Tag Archive: state health benefit exchanges

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 may be first state with no health insurers on exchange – SFGate

DES MOINES, Iowa (AP) — Iowa could be the first state in the nation with no health insurance company willing to offer policies on its Affordable Care Act exchange next year unless President Donald Trump’s administration approves a stopgap proposal, Iowa Insurance Commissioner Doug Ommen said Monday.Ommen said he and officials from two major Iowa insurance carriers met last week with Centers for Medicare & Medicaid Services officials in Washington to pitch a proposal that would save the Iowa market from collapsing.Several counties in Missouri, Ohio and Washington state have no insurer for next year, but Iowa would be the first state to lose all insurers on an ACA exchange.

Source: Iowa may be first state with no health insurers on exchange – SFGate

The dreaded adverse selection death spiral appears to have gained a grip on Iowa’s non-group medical insurance market. The item reports Iowa Insurance Commissioner Doug Ommen is asking the federal government to redirect advance premium tax credit subsidies to improve the spread of risk in the state’s pool by attracting more younger individuals and using some of the those dollars to cover higher cost people.

 


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. 

Administration, Congress would leave CSR subsidies in limbo in latest court filing

President Donald Trump and House Republicans have decided not to blow up the Obamacare health insurance markets just yet. In a filing to a federal appeals court Monday, the Justice Department and lawyers representing House Republicans have requested another 90-day delay in the proceedings from a case challenging the legality of payments made to health insurers serving low-income customers. “The parties continue to discuss measures that would obviate the need for judicial determination of this appeal, including potential legislative action,” attorneys for both parties wrote to the appeals court.

Source: Trump Decides Not To Blow Up Obamacare — Yet | HuffPost

If the U.S. District Court of Appeals grants this request, the legal uncertainty over the reduced cost sharing subsidies for silver actuarial value (AV) plans sold in state health benefit exchanges would potentially continue for the rest of the summer. As the article notes, those subsidies could be cut off at any time by the Trump administration and an appeal in the case, House v. Price, dropped. That would leave intact a U.S. District Court ruling one year ago finding the subsidies cannot be allocated by the executive branch without congressional appropriation. Neither the Trump administration nor the current Congress are committed to keeping the exchange market functional and have little motivation to resolve the matter.

These circumstances will likely prompt plan issuers to increase plan year 2018 premium rates as a precaution as rate filings are due to state regulators in the next month since the Affordable Care Act would continue to require them to offer more generous coverage than standard 70 percent AV silver plans for households earning below 250 percent of federal poverty levels and purchasing though the exchanges. At least one plan issuer, Anthem, has indicated it would have to boost premiums by at least 20 percent to cover the potential loss of the CSR subsidies.

A second consecutive year of double digit premium increases could threaten the actuarial viability of the state non-group market risk pools since those eligible for little or no advance premium tax credit subsidies would likely flee the market. Particularly if the Trump administration doesn’t enforce the ACA’s individual mandate, making that option more appealing.

Some state regulators including California and most recently New Mexico have asked plan issuers to file two sets of premium rates, one assuming continuation of the subsidies and another without them.

 


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. 

State health benefit exchanges not out of the woods yet

State health benefit exchanges dodged a legislative bullet last week that would have eliminated advance premium tax credit (APTC) subsidies to help low and moderate income households purchase non-group coverage. The nation’s largest exchange, Covered California, estimated the tabled budget reconciliation bill replacing the subsidies with an age-based tax credit beginning in 2020 would on average amount to only 60 percent of that provided under the APTC subsidies. That would have made coverage for less affordable for many households and potentially led to a dramatic drop in enrollment qualified health plans sold on the exchanges, shrinking the non-group risk pool and reducing spread of risk.

The exchanges now face a more immediate threat that could significantly disrupt plan year 2018 and potentially current year enrollees: the loss of cost sharing reduction (CSR) subsidies for silver level plans sold on the exchanges. The subsidies are available to households earning between 100 and 250 percent of federal poverty levels. By reducing out of pocket costs for eligible households, the subsidies effectively increase the actuarial value of silver plans that cover on average 70 percent of medical care costs.

