Tag Archive: Department of Health and Human Services

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. 

Absence of rules means Direct Primary Care Medical Home QHPs unlikely to be offered on exchange marketplace in 2014

An innovative type of health plan that bundles pre-paid primary and preventative care with catastrophic insurance coverage isn’t likely to be sold on state health benefit exchange marketplaces in 2014.

The reason is the federal Department of Health and Human Services (HHS) has not yet developed rules governing Direct Primary Care Medical Home Plans, recognized at Section 1301(a)(3) of the Affordable Care Act as qualified health plans (QHPs) eligible to be sold through the exchanges. However, Section 1301(a)(3) requires such plans meet HHS criteria. HHS has not yet issued regulations defining those standards nor any guidance indicating when the rules will be forthcoming.

In April of this year, the California HealthCare Foundation issued an issue brief on Direct Primary Care Medical Home Plans authored by Dave Chase noting these plans offer significant potential health care cost savings over all inclusive plans such as HMOs while providing economic incentive for primary care physicians – many of whom will be needed to care for new patients obtaining health coverage under the Affordable Care Act.


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. 

HHS: Half of 2011 health insurance rate increases reduced; 12% withdrawn

In May 2011, federal Department of Health and Human Services (HHS) promulgated a final rule implementing Section 2794 of the Public Health Services Act requiring HHS to establish an annual rate review process to identify “unreasonable” health insurance rate increases. What’s considered reasonable (and not)?  According to HHS, here’s how the regulation, found at 45 Code of Federal Regulations (CFR) Part 154 works:

Starting on September 1, 2011, health insurance companies in the small group and individual markets must submit information on all rate increases with an annual impact of 10 percent or greater for their non-grandfathered plans.  Insurance companies cannot raise premium rates by 10 percent or more without first justifying the increase to a Rate Review Program.  Insurers proposing increases of at or above 10 percent must submit for review clear information indicating the factors contributing to the proposed increases.  HHS or Effective Rate Review Programs (see insert below) review insurers’ projections, data, and assumptions to assess whether premium increases are based on sound, up-to-date information on health care costs and use of covered services.  Proposed rate increases may be determined to be unreasonable if for example, the proposed increase is based on faulty assumptions or unsubstantiated trends or if the rate increase charges different prices to people who pose similar cost risks to the insurer.  Information collected through this program, including explanations of the final determination, is made available to the public on HealthCare.gov.

The regulation is enforced jointly by HHS and state regulators or HHS alone if states opt not to participate. HHS announced today that as a result of the review process used under the rule, one half of 2011 insurer rate increases resulted in consumers receiving either a lower rate increase than requested or no increase at all.  In addition, HHS said 12 percent of the rate increases were withdrawn prior to review “in part because some insurers were not willing to have their proposed rate increase labeled as ‘unreasonable.’”  According to HHS, states made the call on reasonability in 69 percent of the proposed increases and HHS reviewed the remaining 31 percent.  HHS’s 2012 Annual Rate Review Report along with estimated savings for policyholders in the individual and small group markets can be viewed here.

In addition, the Section 1311(e)(2) of Part II the Patient Protection and Affordable Care Act (PPACA) gives state health benefit exchanges a degree of leverage over premium rates for health plans sold on the exchanges.  It mandates exchanges to require health plans seeking certification for “listing” on the exchanges as qualified health plans to submit a justification for any premium increase prior to implementation and to prominently post the justification on exchange websites. The Act also allows exchanges to take into account insurer rate reviews under the abovementioned section 2794 of the Public Health Service Act when determining whether to allow the plans to be offered on an exchange as well as “any excess of premium growth outside the Exchange as compared to the rate of such growth inside the Exchange, including information reported by the states.”

Meanwhile, in November 2014 California voters will decide whether individual and small group health insurance rates should be regulated under a prior approval scheme like that created by 1988’s Proposition 103 for property/casualty insurance rather than the current retrospective rate review scheme.  The initiative statute can be viewed by clicking here.


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. 

Insurer’s medical home initiative achieves cost savings double amount invested

The Associated Press reports a two-year-old initiative by Blue Cross Blue Shield of Michigan that provides patient-centered preventative care based on a “medical home” treatment model is proving to be a good investment, producing savings double the $35 million invested by the insurer in 2010.

The initiative involving 2 million lives embodies a conceptual rethinking of the current “sick care” medical treatment model in which multiple fee-for-service providers treat symptoms and co-morbidities of chronic conditions.  Instead of these patients merely counseled to make lifestyle changes, a multi-disciplinary team coordinated by a primary care physician develops a comprehensive care and prevention program.  Patients are provided a large degree of ongoing guidance and coaching to help them permanently adopt healthier lifestyles and reduce high cost medical care utilization.

The Patient Protection and Affordable Care Act (PPACA) requires the U.S. Department of Health and Human Services (HHS) to develop reporting requirements for health insurers by March 23, 2012 on how patient health outcomes are improved through the use of medical homes as well as more effective case management, care coordination, and chronic disease management.  Last month, HHS launched a 3-year pilot program to test the use of the medical homes for high cost Medicare and Medicaid patients as authorized by the PPACA.

Section 3502 of the PPACA also provides for grants to states, state-designated entities and Native American Tribes to establish community-based interdisciplinary teams to support primary practice-based medical homes.

A critical success factor for the medical home model is boosting the supply of primary care and family physicians.  The current fee-for-service model has created strong financial incentive for physicians to instead pursue lucrative specialty practices.  That means over the long run, moving toward a more preventative, health maintenance-based medical treatment model will require changing the underlying economics of medicine as it’s currently practiced in the United States.


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. 

%d bloggers like this: