 2020 would on average amount to only 60 percent of that provided under the APTC subsidies. That would have made coverage for less affordable for many households and potentially led to a dramatic drop in enrollment qualified health plans sold on the exchanges, shrinking the non-group risk pool and reducing spread of risk.

The exchanges now face a more immediate threat that could significantly disrupt plan year 2018 and potentially current year enrollees: the loss of cost sharing reduction (CSR) subsidies for silver level plans sold on the exchanges. The subsidies are available to households earning between 100 and 250 percent of federal poverty levels. By reducing out of pocket costs for eligible households, the subsidies effectively increase the actuarial value of silver plans that cover on average 70 percent of medical care costs.

A U.S. District court ruling issued last May found the Obama administration acted unconstitutionally in funding the subsidies without an explicit appropriation by Congress. The decision was put on hold pending appeal, where it sits pending possible action to resolve the underlying fiscal issue by the Trump administration and Congress. Without federal funding for the CSR subsidies, health plan issuers participating in the exchanges would incur billions in losses, according to an analysis prepared earlier this month by The Commonwealth Fund. There is no requested appropriation to cover the CSR subsidies in the Trump administration’s 2018 budget blueprint. As last week’s failed attempt to advance the budget reconciliation legislation illustrates, the Trump administration and Congress are unlikely to achieve a rapid agreement resolving the litigation as they struggle to form a majority party governing coalition.


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. 

November elections increase likelihood of California revisiting single payer

Various media accounts report that California of all states stands to lose the most federal funding for health care coverage under the Patient Protection and Affordable Care Act – 20 to 25 billion dollars annually – if the law’s health insurance reforms are repealed as expected next year. The large majority of that sum comes from enhanced federal cost sharing under the law’s Medicaid eligibility expansion, representing more than $18 billion this year, according to this issue brief by the State Health Reform Assistance Network. Accounting for the balance are advance premium tax credits and cost sharing subsidies to offset the cost of qualified health plans purchased on the state’s health benefit exchange, Covered California.

Other media accounts portray California’s state policymakers as circling the wagons to fight this substantial loss of federal dollars given the potential for many low and moderate income households not covered by employer group plans to lose health coverage as well as extensive fiscal damage the state budget. But they are unlikely to prevail against the political will of Washington under the new administration and Congress and will have to consider alternatives. One likely candidate would be some form of single payer coverage, perhaps utilizing an all payer Accountable Care Organization (ACO) structure to hold down rising health care costs and financed by income, payroll and self-employment taxes.

In the previous two decades, single payer failed to gain voter approval when proposed as a ballot measure or as legislation. This time, however, with a supermajority vote margin gained in the November elections, legislative Democrats along with incumbent Democratic Gov. Jerry Brown could enact a single payer measure with — or without — support from Republican lawmakers. It would represent a far more radical reform than the Affordable Care Act. However, among the states, California has a sufficiently large population base and economy to go single payer if it chooses. The Golden State may well have to if it wants to carve out its own health reform destiny in the post Affordable Care Act era.


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. 

An unvirtuous combination: Prevalence of chronic disease and consumer expectations spawned by decades of managed care

The prevalence of chronic illness and the expectation built up over decades of managed care that health plans should cover office visits with no or little out of pocket costs are combining to drive up America’s health care costs – and health insurance premiums. People are visiting physician offices more often and want their wallets protected from paying for those visits.

Case in point is California’s health benefit exchange, Covered California. Its benefit standards for participating high deductible health plans require them to offer low, set co-pays for office visits at $35 for primary care doctors and $70 for specialists. The goal, as Covered California Executive Director Peter Lee told the Los Angeles Times, is to take the sting out of high deductibles that require people to pay the full cost of an office visit until they are reached. “No patient I know wants to pay $2,500 to see the doctor,” Lee told The Times, referring to a $2,500 high deductible plan. But there’s no proverbial free lunch. There’s a tradeoff involved. More office visits equal greater utilization and administrative costs — which in turn lead to higher premiums.

The thinking here appears to be to avoiding creating an economic disincentive for people to see a physician in order to catch a health problem before it develops into a more serious, costly condition. For some people, that may apply. But not for all if not most. The great majority of people are blessed with the ability to maintain good health by leading healthy lifestyles that include adequate exercise, sleep and a healthy diet. Unlike motor vehicles that require regular maintenance to stay road worthy, human beings do not require ongoing preventative maintenance in a doctor’s office. If the current policy that health coverage is to be an insurance product – and all indications it will remain so for most working age Americans barring a collapse of employer-sponsored health benefits – that policy should treat it as insurance.

