Tag Archive: non-group market

Tax bill’s evisceration of individual mandate will shrink, bifurcate non-group market

Reforms of the non-group market aimed at revitalizing it as it faced the death spiral of adverse selection at the start of the decade have reached a turning point. A major tax reform bill almost certain to be signed into law this month effectively cancels out one of three foundational elements designed to rescue the market contained in the Patient Protection and Affordable Care Act: the tax penalty levied on households that go “bare” without medical coverage.

The Affordable Care Act reforms effectively force buyers and sellers together to sustain a functional non-group market. Plan issuers must accept everyone applying for coverage without medical underwriting. On the buyer side, the thinking was the penalty would provide incentive to purchase an individual plan, with the segment acting as a residual market for those without access to other forms of coverage. In retrospect, turns out the incentive wasn’t strong enough, particularly to improve the spread of risk by creating a diversified risk pool of young and old and those in good and ill health. Many households found the tax penalty the superior option over purchasing coverage, eroding the intended effect of strengthening the market and ensuring a good spread of risk.

Zeroing out the tax penalty as the pending tax bill does would not collapse non-group into a rapid adverse selection death spiral, accounting to the Congressional Budget Office. The CBO projects the negation of the tax penalty will cut the estimated 15 million Americans in the individual market by one third by 2027. Nevertheless, the CBO said, the segment “would continue to be stable in almost all areas of the country throughout the coming decade.” In other words, a shrunken but not a fatally crippled market over the near term.

Going forward, a couple of factors not addressed in the CBO analysis could further downsize the non-group segment:

  • The exit of households earning in excess of 400 percent of federal poverty and therefore ineligible for premium subsidies offered though state health benefit exchanges, particularly for family plans and for individuals aged 50 to 64. Premium rates are already considered out of reach for many of these households. According to the CBO analysis, premiums will continue to rise by 10 percent a year over the next 10 years. The CBO analysis notes non-enforcement of the tax penalty would help drive the increases as healthier people would be less likely to obtain insurance, requiring plan issuers to make up the lost premium revenue by raising rates.
  • The replacement of Affordable Care Act compliant individual plans with short term plans. In October, the Trump administration directed three federal agencies to consider new regulations or guidance that would expand the availability of short term policies beyond the current 90 day limit. If short term policies are defined as up to 12 versus three months and be renewable for another year, they would offer a medically underwritten, lower cost alternative to those who can pass underwriting standards. That would reintroduce medical risk selection mostly barred by the Affordable Care Act, which permits premium rating based only on age, location, family size and tobacco use. According to  Modern Healthcare, at least two plan issuers – UnitedHealth and Aetna – are looking into issuing short term plans, potentially offering covered benefits on a par with individual plans. That would create a bifurcated non-group market rather than the single state risk pooling under the Affordable Care Act’s reforms and has raised concerns among stakeholders and state regulators according to Modern Healthcare.
 


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. 

Analysis: Non-group market faces adverse selection failure starting in thinly populated states with repeal of ACA individual mandate

The Senate Republican plan to use tax legislation to repeal the federal requirement that Americans have health coverage threatens to derail insurance markets in conservative, rural swaths of the country, according to a Los Angeles Times data analysis.That could leave consumers in these regions — including most or all of Alaska, Iowa, Missouri, Nebraska, Nevada and Wyoming, as well as parts of many other states — with either no options for coverage or health plans that are prohibitively expensive.

Source: Republicans’ latest plan to repeal Obamacare’s insurance requirement could wreak havoc in some very red states – LA Times

A New York Times analysis finds repeal of the individual mandate would spur sales of medically underwritten and rescindable short term plans with narrower coverage benefits than mandated for non-group plans by the Patient Protection and Affordable Care Act — particularly if an executive order issued by President Donald Trump in October that would extend the current three month term limit on such policies to one year is fully implemented.

According to this article from The Hill, state regulators are worried if this plays out, non-group markets could fall into an adverse selection death spiral and collapse.

 


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 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 adopts market-based statement of health care policy

Nearly nine months into his administration after many months of policy debate in Washington, President Donald Trump has issued an official statement of his administration’s health care policy in an October 12, 2017 Executive Order.

