Tag Archive: individual market

Non-group segment clouded in uncertainty amid questions of market and actuarial sustainability

Four years after the start of open enrollment under the Patient Protection and Affordable Care Act’s reformation of the non-group medical insurance market, the market’s future is clouded in uncertainty. The biggest questions are whether it can sustain itself as a market and as a functional risk pool.

First the market. Alarm bells are being sounded that that the segment will undergo buy side market failure as households with incomes exceeding 400 percent of federal poverty levels that don’t qualify for premium subsidies on state health benefit exchanges will no longer be able to keep up with large premium rate increases. This is complicated by the fact that these households perceive low value in high deductible plans that have become commonplace. Their expectations of fair value are under assault by high premiums for high deductible plans. The expectation is high premiums should have an inverse relationship with out of pocket costs such as deductibles and co-insurance as they historically have. That’s no longer the case.

Many of these 401 percenters ineligible for premium assistance have income tax incentives to continue to purchase non-group plans. For all of them, there is the stick of the tax penalty for going without coverage. For the many that are self-employed, there is the carrot of being able to deduct premiums from taxable income on their Form 1040. Both of these incentives however can only go so far if premium costs are unaffordable. The perception of poor value due to high plan deductibles might be enough to push a vacillating 401 percent plus household to make the decision to go without coverage and pay the tax penalty instead. Particularly if that self-employed household has dependent children or is comprised of adults over age 50. Premiums hit these households particularly hard since household size and age are two key premium rating factors in the non-group market.

The out migration of the 401 percenters combined with the reluctance of under 30 “young invincibles” to purchase a plan and instead pay the tax penalty would shrink and distort the non-group risk pool, calling into question its actuarial sustainability. The primary members would be adults aged 30-50 and a declining number of those over age 50 who are high utilizers of medical care eligible for premium subsidies though the exchanges or willing and able to pay rising premiums in the off-exchange market. With these populations, there may not be enough people in the pool to achieve a sufficient spread of risk among high and low utilizers to keep the segment from falling into adverse selection, further accelerating premium rate hikes.

The aversion of the young invincibles to comprehensive standard non-group plans would be reinforced under a Trump administration that’s exploring relaxing the rules governing short term “gap” policies. That liberalization would create a large degree of parity between short term and standard non-group plans. Both would have annual terms and be renewable. That would shrink the individual risk pool by providing a lower cost replacement for non-group plans for young adults and those who use little medical care, even when tax penalties for lacking comprehensive coverage are taken into account.

In sum, these factors leave the non-group market segment vulnerable to a relatively rapid unwinding over the next three or so years.

 


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 administration policy favors employer-sponsored coverage

In championing the enactment of the Patient Protection and Affordable Care Act in 2010, the Obama administration held to a bedrock policy principle of preserving the employee benefit-based system that covers medical care costs for the vast majority of Americans under age 65. That would be the least disruptive to the current scheme and thus politically viable, the thinking went. The Affordable Care Act also reinforced the role of employer sponsored medical benefit plans by requiring employers of more than 50 to offer them to most of their employees and requiring small employer plans offer specified benefits.

Trump administration policy bolsters the role of employer group coverage even more, clearly favoring it over non-group. During the past year, it has reduced funding for outreach and enrollment for individual plans sold on state health benefit exchanges while promoting enrollment in the exchanges’ Small Business Health Options Program (SHOP). Additionally, the administration has refused continued funding of subsidies to assist low income households with out of pocket costs for silver level individual plans sold on the exchanges.

Then on October 12 of this year, the administration issued an Executive Order directing federal regulatory agencies study three possible areas where employer-based coverage could be expanded by administrative rulemaking or agency guidance.

They include:

  • Expanding Association Health Plans to small employers and potentially based on industry or geographic regions. Some early analysis of this provision speculates that individuals who are self-employed with no staff could be included in the expansion, but it’s unclear whether sufficient statutory authority exists because such individuals are not employers. Initial analysis also warns that expanding these multi-employer plans could jeopardize the actuarial viability of non-group coverage.
  • Liberalizing rules governing employer-sponsored Health Reimbursement Arrangements (HRAs) to help offset employee costs for medical care, including premiums for non-group coverage. While this provision of the order recognizes a role for non-group coverage, it puts employers in a major role in sharing a portion of its costs for employees, impliedly recognizing the primacy of the employee-benefit coverage model for those under age 65.
  • Making short term medical insurance coverage for individuals available for longer than the current three months allowed under existing rules and on a renewable basis. Short term coverage tends to appeal to those between jobs and thus implicitly reinforces the dominant role of employment-based 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. 

