Tag Archive: Obama administration

Individual health insurance segment will continue to face existential crisis post-election

Source: Health Affairs Blog. http://healthaffairs.org/blog/2017/02/08/the-marketplace-premiums-increase-underwriting-cycle-or-death-spiral/

 

Regardless of what the incoming Trump administration and Congress opt to do with the Patient Protection and Affordable Care Act’s reforms of the individual health insurance market, the segment will continue to face an existential crisis. The individual market remains the problem stepchild of health coverage, playing an important but relatively minor role in a siloed scheme dominated by employer sponsored coverage for a solid majority of those under age 65 and the big government entitlement programs of Medicare and Medicaid for most of the rest. Not to mention the other integrated government run care systems for active duty military members and their dependents and military veterans.

Given its place in the overall scheme of things, individual health insurance is the remainder market of last resort for those not covered by the dominant private and public systems. It functions as a high turnover, temporary segment that’s inherently unstable. People move in and out of coverage due to changing life circumstances or obtaining eligibility for coverage under one of the dominant systems. Others possess a deeply ingrained “culture of coping” as some have termed it to get medical care where it’s the most easily accessible and affordable such as hospital emergency departments, community clinics and free care events. That coping culture includes avoiding paying for individual health insurance, a pattern in place decades before the Affordable Care Act’s individual market reforms went into effect in 2014. It’s not going to be changed quickly even as health plan issuers are required to accept all applicants without regard to medical history and the law provides subsidies for premiums and out of pocket expenses to low and moderate income households.

That instability makes it very challenging for the basic insurance principle of risk spreading since the risk being insured against is highly dynamic. Actuaries base their projections on relatively stable risk pools and flows of premium dollars into the pool. As long as “covered lives” are moving in and out of the individual market, that desired actuarial predictability will remain elusive, the Affordable Care Act’s carrots and sticks aimed at stabilizing the pool notwithstanding.

As policymakers reassess the Affordable Care Act health insurance market reforms in the post-election period, they might well reexamine an assumption of the law that small group coverage would be eclipsed by the reformed individual market. It was expected that by making individual market coverage more like small group coverage by establishing small group plans as benchmark plans, that along with the individual market reforms would drive more people into individual coverage.

It hasn’t quite worked out that way. Even though the Affordable Care Act does not mandate they do so, small employers are continuing to offer group coverage, albeit less generous than the recent past and more akin to major medical, catastrophic plans with high deductibles. If they are offered coverage under them, employees have little incentive to enroll in individual coverage since they would not qualify for subsidized coverage sold on state health benefit exchanges.

That circumstance reduces the potential size of the individual segment and in so doing, degrades the individual market risk pool. While the Obama administration’s health insurance reforms are based on keeping employer-sponsored health benefits as the bedrock of coverage for most pre-retirement Americans, they also were aimed at revitalizing the struggling individual market. Given that employer-sponsored coverage cuts against a robust individual health insurance space, it may not be possible to have both.

 


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. 

Killing the ACA individual health insurance market reforms softly

If they so choose, the incoming Trump administration and new Congress could begin quickly unwinding the Patient Protection and Affordable Care Act’s individual health insurance market reforms without taking any affirmative action to do so. The reason is the House of Representatives prevailed earlier this year in United States House of Representatives v. Burwell in which the House challenged the outgoing Obama administration’s funding of out of pocket cost sharing subsidies under Section 1402 of the Affordable Care Act. That section provides for supplemental subsidies in addition to advance premium tax credits for households earning between 100 and 250 percent of federal poverty levels. The additional subsidies limit out of pocket costs for households at that income level enrolling in silver level qualified health plans offered on state health benefit exchanges. In House of Representatives, plaintiffs argue funding of the cost sharing subsidies is not a continuing appropriation and thus requires an annual appropriation as part of the federal budget.

In a ruling issued May 12, U.S. District Court Judge Rosemary M. Collyer agreed, finding the supplemental cost sharing subsidies must be annually appropriated, but leaving them in place pending the Obama administration’s appeal. If the Trump administration opts not to move forward with the Obama administration’s appeal of Collyer’s decision, the ruling stands with immediate effect.

The cost sharing subsidies effectively increase the actuarial value of silver plans that cover on average 70 percent of medical care costs up to the annual out of pocket limit to a higher percentage. Without funding for the cost sharing subsidies, health plan issuers in state health benefit exchanges would be forced to take a bath since calculated premiums would not account for the higher actuarial value of silver plans with cost sharing subsidies. Already leery of higher than expected medical costs and concerned over the potential of adverse selection among exchange plans, the loss of federal funding for the cost sharing subsidies would likely send health plan issuers running for the exits and potentially seeking relief from enforcement of Section 1402. To avoid the pandemonium that would roil the exchanges, plans might pressure Congress and the new administration to appropriate stopgap funding to give policymakers time to reassess the options for plan year 2018 as part of an orderly transition to enact the incoming Trump administration’s avowed repeal of some or all of the Affordable Care Act.