Insurance is for large, unexpected costs. It’s not for maintenance. That’s why most insurance policies exclude coverage for losses arising out of neglected maintenance. That’s why they won’t pay a claim for a roof collapse if the roof not properly reshingled or for a blown engine due to missed oil changes.

Health insurance isn’t really something that can be purchased. It’s something all people can give to themselves by respecting their ability to maintain their own health in order to avoid needing medical care. That’s true health maintenance. It can’t be legislated via public policy. It must become a widespread cultural ethic that respects it and the need for people to invest in their own 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. 

Economic pressures of ACA individual insurance market reforms tear at fabric of provider networks

The Patient Protection and Affordable Care Act’s reforms of the individual health insurance market removed tools health plan issuers historically utilized to control costs such as medical underwriting, unlimited annual cost sharing and lifetime limits. That has left health plan issuers one main tool: using the market power represented by their plan memberships to negotiate lower reimbursement rates with providers while maintaining quality of care. Those providers who don’t play along can find themselves left out of provider networks. That naturally functions to narrow plan networks.

The Affordable Care Act permits the standardization of benefits within metal tier actuarial value rating levels. California’s health benefit exchange, Covered California, has opted to standardize benefits to facilitate consumer comparisons of plan benefits and costs. The exchange has also chosen to actively negotiate with health plan issuers and affirmatively select which plans will be included among its qualified health plans (QHP) for a given plan year. In a state as large as California, that gives the exchange real negotiating power given the number of covered lives it can potentially bring to the table. Plan issuers that want on the exchange must reach an accommodation with Covered California on premium rates and providers as well as their own providers — while at the same time convincing regulators their plans offer a sufficient selection of providers.

Striking that balance since the Affordable Care Act reforms began to be felt in 2013 was never easy and could be getting a lot tougher. Something eventually has to give to resolve the economic tension. When a complex system like America’s private health care market is placed under stress, stress fractures first appear at its weakest links and components. Particularly given that the Affordable Care Act has welded shut most of the escape hatches. In this case, it appears to be a rent in the fabric of the provider network, described by the journal Health Affairs (and reported here by The Los Angeles Times). The issue of plan members having difficulty connecting the providers has caught the attention of regulators. (See this recent, in depth Health Affairs policy brief for a detailed discussion. As it should since if the fray grows into a larger tear, it could prove fatal to the Affordable Care Act’s individual insurance market reforms.


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 care arms race:” Payers, providers scale up to boost negotiating power

Last year, the head of California’s health benefit exchange and a health economist opined that consolidation among health plan issuers offsets the urge to merge that’s also taking occurring among health care providers. A rough balance of market power between payers and providers will benefit buyers of health insurance, argued Peter V. Lee, executive director of Covered California and Victor R. Fuchs, emeritus professor of health economics at Stanford University. The enhanced market power of bigger plan issuers would exert pricing pressure to hold down provider fees, they asserted.

The primary rationale of the Lee/Fuchs position is the Patient Protection and Affordable Care Act’s requirement that individual and small group health plan issuers must devote at least 80 cents of every premium dollar to paying providers (85 cents for large group plans) and care quality improvements. That will force health plans to find ways to hold down health care costs since they are statutorily limited in terms of what they can keep for themselves, Lee and Fuchs contend.

The U.S. Department of Justice holds a far different view. It filed legal challenges last week to block proposed mergers of Anthem and Cigna and Aetna and Humana on antitrust grounds, contending the resulting market consolidation would harm market competition. Meanwhile, The Sacramento Bee editorialized that while it sympathizes with insurers looking for negotiating leverage to counter a similar consolidation among providers, it is concerned about the prospect of a “health care arms race” that would create megaliths on both the payer and provider sides, giving them enormous market power.

The rationale for preserving competition is to hold down prices consumers pay. Fewer sellers in a given market means consumers have less to choose from, lessening the deterrent to charge more since higher prices could mean consumers going to a competitor that charges less. The problem however as the health care market tends toward oligopoly (few sellers, many buyers), it offers a natural advantage to sellers. In an oligopolistic market, it’s not in any one seller’s interest to significantly undercut the other guy since competitors, like them, are big by definition and have staying power. They can ride out a competitor’s lower pricing and know that unless the competition has some unfair cost advantage, they can offer significant price discounts for only so long before they lose money or go out of business. Notably, health plans are amplifying the oligopoly effect on the provider side. As health plan networks narrow, consumers have fewer and fewer providers from which to choose.