Trump’s policy is essentially not much different than that of his predecessor, Barack Obama, insofar as it retains one of the nation’s largest private sector financing mechanisms: employee benefit medical care plans. Like the managed competition principle of Obama’s Patient Protection and Affordable Care Act, Trump’s policy is market-based and aspires to harness competitive market forces to reduce medical costs and increase access to coverage.

It also mirrors the Affordable Care Act insurance market reforms by concentrating on the small employer group and individual (non-group) market segments where medical care cost pressures hit hardest. The order suggests (not orders) his administration explore allowing small employers to participate in association health plans traditionally used by large employer groups. In addition, Trump suggested his administration consider proposing regulations or revising guidance to increase the use of Health Reimbursement Accounts (HRAs) and expand employers’ ability to offer HRAs to their employees and allow HRAs to be used in conjunction with non-group coverage for employees.

The latter element closely aligns with recent legislation signed into law late in the Obama administration that enables employers to use a new type of HRA to subsidize premiums on a pre-tax basis for employees obtaining coverage in the non-group market. Effective January 1, 2017, employers of 49 or fewer employees that do not offer group coverage can fund up to $4,950 annually for single employees and $10,000 for an individual plan covering an employee and their family members.

Various observers expressed concern at the executive order’s suggestion (once again couched as a request, not a directive) that the administration consider reversing an Obama administration restriction limiting short term individual medical insurance policies to a maximum term of three months and expanding the limit to 12 months or even longer. The concern is well placed because doing so would put short term plans in competition with non-group and small group plans sold with the standard 12 month coverage term.

The Affordable Care Act established ten essential benefit categories with the goal to put small group and non-group coverage on a par with large group plans. But the tradeoff for these more generous plans is high and rapidly rising premium rates and deductibles, particularly painful for households earning too much to qualify for premium and cost sharing subsidies for individual plans sold on state health benefit exchanges. However, short term plans offering skimpier coverage for lower cost won’t comply with the Affordable Care Act’s minimum coverage mandate for individual taxpayers, subjecting them to a tax penalty.

Finally, Trump’s executive order reinforces market-based approach to mediate medical care costs by requiring the Health and Human Services Department in consultation with the departments of Treasury and Labor as well as the Federal Trade Commission to produce a report by April 12, 2018 and every two years following outlining where existing state and federal policy hinders market competition. The report must also identify policy actions to reduce barriers to market entry, limit excessive consolidation and prevent abuses of market power.

 


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 cites market uncertainty in reducing non-group presence in California

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Anthem explains its decision to withdraw from 16 of 19 of the state’s rating regions in an email sent today to individual plan members, with proviso it could boost California plan offerings in future:

Unfortunately, uncertainty in the health insurance market does not provide the clarity and confidence we need to offer affordable coverage to our members in 2018. Anthem is committed to affordable health care coverage and we’re truly sorry we can’t continue offering these plans. We hope to increase our plan offerings in California very soon.

 


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. 

Deficient economies of scale challenge Nevada non-group market

The scarcity of doctors and medical facilities in vast, thinly populated areas can mean higher costs to insurers. But Nye County, which borders Las Vegas’ Clark County, is one of the state’s largest rural counties — and all four companies will participate there. “It is puzzling to me how carriers are ensuring full county coverage to Nevada’s neighboring states, yet are at a potential loss about how to offer insurance for all but three of Nevada’s counties,” Sandoval wrote the same executives earlier this week. He told them that leaving the exchange vacant in 14 counties will set back years of work to nearly halve Nevada’s uninsured rate.

Source: Governor insists execs work to keep rural Nevadans insured | Charlotte Observer

Nevada Gov. Brian Sandoval is confronting a challenge facing the non-group medical insurance market in states where there are too few patients and providers to make for a viable insurance market. Coverage goes hand in hand with provider networks since without enough providers, coverage isn’t useful. Factoring in overhead, it’s no wonder plan issuers aren’t interested in playing, particularly facing the possible loss of cost sharing subsidies for exchange silver plans.

Even though the Patient Protection and Affordable Care Act pooled entire state non-group populations into a single statewide risk pool, provider networks are by definition local. In less populous areas, it’s possible only statewide integrated payer and provider plans are going to work. Federally Qualified Health Centers may also have to play a larger role in providing primary care in these areas, with the plans covering costlier services provided in more populated parts of a state.

Telemedicine can also play a role in access to consultations with distant specialists and post hospital discharge patient monitoring. But it requires robust advanced telecommunications infrastructure that is typically lacking in less densely populated areas. Here too, the federal government can play a constructive role in financing its construction in areas passed over by private sector providers.

 


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. 

401 percenters face another year of double digit premium hikes — with likely political consequences

ASHEVILLE, N.C. — Jane and Abe Goren retired here five years ago to escape the higher cost of living they had abided for decades in the suburbs of New York City. They did not anticipate having to write monthly checks for health insurance that would exceed their mortgage and property taxes combined. Ms. Goren, 62, is paying nearly $1,200 a month for coverage through the individual insurance market (her husband, 69, is on Medicare) and accumulating enough debt that her sons recently held a fund-raiser to help. For next year, her insurer, Blue Cross and Blue Shield of North Carolina, has proposed raising premiums by an average of 22.9 percent, a spike it is blaming squarely on President Trump.

Source: Middle Class, Not Poor, Could Suffer if Trump Ends Health Payments – The New York Times

The Gorens are part of what I’ve dubbed the 401 percenters — households with modified adjusted gross incomes in excess of the 400 percent of federal poverty cutoff for advance premium tax credit subsidies offered via state health benefit exchanges. For plan year 2018, the likely loss of reduced cost sharing reduction (CSR) subsidies for households with incomes between 100 and 250 percent of poverty levels is being blamed for another round of double digit premium increases. The cost sharing subsidies are tied up in litigation over which branch of the federal government has authority to allocate the CSR funding to health plan issuers.

There’s bound to be a political blowback in next year’s mid-term elections over steep premiums in the non-group segment, particularly among voters older than 50 but under age 65 and not yet eligible for Medicare, a demographic with strong voter turnout.

 


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. 

Anthem’s exit from Ohio non-group is a shot across the bow of official Washington

The Anthem exit in Ohio is especially worrying, however, given the massive swath of the country in which it is the sole insurer in the exchanges, according to Cynthia Cox, associate director at nonpartisan health policy think tank The Kaiser Family Foundation.”Anthem’s exit from Ohio could be the tip of the iceberg,” Cox told Business Insider on Tuesday. “Their reasons for leaving don’t appear to be specific to Ohio, rather about political and regulatory uncertainty coming from the White House and Congress. If Anthem leaves the market nationally, there could be hundreds of thousands of people without any exchange insurer.” In a statement to Business Insider, Anthem cited a number of uncertainties that could impact the market coming from the Trump administration and Congress. “The individual market remains volatile and the lack of certainty of funding for cost sharing reduction subsidies, the restoration of taxes on fully insured coverage and, an increasing lack of overall predictability simply does not provide a sustainable path forward to provide affordable plan choices for consumers,” said the statement.

Source: Anthem Obamacare exchange exit from Ohio – Business Insider

Cox raises an excellent point that suggests Anthem’s withdrawal from the Ohio non-group market is less about Ohio than national policy. Anthem is likely firing a shot across the bow of Washington, warning it to quickly provide a degree of certainty going forward — or all bets are off nationwide.

That’s bound to get attention given Anthem’s major presence in the non-group medical insurance market. In late April, Anthem tentatively indicated it would sell coverage in state health benefit exchanges for plan year 2018, but reserved the right to reverse course lacking clear federal policy direction, particularly with regard to reduced cost sharing subsidies offered to low income households and the Affordable Care Act’s tax on health plan issuers.

As some observers have noted, Anthem could simply raise premium rates by 20 percent on its silver level plans to make up for the potential loss of cost sharing reduction subsidies for income qualifying households as Anthem indicated in April. However, that would potentially accelerate adverse selection among households that don’t qualify for significant advance premium tax credits to offset higher premiums, particularly coming after steep increases for 2017 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. 

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