Tag Archive: Milliman

Risk corridor element falls short as exchange QHP premium stabilization mechanism

Insurers can now expect to receive only 12.6% of 2014 risk corridor receivables in 2015, with the remainder to be potentially funded in future years. Last week’s announcement validates prior concerns regarding a 2014 risk corridor funding shortfall because of Cromnibus and higher-than-expected 2014 claim costs. This shortfall occurred despite two earlier injections of additional transitional reinsurance program recoveries into the Patient Protection and Affordable Care Act of 2010 (ACA) individual market.The shortfall will have a significant negative financial impact on insurers who find themselves in a risk corridor receivables position, not only for the 2014 benefit year but also possibly for 2015 and 2016. A 2014 funding shortfall puts the collectability of 2015 and 2016 payouts in increased jeopardy—2014 receivables that were not paid in 2015 will be first in line to receive payments in later years if funds are available.

Source: Headwinds cause 2014 risk corridor funding shortfall – Milliman Insight

Risk corridors — one of three elements of the Patient Protection and Affordable Care Act’s Premium Stabilization Programs designed to help ward off steep rate increases for plans sold on state health benefit exchanges — has proven problematic and is unlikely to significantly contribute to reducing rate volatility among exchange Qualified Health Plans (QHPs).

That’s the upshot of this Milliman analysis of the risk corridors component — a short lived financial mechanism that expires at the end of 2016. Risk corridors are designed to level claims experience among health plans offered on state health benefit exchanges. Plans that suffered greater than expected losses are partially compensated for them — and thus reducing their need to sharply boost premium rates — while those paying out less than expected transfer funds to plans with worse experience. While risk corridors have not yet expired and have another year of life, Milliman’s Scott Katterman offers a detailed post mortem of this troubled premium stabilization program component.

 


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. 

Healthcare Town Hall » Insurers adjust to paradigm shift

Milliman’s Tom Snook

via Healthcare Town Hall » Insurers adjust to paradigm shift.

Milliman’s analysis suggests the key to keeping the individual market actuarially viable isn’t only about getting enough so-called young invincibles into individual market state risk pools. It’s also about bringing in older people in good health — and keeping them healthy.

 


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. 

Changes in the individual market, adverse selection to have largest impact on 2014 premiums, Milliman projects

One month after it produced a projection of factors affecting 2014 premiums in California’s individual health insurance market segment for the Golden State’s health benefits exchange, Covered California, the actuarial consulting firm Milliman has issued a similar study with a national focus.  Like its analysis of the California market, Milliman’s review examined the impact of new coverage requirements under the Patient Protection and Affordable Care Act as well as individuals opting to “buy up” to plans with richer benefits, premium and benefit subsidies and the underlying upward trend in the cost of medical treatment.  It was commissioned by America’s Health Insurance Plans.

Milliman’s national study took into account additional factors including new taxes and fees on health plan issuers and premium stabilization programs including a transitional reinsurance program to protect plans from unexpectedly high care costs.  It concludes “average individual market pre-subsidy premiums are anticipated to increase significantly from what standard rates are today.”  It adds advance tax credit premium subsidies for coverage purchased through state benefit exchanges for those earning 400 percent or lower of the federal poverty level will produce “significant reductions from current premium levels.”

The Milliman study projects that Affordable Care Act changes in the individual risk pool and adverse selection — largely due to the law’s ban on medical underwriting of individuals looking to purchase or upgrade coverage — will have the largest impact on premiums.  Those factors including the potential for younger, healthier individuals to remain in plans issued prior to 2014 and sicker people opting for 2014 plans with more extensive coverage could increase premiums by 20 to 45 percent, according to Milliman.

The study raises a red flag over the law’s restriction on the use of age as a rating factor for older individuals, predicting it will boost premiums for younger people and thus potentially drive adverse selection if they opt to forgo coverage until they need it — notwithstanding the Affordable Care Act’s tax penalties for not having some form of health coverage. “For the individual market risk pool to remain a stable market in 2014 and beyond, it is vital that young and healthy individuals enter and remain in the insurance market in addition to individuals with an immediate need for healthcare services,” the study concludes.

 


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. 

“Loophole” has potential to delay health insurance market rules, disrupt exchange marketplace in 2014

Health insurers could have the option to take an extra year to overhaul their individual and small group offerings to meet Patient Protection and Affordable Care Act requirements effective in 2014 and to decide if they want to participate in the state exchange marketplace. Such are the startling implications of a Los Angeles Times story early this month that reported that some health plan issuers are considering waiting until 2014 to revamp their plans to comply with the law.  The Times story cites “a little-known loophole” in the Affordable Care Act “that enables health insurers to extend existing policies for nearly all of 2014.”  The story quotes Timothy Stoltzfus Jost, a law professor and health policy expert at Washington and Lee University as saying that insurers have discovered the loophole, raising the question of “how many will try to game the system.”

The likely loophole?  The Affordable Care Act qualifies certain health plan requirements as applying in “plan years beginning on after January 1, 2014.”  So when does a plan year – the key operative term – begin?  45 Code of Federal Regulations 144.103 defines “plan year” relative to employer-sponsored coverage (such as would be offered through the exchange marketplace Small Business Health Options Program) as follows:

Plan year means the year that is designated as the plan year in the plan document (emphasis added) of a group health plan, except that if the plan document does not designate a plan year or if there is no plan document, the plan year is—

(1) The deductible or limit year used under the plan;

(2) If the plan does not impose deductibles or limits on a yearly basis, then the plan year is the policy year;

(3) If the plan does not impose deductibles or limits on a yearly basis, and either the plan is not insured or the insurance policy is not renewed on an annual basis, then the plan year is the employer’s taxable year; or

(4) In any other case, the plan year is the calendar year.

For individual coverage:

Policy Year means in the individual health insurance market the 12-month period that is designated as the policy year in the policy documents (emphasis added) of the individual health insurance coverage. If there is no designation of a policy year in the policy document (or no such policy document is available), then the policy year is the deductible or limit year used under the coverage. If deductibles or other limits are not imposed on a yearly basis, the policy year is the calendar year.

Here’s my read on how the loophole might come into play.  The italicized text basically allows plan issuers to define the plan or policy year as they choose.  Theoretically, they could issue coverage on December 31, 2013 and designate it for plan or policy year 2013, thereby avoiding Affordable Care Act requirements for plan years beginning on or after January 1, 2014.

If health plan issuers opt exploit the loophole, there could well be litigation over how the relevant provisions of law are to be interpreted and applied, creating uncertainty and delay in the application of the Affordable Care Act’s health insurance market rules as well as the planned rollout of the exchange marketplace in 2014.  The uncertainty also has the potential to complicate contract negotiations currently underway between “active purchaser” state exchanges and health plans seeking qualified health plan status with those exchanges. Plan issuers could opt to exercise the so-called loophole and issue “plan year 2013” coverage as late as December 31, 2013 if they are unable to reach negotiated contracts with these exchanges.

A study prepared for the health plan industry group America’s Health Insurance Plans by the actuarial consulting firm Milliman would appear to support the notion of having plans designated plan year 2013 still in force in 2014 and exempt from Affordable Care Act provisions such as offering essential health benefits (EHB) and minimum actuarial value of 60 percent of projected claims costs. “The final market and rating regulation released by the (federal) HHS at the end of February made clear that individual policies can stay in place until their scheduled renewals in 2014 instead of requiring all individual plans to convert to an ACA-compliant EHB plan on January 1, 2014,” Milliman opined in its projection of factors affecting premium rates in 2014 dated April 25, 2013.

 


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. 

We are the 401%: Middle class households ineligible for exchange subsidies could reignite health reform

A little more than three years ago, steep premium increases in California’s individual market sparked outrage from Sacramento to Washington, providing a political tipping point for the enactment of the then-moribund Patient Protection and Affordable Care Act (PPACA). This fall and into 2014, those without government or employer-sponsored health coverage who earn more than 400 percent of the federal poverty level (FPL) ($45,960 for singles; $92,200 for a family of four) may find themselves outraged yet again by sharp double digit premium increases.  Under the PPACA, those earning in excess of 400 percent of FPL are ineligible for income tax subsidies available for qualified health plans purchased through state health benefit exchanges.  They will bear the full amount of higher premiums on their own.

Projections of the impact of the PPACA individual market reforms issued this week by the Society of Actuaries (on the medical cost impact of those newly insured under the law) and the actuarial consulting firm Milliman (on premiums in California) suggest premiums for plan year 2014 will rise significantly for these relatively higher income middle class households.  The Society of Actuaries estimates the PPACA individual market reforms will drive up claims costs by an average of 32 percent nationally by 2017 and by double digits in as many as 43 states.  The Milliman study commissioned by the California exchange, Covered California, estimates those currently insured with incomes exceeding 400 percent of FPL purchasing the lowest cost “bronze” rated plan covering 60 percent of expected costs can expect a 30.1 percent premium hike for 2014.   “Currently insured individuals with incomes greater than 400% of FPL will experience the largest increases,” the Milliman study notes.

Those in this income range likely to be hit with the biggest increases are middle class people in their 50s and 60s – the large Baby Boomer demographic not yet Medicare eligible and not covered by employer-sponsored plans.  A major potential implication of higher premiums on top of the already relatively high rates paid by this age group (new age rating rules under the PPACA will provide some relief) is many of them may find even bronze-rated coverage unaffordable and go uninsured, contrary to the policy goal of the PPACA to increase affordability and access to coverage.

If 2014 rate increases for 401+ percent FPL households boost the price of the cheapest plans too high, tax penalties built into the law for those without public or private coverage won’t provide incentive for these individuals to purchase coverage.  The PPACA’s individual mandate expressly exempts those who have to spend more than eight percent of their incomes to purchase the cheapest bronze plan offered in their geographic rating region. The law also provides for a financial hardship exemption.

Because of the sheer size of the Boomer demographic and Boomers’ willingness to seek political redress of their grievances, if the premium increases for the 401 percenters predicted indirectly by the Society of Actuaries and directly by Milliman materialize, it could create impetus for further reforms 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. 

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