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ACA provisions to restore individual health insurance market may have missed target

December 27th, 2016 Comments off

One of the major reforms of the individual health insurance market segment put in place by the Patient Protection and Affordable Care Act is pooling people into statewide risk pools to achieve greater spread of risk. In addition, the law reinforces the fundamental insurance principle of risk spreading by creating incentives for people to get into the pool. Those include advance tax credit premium and reduced cost sharing subsidies for individual plans offered on state health benefit exchanges and tax penalties applied to everyone not covered under some minimum form of coverage for hospital and physician care. Also, requiring health plans to accept all applicants for coverage regardless of medical history.

The goal is to restore what was a struggling market segment circling the drain of runaway adverse selection prior to the reforms going into effect in 2014. Few might have thought such a sweeping overhaul of the market wouldn’t restore it to a healthy, viable segment of the health insurance market. But as the reforms are about to enter their fourth year, it’s unclear whether they will achieve the goal of improved spread of risk. Health plan issuers complain the risk pool is imbalanced with too few young people and too many older and higher utilizing folks. They’ve openly expressed concern that’s driving adverse selection – the very problem the reforms intended to remedy.

Other factors that jeopardize the sustained actuarial viability of the individual market:

  • Poor overall population health status and low health education levels (i.e. how to stay healthy, minimize need for medical care), generally increasing utilization and cost trend.
  • Inadequate market forces exerting downward pressure on medical costs. The Affordable Care Act includes provisions to shift to value-based medical provider reimbursement reform for Medicare, but not the individual or small group market segments.
  • A high level of churn as people’s life situations change, moving them into and out of the individual health insurance market.
 


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. 

Action on ACA individual market reforms successor must come in Q1 2017 to avoid messy market meltdown

December 2nd, 2016 Comments off

Heading into this year’s elections, the individual health insurance market segment developed signs of instability as health plan issuers were pulling back their market presence for 2017 and reassessing their plans for 2018 and beyond. The election that sent Donald Trump headed to the presidency and afforded his party the opportunity to implement their stated policy to quickly repeal the Patient Protection and Affordable Care Act piled uncertainty on top of uncertainty for health plan issuers.

It’s unclear how much of the Affordable Care Act the incoming Trump administration and Congress will gut. However, it is clear that first in their sights are the individual health insurance market reforms contained in Title I of the expansive law. With these reforms first in line for the chopping block, there is no luxury of time to contemplate a gradual transition for the individual market. Congress and the new administration will have to quickly come to a consensus in the first quarter of next year.

As has been widely reported, Congress and the Trump administration could defund the bulk of the reforms using a budget reconciliation bill requiring a simple majority vote, thereby avoiding a Democratic filibuster. But that would only create more market uncertainty, crashing the old Affordable Care Act market rules before new ones could be put in place. Even more comes from the House’s successful court challenge this year of the Obama administration’s funding of out of pocket cost sharing subsidies for many lower income households buying coverage on state health benefit exchanges. It would take effect very early in the Trump administration if the administration as expected opts not to pursue an appeal, prompting health plan issuers to bail from state health benefit exchanges in 2017 and leave millions without coverage. These circumstances underscore the fact that under the Affordable Care Act, health plan market participation is voluntary. If plan issuers can’t predict their finances with any degree of certainty, all bets are off.

Health plan issuers need to begin pulling together their individual market offerings for plan year 2018 early next year. It will be difficult if not impossible for them to do so with the market rules up in the air. Lacking any certainty in the first quarter of 2017, a transition to a new scheme won’t happen in 2018. New policy will have to be nailed down in that critical first quarter. With the Affordable Care Act individual market rules well established, it’s now impossible to quickly unscramble the Obamacare omelet and turn the calendar back to 2009.

 


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. 

Trump’s support of key element of ACA individual health insurance reforms suggests no wholesale, quick repeal

November 9th, 2016 1 comment

For his part, Trump has said that he favors keeping one key aspect, which outlawed the old practice by many insurers of refusing to cover people with preexisting medical problems or charging them more than other customers. The insurance industry has long said it would have a hard time abiding by this rule unless virtually all Americans are required to have insurance — a central feature of the ACA that Trump wants to cut.

Source: Obamacare’s future in critical condition with Trump’s victory – The Washington Post

This is the grand bargain underpinning the Affordable Care Act reforms of the individual health insurance market designed to save the market as it circled the adverse selection death spiral drain pre-2014.

It’s noteworthy Trump indicated during the presidential campaign that he wants to retain the prohibition on medical underwriting — the part of the deal imposed on health plan issuers in exchange for effectively forcing more people into the individual risk pool with the coverage mandate to help restore it to functioning. Keeping this ACA reform component in place suggests there will be no wholesale, rapid repeal of the health care law’s individual market reforms. Trump will clearly have to negotiate with health plan issuers if he wants to keep the medical underwriting ban intact, particularly if he wants to dispense with quid pro quo of the individual coverage mandate.

This demonstrates that the health care policy of the incoming Trump administration is a very rough work in progress that’s hardly set in stone. There will likely be a period of intense negotiations involving various stakeholders leading up to the new president’s inauguration and in the initial months of Trump’s administration.

Update 11/11/16:

The president-elect reaffirmed his position, The New York Times reported:

Mr. Trump said Friday that, after talking with President Obama this week, he might be willing to leave in place parts of the Affordable Care Act once he’s in office. Mr. Trump made the comments to The Wall Street Journal in his first interview since winning the election. The newspaper said Mr. Obama had urged the president-elect to reconsider repealing his signature health care law, which Mr. Trump said had become “unworkable.” But in the interview, Mr. Trump said he told the president that he would consider keeping two provisions of the law: the prohibition against insurers denying coverage because of a patient’s pre-existing condition; and the one that allows parents to keep their children on their insurance plans until they turn 26.

 


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. 

Anthem CEO Won’t Commit To Obamacare Beyond 2017

November 2nd, 2016 Comments off

Key changes need to be made to put Obamacare on a “path toward viability,” Anthem chief executive Joe Swedish told analysts during the company’s third-quarter earnings call Wednesday. Anthem, which operates Blue Cross and Blue Shield plans in 14 states, is one of the largest providers of Obamacare  coverage after Aetna AET +0.85%, Humana HUM +0.87% and UnitedHealth Group UNH +0.85% decided to scale back participation on public exchanges for 2017. Anthem has 1.4 million members in Obamacare plans including 889,000 who have purchased from the exchanges.

Among changes needed are elimination of certain special enrollment periods that allow Americans to sign up for coverage year-round and make it difficult for actuaries to predict costs. In addition, Swedish, like other health insurance CEOs, said the “risk adjustment model” needs to be updated to improve risk pools that currently see more sick Americans with chronic conditions than younger and healthier people. Because younger people haven’t signed up and Americans have opted instead to pay a penalty, enrollment in individual coverage hasn’t been the 20 million to 25 million that insurers anticipated, Swedish said, citing past Congressional Budget Office estimates. Instead, insurers have been competing for business in a much smaller risk pool of 10 million to 11 million customers who purchased coverage on exchanges

Source: Anthem CEO Won’t Commit To Obamacare Beyond 2017

Anthem’s concerns touch upon a major tradeoff contained in the individual health insurance market reforms of the Patient Protection and Affordable Care Act. In exchange for agreeing to end medical underwriting of those who apply for coverage and accept partial community rating, the reforms are intended to reward health plans by boosting enrollment and enhancing the stability of the individual market.

With more covered lives with continuous, year round coverage, the market becomes more actuarially viable and predicable. That’s why health plan issuers were initially bullish on the reforms, foreseeing a much needed rescue of a market segment they had all but lost to the adverse selection death spiral. Now four years into the reforms, they’re undergoing a crisis of confidence and not certain they’re getting the benefit of the bargain.

 


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. 

Aetna CEO warns of adverse selection in individual health insurance market — what the ACA intended to cure

October 26th, 2016 1 comment

Healthier people will avoid buying Affordable Care Act health insurance plans as premiums climb, threatening the stability of the market, Aetna Inc. Chief Executive Officer Mark Bertolini said.

“As the rates rise, the healthier people pull out because the out-of-pocket costs aren’t worth it,” Bertolini said at Bloomberg’s The Year Ahead Summit in New York. “Young people can do the math. Gas for the car, beer on Fridays and Saturdays, health insurance.”

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“What happens is the population gets sicker and sicker and sicker and sicker,” Bertolini said. “The rates keep rising to try and catch it. It’s a fruitless chase, and ultimately you end up with a very bad pool of risk.”

Source: Aetna CEO Says Young People Pick Weekend Beer Over Obamacare

That “fruitless chase” as Bertolini terms it refers to adverse selection. In plain words, adverse selection means risk pooling and risk spreading — the essential functions of insurance — fundamentally break down. As time goes on, the pool shrinks and those left in it are increasingly adverse risks more inclined to need payments for losses. The demand for coverage dollars paid out of the risk pool outpaces premium dollars flowing in. Premiums must increase substantially to restore balance, driving away those the pool needs to remain viable.

If Bertolini’s characterization of the individual health insurance market segment holds true going forward, it would mean the Patient Protection and Affordable Care Act’s reforms have failed since they were specifically designed to restore an individual health insurance market trapped in the death spiral of adverse selection and rising premiums. The goal of the reforms is to restore the functionality and stability of the individual market risk pool by enhancing the spread of risk and ensuring members remain in the pool year round.

 


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. 

When ACA individual market reforms fail and reprise de facto high risk pool

October 19th, 2016 Comments off

The Minnesota Department of Commerce struck a deal with five health plans in the state’s individual market to prevent a market collapse. In June, Blue Cross Blue Shield announced that it was leaving the individual market, with 103,000 individuals left to find a new plan when open enrollment starts on November 1. It was feared that other plans would quickly follow suit. Given that BCBS had a broad network and notably higher risk profile, the remaining plans were not eager to take on new enrollees in a guaranteed issue environment. The agreement reached included caps on health plan enrollment and significant rate increases between 50-66.8 percent. Only one of the five plans, BCBS’s narrow-network HMO plan, Blue Plus, agreed to offer plans without an enrollment cap.

Source: Capping Enrollment To Save Minnesota’s Individual Market

A key element of the Patient Protection and Affordable Care Act’s reforms of the individual health insurance market is the formation of statewide risk pools comprised of those not covered by government or employer-sponsored plans. But as the Minnesota Department of Commerce notes in this news release, just five percent of Minnesota residents or 250,000 people don’t fall into these categories and make up the entire universe of the individual market.

When Affordable Care Act rules that permit health plan issuers to slice and dice state individual risk pools into county-sized rating areas where they can choose — or not — to offer a plan or plans are factored in, that universe is narrowed down. That effectively reduces the spread of risk for health plan issuers offering coverage in those rating areas if there are few issuers offering plans within them. Ultimately, the number of those in the individual market becomes too small to achieve effective spread of risk, even with the law’s individual shared responsibility mandate to have some form of health coverage in force. Especially in smaller states like Minnesota, where it appears from this Health Affairs blog post that rather than spreading risk across a larger population, the individual market is functioning more like a high risk rather than true insurance pool. That’s why Minnesota regulators accommodated health plan issuer concerns by capping enrollment — a defining characteristic of a high risk pool.

That’s a perverse development given the Affordable Care Act’s reforms of the individual market were specifically intended to restore the individual market to healthy functioning and obsolete state high risk pools that offered tightly limited coverage to those whose health status fell short of health plan issuers’ medical underwriting standards that existed prior to the reforms taking effect in 2014.

 


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. 

Individual market reform goals of spread of risk, affordability showing strains at extremes of age continuum

October 12th, 2016 Comments off

Two fundamental policy goals of the Patient Protection and Affordable Care Act reforms of the individual health insurance market are improving the spread of risk – the essential risk pooling element of any form of insurance – and affordability. Each complements the other. Having more affordable forms of individual coverage brings more people into the risk pool. That in turn improves the spread of risk. Better spread of risk means health plan issuers can set premium rates lower because there are more premium dollars being paid in to cover the costs of those who need medical care. A virtuous cycle in economic terms.

Four years after most of the reforms began to take effect, it remains unclear if these two policy goals will be achieved, with strains appearing at both ends of the age continuum of working adults not covered by employer sponsored health plans. At the lower end are the so-called “young invincibles” who as this Heath Affairs Blog post posits are opting not to purchase coverage. Its authors suggest the Affordable Care Act’s age rating rules designed to make coverage more affordable for older adults deter young adults – who may not see the need — from enrolling in coverage.

That has frustrated the policy goal of achieving greater spread of risk by shifting the risk pool toward older adults, the authors write, reinforced by the law’s bar on medical underwriting that previously kept these older adults who tend to use more medical services out of the pool. Consequently, they note, the risk pool faces the danger of adverse selection, with a surplus of older adults who consume more medical care and too few younger adults who tend to use less.

But despite the age rating rules that stipulate that the relative weight of age in setting premium rates cannot exceed a three to one ratio between the oldest and youngest adults in the pool, older adults with household incomes exceeding 400 percent of federal poverty and thus ineligible for premium tax credits for coverage sold on state health benefit exchanges are facing an affordability crisis. Shela Bryan, a 63-year-old maintenance supervisor from Hull, Georgia, is a typical example. She’s shopping for coverage for 2017 and told Kaiser Health News:

“They cost a thousand, $1,200 [a month], and they have a deductible of $6,000,” she said. “I don’t know how they think anyone can afford that.”

There also a very real perception of poor value at work here that can deter older consumers from purchasing coverage. High deductible plans shift what’s known in insurance terminology as “first dollar” or “burning layer” risk to insureds. Consumers in age rating bands of 55 and older naturally wonder why they are being asked to pay so much for what is essentially catastrophic coverage. Particularly older adults who are relatively healthy and are committed to leading healthy lifestyles, knowing they are not bulletproof 29-year-olds anymore. Unlike other forms of insurance where an insured can earn lower premiums and discounts for mitigating risk, the Affordable Care Act prohibits use of such incentives that could improve the individual risk pool.

 


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. 

Are state health benefit exchanges undergoing adverse selection?

September 30th, 2016 Comments off

A trend worth watching is health plan issuers opting not to sell individual plans on state health benefit exchanges while continuing to offer them outside the exchanges. Health plan issuers withdrawing from exchanges for plan year 2017 cite high losses on exchange plans for the decision to withdraw.

This naturally raises questions as to why losses are higher on exchange plans compared to off exchange plans and whether the exchanges are prone to adverse selection and if so, why. It’s an area ripe for research by health policy and actuarial research organizations. It’s also critical to the future of the Patient Protection and Affordable Care Act’s health insurance market reforms given the central role of the exchanges to restore the individual market to functionality by making coverage affordable for low and moderate income households with advance premium tax credit and out of pocket cost subsidies. That combined with the law’s mandate the individuals be pooled into a single statewide risk pool were designed to improve the essential risk spreading function upon which all types of insurance is based. However, if the risk profile of exchange enrollees is inordinately poor compared to the individual state pool as a whole, it could explain why some health plan issuers have opted out of the exchanges.

One possible reason is the well-established positive correlation between socio-economic status and health status. Since the exchange population is by definition low and moderate income, that correlation could be a factor since the correlation predicts those with poorer health status are more likely to utilize medical services. Another possible contributing factor is an insurance concept known as morale hazard. Morale hazard arises when those with insurance coverage figure that since they are protected from loss, they don’t have to worry as much about a covered loss event or taking steps to prevent one. In other words, insurance can ironically increase the risk of loss because insureds become less vigilant to avoid one in the first place such as eliminating fire hazards in a dwelling or obeying traffic laws and driving carefully in the case of vehicle insurance.

The correlation between lower household socio-economic status and poorer health status may also reinforce morale hazard on the exchanges since those with the lowest incomes will have relatively minimal personal financial risk since they qualify for out of pocket cost sharing on some silver level plans.

When it comes to health, American society is fraught with morale hazard. It tends to place too little value on maintaining and supporting healthy lifestyles and regards medical services as a consumer commodity to be shopped and consumed. Particularly when someone else is paying for those services when packaged as a benefit or entitlement. That’s a formula for increased medical utilization with negative and potentially fatal implications not only for the exchanges, but for the nation’s health care system as a whole.

 


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. 

The states with the biggest Obamacare struggles spent years undermining the law

September 8th, 2016 Comments off

As insurers exit Obamacare marketplaces across the country, critics of the Affordable Care Act have redoubled claims that the health law isn’t working. Yet these same critics, many of them Republican politicians in red states, took steps over the last several years to undermine the 2010 law and fuel the current turmoil in their insurance markets. Among other things, they blocked expansion of Medicaid coverage for the poor, erected barriers to enrollment and refused to move health plans into the Obamacare marketplaces, a key step to bringing in healthier consumers.

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There are many fewer options in states whose leaders have spent years working to sabotage the law.

Source: The states with the biggest Obamacare struggles spent years undermining the law

It is inaccurate to describe red states as “sabotaging” Obamacare. The ACA is a federal-state initiative that afforded a good degree of policy latitude to the states, with that freedom vis Medicaid expansion broadened by the USSC in NFIB v. Sebelius (2012).

The real issue is there is no policy consensus among the states re health care reform notwithstanding broad agreement that reform is essential. Also, the individual market poses enormous challenges re achieving spread of risk to ensure this market segment’s long term actuarial viability. Contributing to that challenge is a culture that does not value health promoting lifestyles and regards medical care and insurance as high cost consumer commodities.

 


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. 

Improving primary/urgent care consumer experience as a means of risk selection in individual market

May 9th, 2016 Comments off

The Patient Protection and Affordable Care Act’s reforms of the individual health insurance market are intended to create a large, risk diversified pool with the individual mandate and prohibition on health plan medical underwriting. A related goal is to enhance competition among health plan issuers based on value and price rather than risk selection – selecting for populations more likely to have lower medical utilization. In addition, the Affordable Care Act’s risk adjustment mechanism — whereby health plan issuers with plans having fewer members with high risk chronic health conditions transfer funds to those with higher numbers of members with such conditions – is designed to disincentive selecting members who tend toward lower medical utilization.

However, as this Money item suggests, market forces may be in play that could work against shifting the market away from risk selection as a means of competition. How? By creating a health plan bundled with a consumer friendly front end primary/urgent care clinic that targets Millennials and young families. These plans – Zoom and UnitedHealth’s Harken Health unit — compete by offering a superior primary and urgent care consumer experience. Along with convenience and transparency and more personalized care and healthy lifestyle support. Since their target demographic is less likely to be suffering from costly chronic health conditions or require hospitalization, the overall risk profile of their plan memberships will likely be superior to those of other health plan issuers.

 


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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