Back to the Lee/Fuchs argument on the Affordable Care Act’s minimum loss ratio rule serving a forcing function to keep the lid on rising health care costs. In the first post on this blog in February 2010, Veteran Sacramento-based journalist and policy wonk Daniel Weintraub pointed out that it won’t necessarily result in lower premium rates for consumers. If health plan issuers devote 80 or 85 percent of premium dollars to care and care improvements as required under the Affordable Care Act, any increase in overall health care costs still gets proportionally passed on to consumers as the size of the overall health care cost pie grows. Similarly, so does the pot of premium dollars representing the 15 or 20 percent health plan issuers set aside to cover overhead and profit as underlying health care costs continue to ratchet upward.


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 exchange mulls flexing market power to enforce hospital care quality

California’s insurance exchange is threatening to cut hospitals from its networks for poor performance or high costs, a novel proposal that is drawing heavy fire from medical providers and insurers.The goal is to boost the overall quality of patient care and make coverage more affordable, said Peter Lee, executive director of the Covered California exchange.“The first few years were about getting people in the door for coverage,” said Lee, a key figure in the rollout of the federal health law. “We are now shifting our attention to changing the underlying delivery system to make it more cost effective and higher quality. We don’t want to throw anyone out, but we don’t want to pay for bad quality care either.”

“California is definitely ahead of the pack when it comes to taking an active purchasing role, and exclusion is a pretty big threat,” said Sabrina Corlette, a research professor at Georgetown University’s Center on Health Insurance Reforms. “There may be a dominant hospital system that’s charging through the nose, but without them you don’t have an adequate network. It will be interesting to see how Covered California threads that needle.”

Source: California Insurance Marketplace Wants To Kick Out Poor-Performing Hospitals | Kaiser Health News

State health benefit exchanges aggregate individual and small group health plans and purchasers in order to facilitate a more functional market and make health coverage more accessible and affordable. When they actively negotiate with health plan issuers on terms and conditions for exchange participation as Covered California does, they in effect become super payers relative to providers since they can leverage their market power to establish quality standards for medical care covered by participating plan issuers. Covered California now wants to exercise that power relative to hospitals. That dynamic disrupts the traditional contractual relationship between plan issuers and providers and both are initially reacting to the proposal by telling Covered California to butt out.

Hospitals operate in a market that tends to be oligopolistic in metro areas and monopolistic in less populous areas. In California’s expansive geography, it has a mix of both. Georgetown University’s Sabrina Corlette points up the tension between enforcing quality standards on hospitals and the realities of the hospital market relative to ensuring an adequate number of hospitals exist in exchange plan provider networks. The California exchange has a large degree of purchasing power. But in a market with few sellers and many buyers (plan members in a given rating region), sellers have a natural advantage relative to determining price and quality.


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. 

Consumers Enrolling Online with Covered California Say There’s Room for Improvement – CHCF.org

CHCF retained gotoresearch, a division of the San Francisco-based user experience and design agency gotomedia, to conduct this research over each of the last three open enrollment periods. The findings are based on unscripted, real-time observation of people applying for or renewing coverage online, and they capture sources of consumer satisfaction, knowledge, confusion, and frustration.Like Anthony, most other participants in the CHCF-sponsored research were confronted with problems with the online enrollment process. Of 31 people eligible to enroll in or renew a Covered California health plan in the second (2014-15) and third (2015-16) open enrollment periods, only one was able to complete the task during the observed research session. Sessions lasted 45-90 minutes for renewals and 90-120 minutes for new enrollees.Today, CHCF released Room for Improvement: Consumers’ Experience Enrolling Online with Covered California, which describes this user testing in further detail, discusses common problems experienced by participants, and offers recommendations for improving the online enrollment process.

Source: Consumers Enrolling Online with Covered California Say There’s Room for Improvement – CHCF.org

This report shows how a combination of factors can deter online enrollments — this one involving the nation’s largest state-based health benefit exchange. Many consumers have low levels of health insurance literacy, unable to fully take into account premiums, deductibles, co-pays, co-insurance and annual out of pocket maximums when selecting a plan. Even when benefits are standardized as they for California exchange plans.

As the CHCF report and video illustrates, in order to self enroll consumers must also possess a degree of income tax literacy that many — particularly the younger adults the plans hope to attract — may lack. Then there are complex family situations and sporadic, unpredictable incomes of those participating in the “gig” economy that exponentially increase the challenge of online self-enrollment. If an online enrollment portal adds to the burden by being less than user friendly as reported here, it’s no wonder many are flummoxed by the enrollment process and simply throw up their hands and log out.

Shopping online for plans is one thing. But enrolling in an individual health plan offered on a state health benefit exchange can be like filing an income tax return — and a relatively complex one at that for many. Call center support can only go so far. Imagine trying to file an income tax return by phone. That makes the role of insurance agents and in person assisters just as vital as that of tax preparers for many income tax filers during the current tax filing season.


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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