Tag Archive: Patient Protection and Affordable Care Act

Interim High Risk Pool could run out of money before 2014

The Patient Protection and Affordable Care Act’s Interim High Risk Pool — aimed at making medical coverage available at standard market rates for those with preexisting medical conditions until insurers and health plans are required to accept all applicants regardless of preexisting conditions in 2014 — will likely run out of money before then.

That’s the conclusion of a recently issued paper by the National Institute for Health Care Reform.  The paper warns that while 5.6 million to 7 million Americans may qualify for the pool, the $5 billion the Act allocated may be enough to cover only 200,000 people a year. “Policy makers will need to tailor eligibility rules, benefits and premiums to stretch the dollars as far as possible,” the paper recommends.

There are multiple factors that could affect demand for the $5 billion set aside to subsidize Interim High Risk Pool coverage as well as cover administrative costs of operating the pool.  Individual market premium rates are trending upward so even the standard rates required to be charged those in the pool (insurers charge nonstandard, surcharged premium rates to individuals with certain controlled preexisting conditions) could as this blog previously noted end up roughly equal to current nonstandard rates.  In a struggling economy, those higher premiums would reduce the incentive for people to sign up for coverage.

The other unknown is how the states ultimately implement the Interim High Risk Pool and how the 35 states that have high risk pools in place coordinate (or don’t) their pool rules with those of the new, temporary federal program.  Some states have already indicated they will be opting out of the federal program, which means the feds will designate a nonprofit organization in those states to administer the Interim High Risk Pool there.

In those states as well as states that have indicated they intend to integrate their high risk pools with the federal program, there could be disparities between the new pool and existing state high risk pools that could create incentives for individuals to go uninsured (individuals must be uninsured for at least six months to qualify for coverage via the Interim High Risk Pool) in order to obtain more generous, lower cost coverage than their state high risk pools offer.  That would accelerate the drawdown of the $5 billion set aside for the 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. 

Health care crisis is socio-economic problem

The state Legislative Analyst’s Office has issued a report on how the Patient Protection and Affordable Care Act will affect California, which decades ago was the birthplace of the notion that a superior health care payment scheme is prepaid health maintenance rather than post-care health insurance.  The Golden State and more specifically Kaiser Permanente pioneered the health maintenance organization (HMO) as an alternative to indemnity “major medical” insurance designed to cover hospitalizations and other major unforseen health care costs.

The rapid rise in health care costs over the past decade has turned the principle that preventative care costs less than “insured” care on its head.  Since about 2003, California HMO premiums have ironically gone up faster than those for indemnity-based catastropic and preferred provider organization (PPO) plans, sending more people into the latter category and paying higher deductibles and cost shares than previously.

The LAO report suggests the HMO’s health maintenance objective has been stymied by a fragmentation of services and a lack of care coordination among providers and treating diseases but not necessarily focusing on improving the overall health of patients.  Another cost driver identified in the LAO report is financial incentives that reward the quantity of services provided rather than the quality of that care.  Services more accurately described not so much as health maintenance but sick care. 

I believe America’s health insurance crisis is fundamentally due to the growing commercialization of health care and pharmaceuticals combined with a post-industrial service economy in which many people spend most of their sleep deprived waking hours commuting to and working at sedentary jobs.  Too little time for exercise, sleep and nutritious “slow” food exacts a major toll on the nation’s overall health status.  This is a socio-economic problem that no amount of health reform can solve. 

The Obama administration and Congress can rightly claim to have made history by enacting health care reform after multiple failed attempts dating back to the administration of Frankin Delano Roosevelt.  But unless Americans change how they work and live and value their health, it will be a hollow accomplishment.  Health care costs will continue to go up as Americans get older and sicker, less fit and fatter.  If current trends continue, by the time most of the reform provisions take effect in 2014, it will become actuarially evident that no system of paying for health care — pre or post reform — can be affordable.  The health insurance crisis will be subsumed by a overarching health crisis.


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 reform bill’s delayed implementation will spark another round of reform

The Patient Protection and Affordability Act was enacted largely in response to a perceived crisis in health care in the U.S. That sense of urgency propelled the reform train forward over objections that the nation’s medical care system would be effectively deprivatized to a greater extent than it was by Medicaid and Medicare more than four decades ago.

But most of the law’s provisions don’t take effect until 2014 and thus don’t provide an immediate solution to what’s seen as an immediate problem. Premium rates in the individual health insurance market — which covers only about five percent of working age Americans but provided much of the impetus for the Act’s enactment — are rising in response to higher underlying medical care costs.