 


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. 

Obama cites “insufficient” ACA grandfather clause for policy cancellation uproar

At a press briefing this week announcing his administration will allow individual and small group health plan issuers to temporarily continue offering plans that don’t meet new Affordable Care Act standards effective January 1, 2014, President Obama blamed a shortcoming in the law for the confusion and angst arising from cancellation notices plan issuers recently sent out informing policyholders their current coverage is being cancelled. That coverage will no longer be ACA compliant effective January 1, the notices explained, thereby requiring policyholders to get into new plans that meet ACA coverage standards that take effect that year. Here’s what the president said, according to a White House transcript of the briefing:

With respect to the pledge I made that if you like your plan, you can keep it, I think — and I’ve said in interviews — that there is no doubt that the way I put that forward unequivocally ended up not being accurate. It was not because of my intention not to deliver on that commitment and that promise. We put a grandfather clause into the law, but it was insufficient.

What is the “insufficient” ACA grandfather clause referred to by the president? It’s at Section 1251(a)(2) of the law:

 (2) CONTINUATION OF COVERAGE.—As revised by section 10103(d)(1). Except as provided in paragraph (3), with respect to a group health plan or health insurance coverage in which an individual was enrolled on the date of enactment of this Act, this subtitle and subtitle A (and the amendments made by such subtitles) shall not apply to such plan or coverage, regardless of whether the individual renews such coverage after such date of enactment.

That means those enrolled in individual and small group plans as of the March 23, 2010 ACA enactment date can remain in them. But that’s’ where the insufficiency comes in. It doesn’t apply to plans that came about after the March 23, 2010 ACA enactment date. Those plans aren’t grandfathered and become legally obsolete for plan years starting January 1, 2014 and later. Rather than letting them fall through the cracks and to tamp down outrage over the cancellation notices, the administration is asking plan issuers and state regulators to take it up on a voluntary waiver offer to extend these plans out as far as September 30, 2015.

Congress is also acting to amend Section 1251(a)(2) to bring the orphan plans within the scope of the grandfather clause.

H. R. 3406 and S. 1617 would retroactively extend the clause to state:

(2) CONTINUATION OF COVERAGE- With respect to a group health plan or health insurance coverage in which an individual was enrolled during any part of the period beginning on the date of enactment of this Act and ending on December 31, 2013, this subtitle and subtitle A (and the amendments made by such subtitles) shall not apply to such plan or coverage, regardless of whether the individual renews such coverage. (New text shown in italics).

Passed this week by the House, H.R. 3350 does not amend the ACA but rather enacts new law that allows health plan issuers with individual plans in effect as of January 1, 2013 to continue to sell the plans outside of the state health benefit exchange marketplace in 2014 and deems these plans grandfathered for the purposes of meeting minimum plan benefit standards effective that year.

 


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. 

Health plan issuers could keep pre-ACA plans in place through September 2015 under Obama administration guidance

President Obama this week offered an administrative fix to quell the uproar over the imminent cancellation of health plans in the individual and small group markets that will not be compliant with coverage standards for plans effective after January 1, 2014 under the Patient Protection and Affordable Care Act.

According to a fact sheet posted at whitehouse.gov, it would allow insurers to renew their current policies for current enrollees without adopting the 2014 market rule changes. State health plan regulators would have the final say as to whether plan issuers can leave in place plans based on the pre-1/1/14 standards, which prescribe minimum essential benefits and plan actuarial value.

Plan issuers however already had the option to keep their 2013 plans in place though 2014 before this week’s presidential announcement, courtesy of what has been termed a “loophole” in existing federal regulations. I blogged about the loophole back in April. Plan issuers can use it to issue a one-year policy covering all of 2014 under the pre-1/1/14 rules as late as December 31 of this year and simply call it a 2013 plan, exempting it from Affordable Care Act standards.

With this week’s action, the administration gave plan issuers even more leeway to keep using pre-ACA plans. If the plans were in effect as of October 1, 2013, they could remain in effect through September 30, 2015 — and possibly even later — per this November 14, 2013 letter (.pdf) to state insurance regulators:

Under this transitional policy, health insurance coverage in the individual or small group market that is renewed for a policy year starting between January 1, 2014, and October 1, 2014, and associated group health plans of small businesses, will not be considered to be out of compliance with the market reforms specified below under the conditions specified below. We will consider the impact of this transitional policy in assessing whether to extend it beyond the specified timeframe.

 


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. 