Iowa files urgent ACA 1332 waiver request to preserve 2018 non-group market

Facing the prospect of no health plan issuers offering coverage in the individual, non-group medical insurance market in 2018, Iowa is urgently asking the federal government for a state innovation waiver under Section 1332 of the Patient Protection and Affordable Care Act. The proposed stopgap measure by the state’s Insurance Division requests federal premium and cost sharing subsidies be used to fund the Proposed Stopgap Measure (“PSM”) Plan. The plan would offer a single standardized benefit plan with an actuarial value of 68 to 72 percent with premium subsidies determined by age and household income. It also proposes the federal Affordable Care Act funding support a reinsurance program for individuals incurring medical expenses greater than $100,000.

 


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. 

Growth in self employment points to need for non-group medical coverage

Another reason insurers will likely return or work to remain in the individual market is that it’s part of the future of health care, says Counihan. With so many people now working for themselves in the “gig economy,” he says, selling insurance “is going to be more business-to-consumer than business-to-business.””This market could grow,” agrees Giesa. “And I don’t think [insurance companies] want to be left out completely from this market if there’s an opportunity to break even, or make a little money. “In the end, says Counihan, regardless of what he considers the Trump administration’s “disorganized neglect, I think this market is here to stay.”

Source: What Happens If The Individual Health Insurance Market Crashes? : Shots – Health News : NPR

Kevin Counihan served as head of the Department of Health Service’s insurance exchange program in the Obama administration. Kurt Giesa is an actuarial expert at the consulting firm Oliver Wyman.

While most working age Americans are covered by employer medical benefit plans that have dominated since the 1940s, there are indications this is changing and pointing to the need for a viable method of financing medical care outside of employer group coverage. The executive summary of a recent McKinsey Global Research survey reports 20 to 30 percent of the working-age population in the United States and the EU-15 countries are engaged in some form of non-employment vocation.

 


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. 

Measures would allow individuals to purchase small group plans sold by DC health benefit exchange and federal employee plan to fill gaps in state individual markets

Two measures were recently introduced in Congress to address gaps in the non-group medical insurance market by allowing individuals and their family members to buy into small group plans sold through the District of Columbia’s health benefit exchange’s Small Business Health Options Program (SHOP) if their state health benefit exchange offers no plans where they live.

The Health Care Options for All Act (S.1201, McCaskill) would require the Office of Personnel Management (OPM) to establish a mechanism for their enrollment. A companion measure to S.1201, H.R. 2770 (Loebsack) was introduced in the House June 2; text for the bill is not yet available. The DC SHOP currently offers coverage to members of Congress and their staffs as required by the Patient Protection and Affordable Care Act. The District of Columbia health benefit exchange, DC Health Link, is reportedly opposed fearing the proposal if enacted would turn the DC exchange into a de facto national high risk pool.

Section 1334 of the ACA authorizes OPM to contract with health insurance issuers or a group of affiliated plan issuers to offer plans in all states as of this 2017. While the intent is to ensure exchanges can offer plans in all areas, the “multistate plans” authorized by Section 1334 are available in less than half of the states.

The bills could raise objections from health plan issuers since they broadly organize their product lines as employer group or non-group (individual) coverage and risk rate, price and establish provider networks separately for each. In addition, the Affordable Care Act segregates small group and individual coverage into separate statewide risk pools. However, states may merge their individual and small group markets under Section 1312(c)(3) of the law “if the State determines appropriate.” ACA Section 1311(b)(2) also affords states the option to merge their individual and SHOP exchanges.

Another measure introduced in early May, (H.R. 2400, Issa) also disregards the distinction between the group and non-group market segments by allowing individuals who are not federal employees to enroll in the Federal Employees Health Benefits Program.

 


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. 

Return to high risk pools implies failure of ACA’s single statewide risk pool

The return to state high risk pools encouraged by Trump administration executive action and as proposed in the American Health Reform Act pending in the Senate — mechanisms phased out with the Patient Protection and Affordable Care Act reforms of the non-group segment effective in 2014 — carries with it a critical implication. Specifically, the individual market even with single statewide risk pools mandated by Section 1312(c) the Affordable Care Act are too small —  in some less populous states at least — to achieve a sufficient spread of risk. Therefore, the logic implies, individuals with conditions who use largely disproportionate amounts of medical care must be excluded from the statewide pool and cordoned off in high risk pools in order to maintain the pool’s actuarial viability and ward off adverse selection in the individual market.

That cuts against a core assumption of the Affordable Care Act — that by having all individuals and family members in a given state treated as one large risk pool, a sufficient spread of risk would be achieved. In addition, the law’s premium stabilization programs and an ongoing risk adjustment mechanism to compensate health plan issuers who take on members with costly, complex chronic conditions would act as buffers to ensure the actuarial integrity of the pool and reduce the likelihood of adverse selection. The proposed revival of high risk pools would suggest that’s not the case and the amount of medical care utilized by some pool members is so costly that it skews an entire state’s risk pool.

This in turn leads to a far larger implication. If 5 percent of the pool population account for 50 percent of the costs — or 1 percent accounting for 20 percent to use another expression of the ratio cited in this National Institute for Health Care Management data brief — then medical care may not be an insurable risk due to insufficient spread of risk. If that’s the case, it could result in plan issuers ceding most or all of the loss risk to the government as is currently the case in Medicare and Medicaid managed care. Notably, Aetna CEO Mark Bertolini reportedly suggested just that, according to this account at Reason.com, with nominal insurers taking on the role of plan administrators handling “back room” transactions:

The government doesn’t administer anything. The first thing they’ve ever tried to administer in social programs was the ACA, and that didn’t go so well. So the industry has always been the back room for government. If the government wants to pay all the bills, and employers want to stop offering coverage, and we can be there in a public private partnership to do the work we do today with Medicare, and with Medicaid at every state level, we run the Medicaid programs for them, then let’s have that conversation.

Note the second condition in Bertolini’s statement: If employers want to stop offering coverage. Complain as they may about rising premiums in group coverage, there’s no indication that the highly entrenched employee benefit model of covering medical care for the non-elderly is going to be abandoned by employers anytime soon. Even if the Affordable Care Act’s mandate on employers of 50 or more to offer coverage is repealed given favorable tax treatment of employer-sponsored medical care 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. 

House Passes AHCA. Next step is to the Senate… with a whole new bill. | Michael Lujan | Pulse | LinkedIn

Source: House Passes AHCA. Next step is to the Senate… with a whole new bill. | Michael Lujan | Pulse | LinkedIn

In this piece, Michael Lujan does a good job outlining the basic insurance principles. The problem however in the non-group market goes deeper than a failure to understand the relatively simple rules that govern all forms of insurance. Paying for medical costs shifted away the major medical risk insurance model to the prepaid model that came with the rise with HMOs and managed care organizations in the 1970s and 1980s.

Hence, consumers don’t see medical risk sharing in the same way they view other forms of personal insurance intended to protect against accidental or unexpected large losses such as life, homeowners and auto. The managed care model of bundling in relatively low cost primary care has furthered that perception. Consequently, consumers chafe at basic insurance functions such as underwriting and being asked to pay deductibles and otherwise assume a degree of risk. To them, it appears as a take away — “unusable” coverage that reduces value in their eyes, especially as premiums rise.

Unless consumers of individually sold medical plans see them as insurance and something only to be used when needed to cover large, unexpected medical costs, the segment will continue to struggle regardless of reform efforts such as the current House bill. It would restore another insurance basic with medically underwritten premium rating for states that opt to allow it for individuals who have not maintained continuous coverage provided the state has established a high-risk pool or participates in a federally-sponsored high-risk pool.

As long as consumers are reluctant to be insured in the conventional insurance sense for medical risk and insurers are reluctant to cover it, the long term viability of the non-group market remains in question.

 


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. 

Fate of 2018 individual market could turn on plan issuer response to proposed Market Stabilization rulemaking

With efforts to enact a successor to the Patient Protection and Affordable Care Act bogging down in the legislative process as health plan issuers must soon make decisions on their participation in the individual market and state health benefit exchanges for plan year 2018, much could ride on the Trump administration’s pending Market Stabilization administrative rulemaking and whether it will instill sufficient market confidence among plan issuers worried about losses and adverse selection. Indeed, the outcome of the rulemaking could well determine whether an individual market exists at all in many states next year as Congress debates changes to the Affordable Care Act’s commercial medical insurance market reforms but also the scope and financing of the six-decade-old Medicaid program.