A U.S. District court ruling issued last May found the Obama administration acted unconstitutionally in funding the subsidies without an explicit appropriation by Congress. The decision was put on hold pending appeal, where it sits pending possible action to resolve the underlying fiscal issue by the Trump administration and Congress. Without federal funding for the CSR subsidies, health plan issuers participating in the exchanges would incur billions in losses, according to an analysis prepared earlier this month by The Commonwealth Fund. There is no requested appropriation to cover the CSR subsidies in the Trump administration’s 2018 budget blueprint. As last week’s failed attempt to advance the budget reconciliation legislation illustrates, the Trump administration and Congress are unlikely to achieve a rapid agreement resolving the litigation as they struggle to form a majority party governing coalition.

 


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. 

Immediate ACA repeal rhetoric mooted as Trump administration issues rulemaking to reinforce law’s individual market reforms

With only about six weeks left to enact any comprehensive replacement for the Patient Protection and Affordable Care Act, the Trump administration has sent a clear signal it won’t happen this year by introducing proposed rules today reinforcing the law’s individual insurance market reforms rather than a wholesale repeal of the omnibus statute. The Market Stabilization rulemaking is a confidence building measure aimed at calming nervous individual health plan issuers as they plan their market participation for 2018 amid worries over adverse selection.

The rulemaking comes just 10 days after President Trump said in a televised interview his administration’s comprehensive successor to the Affordable Care Act would take the rest of 2017 and likely into next year to finalize and move through Congress. That’s realistic considering the Affordable Care Act contains ten titles and runs more than 2,000 pages. It will take time to determine which to keep, which to amend and which to eliminate — and attract sufficient support from across the aisle for any overhaul.

The proposed rule 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 upon renewal, liberalizes the actuarial value definitions of all but silver plans as well as network adequacy standards.

The proposed rule also indicates the federal government plans to revise the timeline for the certification of qualified health plans (QHPs) sold on state health benefit exchanges and rate review process for plan year 2018. “In light of the need for issuers to make modifications to their products and applications to accommodate the changes proposed in this rule, should they be finalized, we would issue separate guidance to update the QHP certification calendar and the rate review submission deadlines to give additional time for issuers to develop, and states to review, form and rate filings for the 2018 plan year that reflect these changes,” the Centers for Medicare & Medicaid Services (CMS) stated. Comment on the proposed rule is due March 7, 2017.

The issuance of the proposed rule renders moot campaign rhetoric leading up to the November 2016 elections to immediately repeal the Affordable Care Act and highlights the lack of a ready Republican plan to replace the law. The party’s opposition is less about genuine policy differences but more about ongoing hard feelings arising from the process (versus substance) of the Affordable Care Act’s enactment in early 2010 that essentially steamrolled then minority Republicans. With no clearly articulated GOP policy alternative, there cannot be a true policy debate.

Congress and the administration have incentive to back off the immediate repeal talk given the likelihood they’d face political blow back from payers and providers vexed by the enormous uncertainty of gutting the law without a clear replacement as well as constituents fearing their coverage might be disrupted. The political consequences of inchoate policy outweigh any immediate policymaking in Congress, particularly since unhappy voters could punish some members of Congress in the 2018 mid-term elections.

In addition to this proposed rule, expect Congress to make a rapid appropriation to stave off another issue threatening the stability of the individual market stemming from ongoing hard feelings over the law’s enactment its implementation by the Obama administration: House v. Burwell. An appropriation is necessary because a federal court ruled in that case funding for out of pocket cost sharing subsidies for low income households purchasing silver plans on state health benefit exchanges requires an appropriation by Congress and that the required appropriation is absent. The House of Representatives challenged the constitutionality of the Obama administration’s funding of the subsidies without an explicit appropriation by Congress. Implementation of the federal court ruling is on hold until at least this month as it’s not expected the Trump administration will pursue an appeal.

 


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. 

