Tag Archive: state health benefit exchanges

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. 

Multi-state plans fall short of nationwide availability

President Obama and Democratic presidential candidate Hillary Clinton have called for a publicly operated health plan to offer individual coverage. The intent is to bolster coverage options that have dwindled in some states as health plan issuers rethink their individual market participation as well as to bring to bear market pressure on participating plan issuers to hold down premium rates.

One existing provision of the Patient Protection and Affordable Care Act designed to do just that is at Section 1334 of law. It creates federally chartered health plans overseen by the Office of Personnel Management (OPM) and authorizes OPM to contract with health insurance issuers (or a group of health insurance issuers affiliated either by common ownership and control or by the common use of a nationally licensed service mark) to offer plans in multiple states.

Under Section 1334, such plans are to be available in all states starting in 2017. Turns out that isn’t going to happen. According to this page at the OPM website, just 22 state exchanges will have multi-state plans for sale next year. That contradicts Section 1334(e), which mandates OPM contract only with multistate plan issuers offering plans in all states in 2017.

OPM issued guidance earlier this year explaining why the requirement cannot be met:

While section 1334(e) of the ACA authorizes OPM to contract with issuers that offer nationwide expansion of coverage over a four-year schedule, the law does not preclude OPM from contracting with issuers that offer fewer than the scheduled number of states in any given year. The statute establishes general authority for OPM to contract for at least two plans in each state, but does not mandate firm parameters for attaining nationwide coverage. It remains the goal of the MSP Program to provide nationwide availability of MSP options by an issuer or group of issuers.

However, the experience of the first three years of the program has demonstrated that providing nationwide coverage for any issuer or group of issuers is difficult to achieve. Moreover, the statute does not give the Director of OPM authority to compel any issuer to provide nationwide coverage or to participate in the MSP Program. Therefore, OPM will exercise administrative discretion in deciding whether to contract with an issuer or group of issuers who would like to participate in the MSP Program but who cannot commit to offering coverage in all 51 jurisdictions by the fourth year of their participation in the program.

In sum, OPM is saying Section 1334(e)’s requirement notwithstanding, if health plan issuers don’t want to play in all states, it cannot force them to given the Affordable Care Act’s recognition of health insurance markets as voluntary. Also, the realities of the individual market in 2017 substantially reduced the likelihood of plan issuers offering multi-state plans nationwide as they reassess their participation in the state individual health insurance markets and the exchanges 2017 and post.

 


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. 

Bill Clinton criticizes ACA gaps

At a campaign event for his wife in Flint, Mich., Bill Clinton had praised the law for insuring millions of Americans, but noted that many middle-class Americans were still unable to afford coverage and talked up his wife’s plan to allow those close to retirement age to buy into Medicare.

“The people who are getting killed on this deal are small business people and individuals who make just a little too much to get any of these subsidies because they’re not organized,” he said. “They don’t have any bargaining power with insurance companies so they’re getting whacked.

“So you’ve got this crazy system where all of a sudden 25 million more people have health care and then the people who are out there busting it, sometimes 60 hours a week, wind up with their premiums doubled and their coverage cut in half. It’s the craziest thing in the world.

Source: Bill Clinton’s Obamacare remarks put Hillary on the hot seat

The former president’s talking about shortcomings in the Patient Protection and Affordable Care Act relative to making health coverage more accessible and affordable for individuals and small employers. Regarding the former, I’ve referred to them as the “401 percenters” — those who exceed the household income cutoff of 400 percent of federal poverty for advance premium tax credits for individual qualified heath plans sold on state health benefit exchanges. There have been numerous accounts that even those with household incomes between 300 and 400 percent of federal poverty levels get too little in the way of subsidies to make coverage affordable or even worthwhile, federal income tax penalties for going bare notwithstanding.

As for Bill Clinton’s reference to small business, the Affordable Care Act envisioned small businesses organizing to gain some degree of bargaining power in the health benefit exchange’s Small Business Health Options Program known as SHOP. In theory, the SHOP was to enable small business to aggregate their market power, aided by the law’s creation of a single statewide risk pool for the small group market segment. In reality, it didn’t work out that way. SHOP turned out to be a flop, with little interest among small employers and insurance brokers in participating in 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. 

Are state health benefit exchanges undergoing adverse selection?

A trend worth watching is health plan issuers opting not to sell individual plans on state health benefit exchanges while continuing to offer them outside the exchanges. Health plan issuers withdrawing from exchanges for plan year 2017 cite high losses on exchange plans for the decision to withdraw.