Obama administration’s messaging on ACA’s individual health market reforms lacking

The Obama administration is suffering a political pillorying this week on the imminent rollout of new market rules governing the individual health insurance market and the government-created health benefit exchange marketplace that began selling the plans October 1.

In large part, the criticism stems from weak messaging to communicate the reforms and why they are needed. There should be more emphasis on conveying these reforms affect the individual market where about five percent of Americans purchase their health coverage, clearly distinguishing these health plans from those purchased by employers that cover the large majority of Americans. As individual health plan issuers revamp and discontinue old plans to comply with the new market standards, the administration now finds itself having to defend its claims that most Americans could keep their current coverage when the individual market reforms take effect January 1, 2014. Viewed in the context of employer group coverage, that is generally accurate. But not necessarily so when it comes to individual coverage, an entirely different insurance product.

Perhaps more importantly, the administration and members of Congress who supported the 2010 enactment of the Patient Protection and Affordable Care Act need to more clearly explain why the law’s substantial government intervention in the individual market was needed in the first place. Administration officials have described the market as out of control from a regulatory standpoint, terming it like the “wild west.” But more fundamentally, the ACA aims to rescue this market because it was falling into oblivion. Individual plan issuers and those who buy this coverage were finding it increasingly difficult to get together in the marketplace on terms and pricing.

That market failure occurred because the market fell into a downward spiral where health plans became overly risk averse and excluded too many potential customers, restricting the flow of membership fees and premiums to pay claims. Plan issuers also violated a fundamental principle of insurance by splitting their customer base into small pools and were consequently unable to share the cost of claims across a larger group of customers. Finally, premiums for some individuals and families began to equal the cost of a mortgage payment and grew unaffordable. No market can function if potential customers cannot afford to buy the product or service being offered.

Whether the ACA can restore the individual market to healthy functioning remains to be seen, particularly given continued upward pressure on premiums from rising medical costs. The law’s market interventions could prove ineffective if too few young adults opt to buy coverage. Also if too many older people not yet eligible for Medicare who earn too much to qualify for tax credit subsidies for plans sold in the state health benefit exchange marketplace find premiums unaffordable and don’t buy coverage or request affordability exemptions from the individual mandate.

 


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. 

Massachusetts health reform template for California — and the nation

Romney aides gave advice on state health care law – SFGate.

This San Francisco Chronicle story is a retrospective on how omnibus Massachusetts health care reform enacted by the Romney administration in the middle of the previous decade became a template for California in 2007 and 2008.  When the California reform effort under then-Gov. Arnold Schwarzenegger faltered in the Legislature amid opposition to the individual mandate and concerns the state could not afford it, the Obama administration subsequently adopted Massachusetts model in crafting its Patient Protection and Affordable Care Act.

Had the U.S. Supreme Court not left the law largely intact last month, California may well have picked up where it left off in 2008 with leading policymakers voicing support for the individual mandate.  However, financing subsidies would have likely proven problematic just as four years ago as the Golden State continues to grapple with chronic budget deficits and high unemployment.

 


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. 

Health benefit exchanges, community rating could reinforce, boost self employment trend

Like the Clinton administration’s comprehensive health care reform proposal of the 1990s, a key goal of the Obama administration’s Patient Protection and Affordable Care Act (PPACA) is having all Americans medically insured though public or private health plans.  Since coverage gaps largely occur with private coverage, private market reform is central to the reforms of both administrations.

Since most working age Americans have employer-paid coverage, the Clinton administration’s reforms would have required all employers to cover their employees so that none had to obtain their own coverage in the individual market or be medically uninsured.  Rather than the Clinton administration’s employer mandate, the Obama administration instead placed the mandate on individuals, requiring all Americans to have medical coverage by 2014.  Key to the individual mandate in the PPACA is the law’s state health benefit exchanges to provide an insurance marketplace for small employers and individuals.

If the U.S. Supreme Court upholds the constitutionality of the individual mandate later this year, it could mesh well what some observers believe is a trend toward more temporary and self-employment.  This trend has seen a significant boost in recent years as employers hire fewer people to do the same work or adopt processes that require fewer permanent staff.  This in turn has led to growing numbers of temporary and self-employed people.

Since these workers aren’t covered by employer-provided plans and must obtain health coverage on their own, they will benefit from the exchanges where participating insurers will be required to offer coverage with minimum coverages and premiums determined using modified community-based rating versus medical underwriting.  As 2014 draws closer, the exchanges could in turn encourage more to deliberately choose temporary and self-employment.  Many who might otherwise work for themselves balk at the prospect of having to find health coverage in the existing individual market where they can be declined for pre-existing medical conditions and don’t benefit from group purchasing power the exchanges would provide.  The exchanges and the PPACA’s mandates that all individuals have coverage and health plans and insurers accept all applicants regardless of medical history would significantly mitigate this disincentive for those considering self-employment.

 


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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