Action on ACA individual market reforms successor must come in Q1 2017 to avoid messy market meltdown

Heading into this year’s elections, the individual health insurance market segment developed signs of instability as health plan issuers were pulling back their market presence for 2017 and reassessing their plans for 2018 and beyond. The election that sent Donald Trump headed to the presidency and afforded his party the opportunity to implement their stated policy to quickly repeal the Patient Protection and Affordable Care Act piled uncertainty on top of uncertainty for health plan issuers.

It’s unclear how much of the Affordable Care Act the incoming Trump administration and Congress will gut. However, it is clear that first in their sights are the individual health insurance market reforms contained in Title I of the expansive law. With these reforms first in line for the chopping block, there is no luxury of time to contemplate a gradual transition for the individual market. Congress and the new administration will have to quickly come to a consensus in the first quarter of next year.

As has been widely reported, Congress and the Trump administration could defund the bulk of the reforms using a budget reconciliation bill requiring a simple majority vote, thereby avoiding a Democratic filibuster. But that would only create more market uncertainty, crashing the old Affordable Care Act market rules before new ones could be put in place. Even more comes from the House’s successful court challenge this year of the Obama administration’s funding of out of pocket cost sharing subsidies for many lower income households buying coverage on state health benefit exchanges. It would take effect very early in the Trump administration if the administration as expected opts not to pursue an appeal, prompting health plan issuers to bail from state health benefit exchanges in 2017 and leave millions without coverage. These circumstances underscore the fact that under the Affordable Care Act, health plan market participation is voluntary. If plan issuers can’t predict their finances with any degree of certainty, all bets are off.

Health plan issuers need to begin pulling together their individual market offerings for plan year 2018 early next year. It will be difficult if not impossible for them to do so with the market rules up in the air. Lacking any certainty in the first quarter of 2017, a transition to a new scheme won’t happen in 2018. New policy will have to be nailed down in that critical first quarter. With the Affordable Care Act individual market rules well established, it’s now impossible to quickly unscramble the Obamacare omelet and turn the calendar back to 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. 

Microeconomic mismatch undermines concept of interstate health insurance market for non-integrated plan issuers

Creating an interstate market for individual health insurance is a component of President-elect Donald J. Trump’s healthcare policy. “To maximize choice and create a dynamic market for health insurance, the Administration will work with Congress to enable people to purchase insurance across state lines,” according to the Trump administration’s transition website.

The concept’s not new. It’s been around for decades as a reform element favored by conservative health policy wonks. It’s even baked into the Patient Protection and Affordable Care Act. Section 1333 of the law provides a mechanism for health insurers and plans to pool risk and sell across state lines via “health care choice compacts” starting this year. The provision allows two or more states to enter into an agreement under which health plans could be offered in state individual markets but subject to regulation by the state in which the plan was written or issued. The Affordable Care Act even provides for interstate health benefit exchanges. Section 1311(f) provides for “Regional or Other Interstate Exchanges” operating in more than one state with federal government approval.

On its face, enabling the marketing of health insurance across state lines appears appealing. After all, insurance is all about large numbers — and the bigger the better. More people in multiple states covered in health plans translates to enhanced spread of risk and potentially operating economies of scale. It’s a particularly appealing reform as individual health plan issuers worry about adverse selection, particularly in less populous states and those with poorer population health status. With health plan issuers able to offer plans in multiple states, the buy side of the market also benefits with more competition and consumer choice, proponents contend.

But undermining the concept is a microeconomic mismatch. Health coverage is far more portable than provider networks, which are geographically fixed by metropolitan areas and the brick and mortar physician offices, clinics and hospitals within them. Provider charges are not uniform, varying considerably from one metro area to another, even within a given state. Health plan issuers negotiate locally with providers because nearly all health care is provided locally and not across state lines except for those living near state borders.

An interstate model currently only favors integrated health plans such as California-based Kaiser Permanente and Molina Healthcare, which each operate health care facilities in a half dozen states and have fared better in the state health benefit marketplace environment than traditional non-integrated health 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. 

%d bloggers like this: