Tag Archive: health benefit exchange marketplace

AHIP’s catastrophic plan proposal needs rethinking

America’s Health Insurance Plans (AHIP) has proposed the creation of a new Patient Protection and Affordable Care Act-compliant catastrophic individual health plan. (Link here) According to AHIP:

The new catastrophic plan would offer an AV (actuarial value) just below the current minimum requirement (covering an average of 60 percent of medical utilization costs) allowing for lower premiums, but would still include coverage of the law’s mandated essential health benefits, have no annual or lifetime benefit limits, and cover all preventive health services with zero cost-sharing for consumers. This would allow individuals and families eligible for premium subsidies to use that financial assistance to purchase the new plan, an option currently unavailable to consumers purchasing the ACA catastrophic plan.

Since bronze plans and catastrophic plans are quite close in actuarial value, have the actuaries found any potential for meaningfully lower premiums for these proposed catastrophic plans? In other words, is the medical services utilization of a population covered at 57 percent AV, for example, significantly lower than one covered at 60 percent such that it can produce meaningfully lower premiums? Especially given that the Affordable Care Act limits annual maximum out of pocket costs for in-network providers?

Not likely. But the apparent goal isn’t so much to reduce premium rates but rather to make catastrophic plans eligible to become qualified health plans (QHPs) sold in the state health benefit exchange marketplace and thereby eligible for advance premium tax credit subsidies. That has raised criticisms from some quarters that proposed catastrophic plans would not be beneficial to lower income individuals and families since the plans’ high cost sharing (deductibles, co-insurance and co-pays) would discourage their getting necessary care. But lower income people and especially those who utilize a lot of catastrophic (i.e. hospital inpatient) care aren’t likely to choose catastrophic plans and instead opt for plans with at least 70 percent AV (this level includes additional cost sharing subsidies for lower income earners).

If the goal however is to bring more relatively healthy people into state risk pools who are comfortable covering their own out of pocket costs for non-catastrophic care and using tax deductible health savings accounts to cover them, a more appealing catastrophic plan would be one that provides lower cost sharing for hospitalizations and other unexpected high cost medical events. Even with annual out of pocket cost limits of $6,350 for an individual plan and $12,700 for a family plan, a hospitalization can result in large medical bills, particularly for out of network hospitals used in an emergency situation that can double those limits.


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. 

Troubled state-based exchanges face critical decision

A half dozen troubled state-based health benefit exchange marketplaces (Maryland, Massachusetts, Oregon, Hawaii, Minnesota and Nevada) have been clobbered by IT glitches that have hamstrung their eligibility and enrollment functions. This circumstance calls into question the exchanges’ viability going forward since under the Patient Protection and Affordable Care Act, they must be able to financially support themselves starting in 2015 based on fees paid by health plan issuers collected for individuals and small employer groups enrolling in coverage. Getting too few people enrolled in 2014 suppresses that fee revenue and produces a knock on effect of reducing fees that could have been generated by 2014 plan renewals this fall for plan year 2015.

Each of the states must now consider their plan year 2015 options since too little time remains to recover sufficient enrollments with the close of the 2014 open enrollment period only about a month away.

The default option is to allow the federal government to take over exchange operations – the course chosen by nearly three dozen states for 2014. The federal government could also designate a non-profit organization to run the exchange marketplace in the affected states. In addition, the states have the option under Section 1311(f) of the Affordable Care Act that permits states to form “regional or other interstate exchanges,” subject to federal approval. That raises the possibility that the affected states – three of them are in the West – could opt to form a western regional marketplace, possibly with the federal government acting as a partner at least initially.


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. 

Exchange executives, IT vendors held accountable for flawed launches

The health benefit exchange marketplace is essentially one that exists in cyberspace. As such, it is very dependent on a well-functioning IT platform. If that platform fails to work properly, the marketplace falters. And when that happens, those in charge look for someone to hold accountable.

So far, the list of those being called to account includes the primary IT contractor for the federally operated web portal, healthcare.gov, after last fall’s problematic rollout that stymied enrollments on the front end for consumers and the back end for health plan issuers. Its contract was not renewed.

The list also includes the executive directors of five state-run exchanges (Maryland, Oregon, Hawaii, Minnesota and most recently this week, Nevada) where enrollment problems can threaten the continued existence of the exchanges since they must under the Patient Protection and Affordable Care Act be financially self-sustaining starting next year on enrollment-based fees paid by participating plan issuers. Some of the IT contractors could also be called to account in the courts, where they face potential litigation claiming they didn’t deliver a functioning web portal per their contracts.

The take away for the health benefit exchange marketplace: it stands or falls on IT implementation.


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 retains former state budget chief as financial sustainability advisor

California’s health benefit exchange marketplace, Covered California, has retained the former head of the state’s Department of Finance to provide counsel relative to financial sustainability, budgeting and evaluation analytics, the exchange announced. Ana J. Matosantos served as the Golden State’s top budget official from 2009 to 2013 under the administrations of Arnold Schwarzenegger and Jerry Brown. Matosantos was given a six-month contract and will be paid $120,000 for her services. The appointment of Matosantos comes as the exchange prepares to transition starting in 2015 from federal grant support to an operating budget fully based on revenues from fees assessed on health plan issuers offering qualified health plans (QHPs) through the exchange.

In July of 2013, the California State Auditor deemed Covered California a “high risk” state entity due to uncertainty associated with projected enrollment in exchange QHPs and the associated impact on fee revenues. The State Auditor’s report concluded Covered California “appears to have engaged in a thoughtful planning process to ensure that it will remain solvent in the future,” adding that its “financial sustainability will continue to be an area of risk that will need to be closely monitored.” Last week, Covered California announced robust enrollment in QHPs during the last quarter of 2013 — the first half of the 6-month-long plan year 2014 initial open enrollment period — reporting slightly more than 500,000 Californians enrolled in QHPs during the quarter.


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. 

Potentially problematic issues in ACA 2014 rollout for exchanges, employers

There are a couple of potentially problematic issues as major components of the Patient Protection and Affordable Care Act roll out now and into 2014 for state health benefit exchanges and large employers.

For the exchanges, it’s verification of household income of applicants for individual coverage. Eligibility for both advance tax credits used to subsidize the purchase of qualified health plans (QHPs) and for Medicaid benefits are means tested based on family size and household income. The rub here is like that standard investment caveat: past performance does not necessary predict future performance. The same principle applies to household incomes, particularly in a sketchy economy still trying to regain solid footing five years after the 2008 economic downturn. What households earned in 2013 does not necessarily mean that’s what they will earn in 2014, the time frame that determines their eligibility for Medicaid and QHP premium subsidies. Timothy Jost describes the problem in this post at the HealthAffairs Blog:

[V]erification in advance of how much lower-income American families will earn over a year is a fantasy. Lower-income Americans often work in part-time, intermittent, or seasonal jobs and are paid hourly wages, making predicting income exactly a year in advance simply not possible.

The agreement to end last month’s federal government shutdown requires state health benefit exchanges pre-verify the eligibility of individuals applying for premium tax credits and cost sharing reductions. By January 1, 2014, the federal Department of Health and Human Services must describe to Congress the procedures used by the exchanges verify eligibility for premium tax credits and cost-sharing reductions. This summer, HHS issued guidance informing exchanges to attempt to verify income using Internal Revenue Service and Social Security income data provided state exchanges via the federal data services hub.

The income verification issue could end up further complicating an already difficult first year rollout of the exchange marketplace. It may also be overblown in terms of concern that those seeking premium and cost sharing assistance and Medicaid will get more than they are entitled. There are well established income tax planning practices enrollees can keep in mind when they sign up for coverage through the exchange marketplace. Employees know if they claim too many withholding exemptions, they could get stuck owing taxes when they file. Most err on the side of caution and declare too few in order to get a refund of what amounts to an interest free loan to the government. Self employeds pay quarterly estimated taxes and know if they pay too little, they face a big tax bill the following year and possible penalty for underpayment of quarterly amounts due. Enrollees can be counseled to keep these comparative examples in mind to avoid a big tax bill as well as potential penalties if they fraudulently misrepresented their incomes in order to qualify for subsidies or Medicaid.

Employers face potential legal hazard in 2014 as they prepare for the large employer mandate that takes effect in 2015. Those that reduce employees’ average weekly hours to less than 30 in order to avoid having them counted as full time employees for the purposes of the Affordable Care Act’s requirement that employers of 50 or more full time employees provide them health coverage could find themselves in court. Employment law firms warn these employers could face legal exposure under Section 510 of the Employee Retirement Income Security Act of 1974 (ERISA), which bars employers from firing, disciplining or discriminating against employees for the purpose of interfering with their access to employee benefit plans. Adam C. Solander and Elizabeth B. Bradley of the law firm Epstein Becker Green explain at Law360:

In the context of the employer mandate, plaintiffs are likely to argue that an employer’s workforce management efforts interfered with an employee’s right to health coverage. The most likely ERISA 510 claim would seem to involve an employee who averaged 30 hours a week previously. If such an employee’s hours were capped below 30 hours a week, arguments could be made that such a change was made with the intent to deny that individual a right to which he or she would have been entitled. While this scenario seems to be the most likely Section 510 claim, arguments could be made that an employer’s workforce management practices could violate Section 510, regardless of the number of hours the employee worked previously.

Provider networks. For health plan issuers, maintaining networks that offer access to a sufficient number of medical providers to people in their communities could prove challenging, particularly as plan issuers narrow their networks in order to hold down premium rates. Exchanges will also be put to the test to ensure revamped provider listings for Qualified Health Plans are accurately listed on the exchanges.


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. 

Obama administration’s messaging on ACA’s individual health market reforms lacking

The Obama administration is suffering a political pillorying this week on the imminent rollout of new market rules governing the individual health insurance market and the government-created health benefit exchange marketplace that began selling the plans October 1.

In large part, the criticism stems from weak messaging to communicate the reforms and why they are needed. There should be more emphasis on conveying these reforms affect the individual market where about five percent of Americans purchase their health coverage, clearly distinguishing these health plans from those purchased by employers that cover the large majority of Americans. As individual health plan issuers revamp and discontinue old plans to comply with the new market standards, the administration now finds itself having to defend its claims that most Americans could keep their current coverage when the individual market reforms take effect January 1, 2014. Viewed in the context of employer group coverage, that is generally accurate. But not necessarily so when it comes to individual coverage, an entirely different insurance product.

Perhaps more importantly, the administration and members of Congress who supported the 2010 enactment of the Patient Protection and Affordable Care Act need to more clearly explain why the law’s substantial government intervention in the individual market was needed in the first place. Administration officials have described the market as out of control from a regulatory standpoint, terming it like the “wild west.” But more fundamentally, the ACA aims to rescue this market because it was falling into oblivion. Individual plan issuers and those who buy this coverage were finding it increasingly difficult to get together in the marketplace on terms and pricing.

That market failure occurred because the market fell into a downward spiral where health plans became overly risk averse and excluded too many potential customers, restricting the flow of membership fees and premiums to pay claims. Plan issuers also violated a fundamental principle of insurance by splitting their customer base into small pools and were consequently unable to share the cost of claims across a larger group of customers. Finally, premiums for some individuals and families began to equal the cost of a mortgage payment and grew unaffordable. No market can function if potential customers cannot afford to buy the product or service being offered.

Whether the ACA can restore the individual market to healthy functioning remains to be seen, particularly given continued upward pressure on premiums from rising medical costs. The law’s market interventions could prove ineffective if too few young adults opt to buy coverage. Also if too many older people not yet eligible for Medicare who earn too much to qualify for tax credit subsidies for plans sold in the state health benefit exchange marketplace find premiums unaffordable and don’t buy coverage or request affordability exemptions from the individual mandate.


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. 

ACA needs a Direct Primary Care/Medical Home fix

Add one to the list of possible future amendments to the Patient Protection and Affordable Care Act: revisiting Section 1301(a)(3) that recognizes Direct Primary Care/Medical Home plans as qualified health plans sold in the state exchange marketplace.

Direct Primary Care (DPC) is paid directly – as the name suggests – by patients to primary care providers and not by insurers or managed care plans. Direct primary care payment is typically effected via basic monthly fee (as well as additional charges for some procedures and tests) that includes direct access to doctors and other primary care providers. Table 2 of this California Healthcare Foundation paper lists several DPC providers and their fees.

As author Dave Chase notes, there are potential downstream medical utilization cost savings from early preventative primary care intervention. Section 1301(a)(3)’s direct linkage of DPC to a “medical home” suggests an added benefit of keeping patients more connected with a primary care provider who can follow a patient over time and help coordinate referrals and care from other providers. The DPC primary care model also fosters economic incentive for primary care physicians to help alleviate concerns of a post-ACA primary care doctor shortage to handle the influx of newly insureds.

In order to be a qualified individual health plan sold on the exchange marketplace under Section 1301(a)(3), a DPC/Medical Home plan must be a health plan that includes primary care as well as nine other essential benefits. This applies to qualified health plans sold through exchanges as well as those sold outside the exchange marketplace. The primary care requirement however isn’t compatible with DPC because as noted previously, the patient – not a health plan or insurance – pays primary care services directly out of pocket via DPC fees. Plus plans must fall into one of the four metal tier actuarial values (AV) specified in the ACA ranging from bronze (60 percent AV) to platinum (90 percent AV), values predicated on both primary and higher cost care.

The appropriate form of insurance for a DPC patient is catastrophic coverage currently exempt from the metal tier AV requirements under Section 1302(e) but limited to young people under age 30 or those exempt from the individual coverage mandate because of financial hardship or coverage costs exceeding eight percent of income.  It’s the right type of coverage for DPC because as the name implies, it is designed not for relatively low cost primary care but rather big dollar costs such as hospitalizations and surgeries.  Referred to as “wraparound” coverage, it picks up where DPC leaves off. It acts as a true insurance product in that these costly services are typically accident-related or otherwise unexpected.

Section 1302(3) should be amended to include those enrolled in DPC arrangements in addition to the so-called “young invincibles” and recognized as meeting the ACA’s individual responsibility requirement to have some form of health coverage. The current limits on out of pocket costs for individual plans at Section 1302(c) would probably work well for DPC “wraparound” coverage.  However, since DPC patients are by definition paying primary care costs out of pocket, catastrophic DPC plans should include only a flat high dollar deductible.  Finally, to provide greater incentive for individuals and families to enroll in DPC/Medical Home plans, the ACA should amend the Internal Revenue Code to make 50 percent of DPC fees paid in a calendar year tax deductible for all taxpayers.


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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