The Department of Health and Human Services is fast tracking the rulemaking and currently reviewing about 4,000 comments received by the March 7 comment deadline. The scope of the rulemaking would directly apply to plans offered on state health benefit exchanges in states where the federal government operates the exchange or provides the online enrollment platform. As for the dozen states that operate their own exchanges, HHS states in the proposed rulemaking it understands those exchanges may not be able to implement the rule in 2017. It asked for comment on an appropriate transitional period for state-based exchanges and whether the rule should be optional for them. HHS also sought comment on how the rulemaking should apply to plans sold outside the exchanges.

The proposed rule is aimed at reducing the likelihood of enrollee gaming and adverse selection by requiring verification of eligibility for special enrollment periods and supporting continuous enrollment. It would more closely conform individual coverage to employer-sponsored and Medicare coverage by establishing the plan year 2018 open enrollment period as November 1 to December 15, 2017. The rulemaking would require those seeking to enroll outside this period to provide documented evidence of life events such as a change in family status or loss of employer-sponsored coverage. It also would make it easier for health plan issuers to collect lapsed premium payments from the prior year upon renewal, liberalizes the actuarial value definitions of all but silver plans as affords states and plan issuers greater leeway for determining provider network adequacy.

“Continued uncertainty around the future of the markets and concerns regarding the risk pools are two of the primary reasons issuer participation in some areas around the country has been limited,” HHS stated in the preamble to the proposed rule. “The proposed changes in this rule are intended to promote issuer participation in these markets and to address concerns raised by issuers, states, and consumers. We believe such changes would result in broader choices and more affordable coverage.”

While the rulemaking is intended to provide a degree of certainty to plan issuers, it can’t provide a full remedy. The lack of quick legislative progress on an ACA successor has increased the likelihood a federal court ruling finding executive branch funding of out of pocket cost subsidies for silver plans sold on the exchanges unconstitutional will take effect. Implementation of the ruling is temporarily on hold pending legislative action. With both inter and intra party legislative gridlock on health care reform, the Trump administration is far less likely to appeal the decision, allowing it to stand.

 


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. 

To “401 percenters” Affordable Care Act isn’t

WASHINGTON (AP) — Michael Schwarz is a self-employed business owner who buys his own health insurance. The subsidized coverage “Obamacare” offers protection from life’s unpredictable changes and freedom to pursue his vocation, he says.Brett Dorsch is also self-employed and buys his own health insurance. But he gets no financial break from the Affordable Care Act. “To me, it’s just been a big lie,” Dorsch says, forcing him to pay more for less coverage.Schwarz and Dorsch represent two Americas, pulling farther apart over former President Barack Obama’s health care law. Known as the ACA, the law rewrote the rules for people buying their own health insurance, creating winners and losers.Those with financial subsidies now fear being harmed by President Donald Trump and Republicans intent on repealing and replacing the ACA. But other consumers who also buy their own insurance and don’t qualify for financial help feel short-changed by Obama’s law. They’re hoping repeal will mean relief from rising premiums.

Source: News from The Associated Press

This is one of the major weaknesses of the Affordable Care Act’s reforms of the individual medical insurance market. Naturally, households earning in excess of 400 percent of federal poverty and who don’t qualify for subsidies are going to be unhappy since they bear the full brunt of premium increases as health plan issuers try to stabilize the market segment under the the law’s provisions by raising premiums. It’s no surprise these 401 percenters as I dubbed them aren’t in favor of keeping those rules in place since from their perspective, they’ve gotten a raw deal other than appreciating the rule requiring plans to accept them regardless of medical history.

The situation also points up the problem of a means-tested scenario of providing medical coverage to those not covered by employer-sponsored plans or Medicare. It’s far from seamless under the Affordable Care Act. The law created multiple categories of benefits and costs for this cohort keyed to household income: 1) Medicaid; 2) Qualified Health Plans offered on state health benefit exchanges with subsidies based on multiple income tranches; and 3) Unsubsidized plans, typically sold outside of the exchanges.

A more elegant, unified scenario is sorely needed, particularly given more households now rely on earnings outside of formal employment arrangements that come with medical benefits or are employed by small employers offering little or minimal 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. 

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