Tag Archive: health care choice compacts

Microeconomic mismatch undermines concept of interstate health insurance market for non-integrated plan issuers

Creating an interstate market for individual health insurance is a component of President-elect Donald J. Trump’s healthcare policy. “To maximize choice and create a dynamic market for health insurance, the Administration will work with Congress to enable people to purchase insurance across state lines,” according to the Trump administration’s transition website.

The concept’s not new. It’s been around for decades as a reform element favored by conservative health policy wonks. It’s even baked into the Patient Protection and Affordable Care Act. Section 1333 of the law provides a mechanism for health insurers and plans to pool risk and sell across state lines via “health care choice compacts” starting this year. The provision allows two or more states to enter into an agreement under which health plans could be offered in state individual markets but subject to regulation by the state in which the plan was written or issued. The Affordable Care Act even provides for interstate health benefit exchanges. Section 1311(f) provides for “Regional or Other Interstate Exchanges” operating in more than one state with federal government approval.

On its face, enabling the marketing of health insurance across state lines appears appealing. After all, insurance is all about large numbers — and the bigger the better. More people in multiple states covered in health plans translates to enhanced spread of risk and potentially operating economies of scale. It’s a particularly appealing reform as individual health plan issuers worry about adverse selection, particularly in less populous states and those with poorer population health status. With health plan issuers able to offer plans in multiple states, the buy side of the market also benefits with more competition and consumer choice, proponents contend.

But undermining the concept is a microeconomic mismatch. Health coverage is far more portable than provider networks, which are geographically fixed by metropolitan areas and the brick and mortar physician offices, clinics and hospitals within them. Provider charges are not uniform, varying considerably from one metro area to another, even within a given state. Health plan issuers negotiate locally with providers because nearly all health care is provided locally and not across state lines except for those living near state borders.

An interstate model currently only favors integrated health plans such as California-based Kaiser Permanente and Molina Healthcare, which each operate health care facilities in a half dozen states and have fared better in the state health benefit marketplace environment than traditional non-integrated health plans.

 


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. 

Credit unions partner with COOP plan in two Midwestern states

In two Midwestern states with a tradition of consumer cooperatives, credit unions will help enroll members in an Iowa-based consumer operated and oriented (CO-OP) health plan, CoOportunity Health, that will offer plans on the states’ health benefit exchange marketplaces. According to the CreditUnionTimes, CoOportunity Health will offer coverage in Iowa, which will operate a state partnership exchange with the federal government, and Nebraska, which has opted for a federally operated exchange. Group Benefits Ltd. will serve as the preferred broker, according to the story.

This is a noteworthy development because it shows interstate cooperation and the innovative use of an established and trusted distribution channel to drive enrollment in the exchange marketplace. It could also serve as a template for health plans to market across state lines via “health care choice compacts” starting in January, 2016 as authorized by Section 1333(a) of the Affordable Care Act. (The ACA specifies implementing regulations be issued by July 1, 2013, but the rules have not yet been promulgated). It could also pave the way for state exchanges to combine into “regional or other interstate exchanges” subject to approval by the participating states and the federal Department of Health and Human Services under ACA Section 1311(f).

 


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 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. 

ACA provides regulatory, market framework for sale of health insurance across state lines

The sale and regulation of commercial health insurance is essentially an intrastate affair.  States serve as discrete markets and each have their own rules governing health insurers and managed care plans.  However, several provisions of the Patient Protection and Affordable Care Act (ACA) are apparently intended to give the industry a more interstate flavor starting in 2014 when state health benefit exchanges chartered by the ACA open for business in each state.

Section 1334 of the ACA establishes a shared federal-state regulatory regime requiring health benefit exchanges to offer two “multi-state plans” (one must be a nonprofit) in their individual and small business exchanges.  These plans would be established under federal charter through the Office of Personnel Management (OPM) and licensed in all states.  The idea behind multi-state plans is to bolster competition in state markets, particularly those with smaller populations and fewer payers, as well as to create a larger risk pool to help assure affordability of premiums and ward off adverse selection.  At the same time, multi-state plans could raise fears among payers since by virtue of their large size (and thus their potential ability to offer more favorable coverage terms and rates), they could “crowd out” smaller, state-based players.

However, the Section 1333 of the ACA also 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.  It allows two or more states to enter into an agreement under which health plans could be offered in state individual markets but subject to regulation by the state in which the plan was written or issued.  Plans sold outside their state of domicile would still however be subject to licensure and rules in the state in which the purchaser resides relative to market conduct, unfair trade practices, network adequacy, and consumer protection standards including standards relating to rating and handling of disputed claims.  The ACA requires the federal Department of Health and Human Services (HHS) to issue regulations governing health care choice compacts by July 1, 2013 and additionally mandates that states must enact legislation authorizing their formation.

Finally, the ACA allows the exchanges themselves to operate across state lines.  Section 1311(f) provides for “Regional or Other Interstate Exchanges” operating in more than one state if the involved states and the federal HHS approve.

 


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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