This naturally raises questions as to why losses are higher on exchange plans compared to off exchange plans and whether the exchanges are prone to adverse selection and if so, why. It’s an area ripe for research by health policy and actuarial research organizations. It’s also critical to the future of the Patient Protection and Affordable Care Act’s health insurance market reforms given the central role of the exchanges to restore the individual market to functionality by making coverage affordable for low and moderate income households with advance premium tax credit and out of pocket cost subsidies. That combined with the law’s mandate the individuals be pooled into a single statewide risk pool were designed to improve the essential risk spreading function upon which all types of insurance is based. However, if the risk profile of exchange enrollees is inordinately poor compared to the individual state pool as a whole, it could explain why some health plan issuers have opted out of the exchanges.

One possible reason is the well-established positive correlation between socio-economic status and health status. Since the exchange population is by definition low and moderate income, that correlation could be a factor since the correlation predicts those with poorer health status are more likely to utilize medical services. Another possible contributing factor is an insurance concept known as morale hazard. Morale hazard arises when those with insurance coverage figure that since they are protected from loss, they don’t have to worry as much about a covered loss event or taking steps to prevent one. In other words, insurance can ironically increase the risk of loss because insureds become less vigilant to avoid one in the first place such as eliminating fire hazards in a dwelling or obeying traffic laws and driving carefully in the case of vehicle insurance.

The correlation between lower household socio-economic status and poorer health status may also reinforce morale hazard on the exchanges since those with the lowest incomes will have relatively minimal personal financial risk since they qualify for out of pocket cost sharing on some silver level plans.

When it comes to health, American society is fraught with morale hazard. It tends to place too little value on maintaining and supporting healthy lifestyles and regards medical services as a consumer commodity to be shopped and consumed. Particularly when someone else is paying for those services when packaged as a benefit or entitlement. That’s a formula for increased medical utilization with negative and potentially fatal implications not only for the exchanges, but for the nation’s health care system as a whole.

 


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 Exchange Signups Fall Short – The Yeshiva World

In February 2013, the Congressional Budget Office predicted that 24 million people would buy health coverage through the federally and state-operated online exchanges by this year. Just 11.1 million people were signed up as of late March.Exchanges are marketplaces where people who do not receive health benefits through a job can buy private insurance, often with government subsidies.“Enrollment is key, first and foremost,” said Sara Collins, a vice president at the Commonwealth Fund, a nonpartisan foundation that funds health-care research. “They have to have this critical mass of people so that, by the law of averages, you’re going to get a mix of healthy and less healthy people.”A big reason the CBO projections were so far off is that the agency overestimated how many people would lose insurance through their employers, which would force them into the exchanges. But there have been challenges getting the uninsured to sign up, too.

Source: Health Exchange Signups Fall Short – The Yeshiva World

There’s a strong element of irony here given the Obama administration’s stated position that health care reform should retain the employer-sponsored model that covers the majority of Americans under age 65. According to this report, it retained a bit too much  — to the detriment of a robust individual market the Patient Protection and Affordable Care Act insurance market reforms envisioned.

 


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. 

Federal study finds Medicaid expansion improves individual risk pool, reduces HIX plan premiums

The HHS analysis uses 2015 data on HealthCare.gov plans and enrollment to assess how Medicaid expansion affects Marketplace premiums. It controls for differences across states in demographic characteristics, pre-ACA uninsured rates, health care costs, and state policy decisions other than Medicaid expansion, finding a 7 percent difference in Marketplace premiums holding these factors fixed.

States that expanded Medicaid coverage under the ACA have Marketplace risk pools comprised largely of individuals with incomes above 138 percent FPL, while non-expansion states have Marketplace risk pools that include more individuals below 138 percent FPL. Because lower-income individuals on average have poorer health status than those with higher incomes, a state’s decision not to expand Medicaid affects the Marketplace risk pool and, ultimately, Marketplace premiums. Issuers have noted that Medicaid expansion is one way that states can strengthen their Marketplaces.

Source: Medicaid expansion lowers Marketplace premiums by 7 percent

The upshot of this analysis is the actuarial health of the statewide individual health insurance risk pools would be improved taking into account the correlation between socio-economic status and health status and removing households earning between 100 and 138 percent of federal poverty from the pool by making that cohort eligible for expanded Medicaid.

Given that some health plan issuers have withdrawn from state health benefit exchange marketplaces citing lower population health status — and higher risk — than anticipated, it would be interesting to see if there’s a correlation between states that opted not to expand Medicaid eligibility and states where plans have exited exchanges for plan year 2017.

 


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. 

NYT: Vision of robust individual health insurance market remains elusive three years after key ACA reforms

State health benefit exchanges established by the Patient Protection and Affordable Care Act were envisioned as robust marketplaces with many health plans offering a wide selection of providers. That robust marketplace is central to the law’s policy thrust to create a market in which consumers would fare far better value than in the dysfunctional pre-ACA individual marketplace, able to select from a broad range of health plans offering both value and choice of providers. More consumers thanks to premium subsidies and mandated coverage, in turn attracting a greater number of health plans and providers to tap into that enlarged market. More is better for all.

The New York Times published two stories Sunday suggesting that hoped for market vigor is proving elusive three years after most of the Affordable Care Act’s main reforms took effect and that market forces are favoring less over more. One story reports health plans driven by consumer demand for low premiums are narrowing provider networks as plans leverage market power to negotiate aggressive reimbursement rates with fewer providers. On the health plan issuer side of the market, The Times reports, there aren’t many playing in the state exchange space with consumers in large parts of the nation having only one or two exchange plans from which to choose.

 


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. 

Exchange subsidies, narrow managed care networks credited for stabilizing individual market

Before the majority of the individual market reforms of the Patient Protection and Affordable Care Act took effect in 2014, the individual health insurance market was mired in a death spiral of adverse selection and rapidly rising, unsustainable premiums. Now those reforms have brought stability to the market, with little risk of the market segment destabilizing, concludes a McKinsey & Company analysis. (h/t to Liz Osius of Manatt).

Key to achieving that stability are subsidies offered households with incomes not exceeding 400 percent of federal poverty levels and health plans’ use of managed care plans and narrow provider networks. The brief notes that an estimated 69 percent of households in the individual market qualify for premium and out of pocket cost sharing subsidies.

The individual market has little risk of entering a classic insurance ‘death spiral’ as long as the federal government continues to offer subsidies to those with incomes below 400% of the federal poverty level. Given the unique regulatory conditions of this market, the key determinants of its stability are not the traditional factors (risk and cost of care for this segment), but rather the ongoing subsidy payments.

McKinsey & Company’s review of plan issuer profitability correlated narrow networks with comparatively better loss experience and profitability compared to plans with wider networks as well as the ability of these plans to set lower premium rates. “The combination of the improving relative pricing of narrowed networks and their superior financial performance suggests that they may be emerging as one sustainable element of exchange plan design,” the McKinsey issue brief states.

Although the individual market has regained stability, profitability remained elusive in the first two years of the major reforms:

Our initial perspective, based on emerging financial results reported for 2015, is that aggregate losses in the individual market may have doubled from 2014, with post-tax margins between –9% to –11% (Exhibit 6). The larger losses are most likely the result of two primary factors: higher year-over-year medical loss ratios (MLRs) (around 4.5% to 5% margin reduction) and lower reinsurance payments (another 3.5% to 4% margin reduction).

 


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. 

Departure of most loss and risk leveling mechanisms poses major test for ACA individual market reforms

A major test of the Patient Protection and Affordable Care Act’s individual market reforms begins with health plans effective next year — plan year 2017. That’s when two of three mechanisms designed to prevent big spikes in plan premium rates are set to go away. Their goal is to provide a degree of premium stability for plan years 2014 through 2016. They do so by balancing the spread of risk and losses among all health plan issuers, particularly given the uncertainty with the move to modified community-based rating in place of medical underwriting of individuals and families starting in 2014.

Gone will be reinsurance for plans sold through state health benefit exchanges to protect plan issuers from exchange enrollees who incur very high medical costs. Also going away is the risk corridors mechanism under which individual and small group plans whose members incurred costs exceeding 103 percent premiums collected receive subsidies from plan issuers having losses below 97 percent of premiums. Left in place for 2017 and later years is the loss leveling mechanism known as risk adjustment — whereby health plan issuers with plans having fewer members with high risk chronic health conditions transfer funds to those with higher numbers of members with such conditions.

Two big questions going forward 2017 post are 1) whether the risk adjustment mechanism alone will keep premiums from shooting upward as plan issuers signal robust premium increases are in the works for 2017 and 2) whether risk adjustment will ward off adverse selection against exchange plans by leveling risk among plans sold both within and outside the exchanges given health plan complaints of high losses on exchange plans.

Over the longer term, a looming question is to what extent for profit health plans will continue to offer individual plans in the exchanges given their function as voluntary marketplaces. “All indications are that … most insurance plans on the exchanges are yielding zero percent at the very most,” notes Vishnu Lekraj, senior equity analyst with Morningstar.

 


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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