Between now and Jan. 1, 2014 when health insurance purchasing exchanges are set to begin operating with the expectation they will provide increased power to individuals and small businesses to bargain for lower rates, both can expect to see their premiums rise above levels many complain are already unaffordable in a presently busted boom and bust economy.

What this means is health insurance reform isn’t over — because the crisis isn’t over. Expect another round of omnibus reform as the distress in the individual and small business market continues and grows amid concern that the underlying medical cost drivers haven’t been adequately tamed. This will clearly affect the political environment. Policymakers won’t be able to satisfy constituents by telling them to wait until 2014 to see if things get better.


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. 

Interim high risk pool may not significantly reduce ranks of medically uninsured

High risk health insurance pools to cover Americans with pre-existing medical conditions who fall short of medical underwriting standards of individual market insurers and managed care plans must be in place within 90 days of the March 23 enactment of the Patient Protection and Affordability Act.  That mandate was put in place by H.R. 3590, Subtitle B, Section 1101.

Going forward, several aspects bear watching.  Among them is how states — the majority of which already have high risk pools in place — implement the pool in their jurisdictions and conform their existing high risk pools to the new federal requirements.

In the interim before the high risk pool mechanism ends Jan. 1, 2014 and health insurance purchasing exchanges that must accept all applicants regardless of pre-existing medical conditions start up, a key question will be the number of people who actually sign up for high risk coverage.  The number in large part will be driven by the size of the premiums.

California’s high risk pool, the Managed Risk Medical Insurance Program (MRMIP), is required by statute to set premiums 125 to 137 percent of standard market rates and has an annual coverage cap of $75,000 and a lifetime limit of $750,000.  Currently the program covers just 7,100 Californians — a tiny fraction of the 1 million potentially medically uninsured Golden State residents projected by Harbage Consulting in 2008.

MRMIP has been limited on the supply side by enrollment caps due to limited funding and on the demand side by relatively high premiums.  HR 3590 requires premiums to be established at a “standard rate for a standard population” that can vary based upon age, an important factor considering a large segment of medically uninsurable are between 50 and 64 years old.  For the oldest members of the pool, premiums are limited to four times those charged the youngest members of the pool.

Standard rates however are on an upward trajectory as evidenced by a sharp increase being implemented for indemnity-based policies by California’s dominant player Anthem Blue Cross.  Those rates if ultimately approved by the California Department of Insurance would be as high as those previously charged those in the MRMIP pool.  For many, they would likely prove unaffordable.  Particularly in a tepid economy that some economists predict won’t fully recover until the high risk pools are slated to end in 2014.

The upshot is HR 3590’s temporary high risk pool may not make much of a dent in the number of medically uninsured not covered through employment-based insurance or government insurance programs.


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. 

Coverage mandate likely spells end of for profit medical insurance in U.S.

The enactment of the Patient Protection and Affordable Care Act requiring all Americans to have medical insurance in 2014 follows in the footsteps of nations like Germany and Switzerland that opted not to put in place socialized health care systems like those of Britain and France or Canada’s single payer system where the government pays all medical bills.  Germany and Switzerland mandate all citizens have coverage.  But it’s no bonanza for medical insurers.  They fiercely compete for mere survival and not to earn profits.  If they don’t efficiently administer claims and keep providers and government regulators satisfied, they could find themselves out of business.  For profit U.S. medical insurers could find themselves in a similar market environment within a decade.

Indications of tighter regulation of medical insurance premiums — and ultimately insurer profits — are already emerging in the nation’s most populous state.  Last week, a California state Assembly committee approved legislation that would regulate health insurers like their counterparts in the state that sell property/casualty insurance.  Those insurers cannot use premium plans until regulators first approve them.

AB 2578 would similarly subject premiums, co-payments, and deductibles of both indemnity health insurers and managed care plans to this prior approval regulatory scheme.  If policyholders or plan members would pay seven percent or more above those currently in effect, it would trigger a provision allowing consumer and public interest groups to protest the filing through a public utility commission style hearing.

Nonprofit health insurers already operate in California, most prominently Blue Shield of California.  A de facto shift of medical insurance to a nonprofit business could give Blue Shield a leg up, although it would be under increased pressure to hold down adminstrative overhead.  (Notably, Blue Shield supported California reform legislation proposed by Gov. Arnold Schwarzenegger in 2007 including a requirement that all state residents have some form of medical coverage.  For profit insurer Anthem Blue Cross opposed the bill).

All payers — whether they are in business to make a profit or not — complain they are increasingly squeezed by raging medical treatment cost inflation.  According to Anthem Blue Cross, those out of control costs forced it to sharply raise premiums for its individual insurance products by as much as 39 percent, sparking outrage and giving a political boost to AB 2578.  A similar bill went nowhere in 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. 

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