Couple profiled by New York Times represents archetypal case for bipartisan post Affordable Care Act reform

The worsening plight of a relatively small number of people under age 65 not covered by employee medical benefit or government sponsored plans may well set the course of a deepening debate over how best finance the medical care for working age Americans. These pre-Medicare eligible households aren’t poor by any means. They earn more than four times the federal poverty level. But that makes them ineligible for premium assistance and for some, out of pocket cost subsidies available for plans purchased on state health benefit exchanges.

That leaves them exposed to the relentless rise in medical care costs that are pushing up premiums, producing annual increases well into the double digits and monthly payments on a par with mortgage and rent payments. They may be self-employed or working for employers that don’t offer medical benefits such as a working couple profiled in this New York Times article. Of this cohort, especially hard hit are those aged 50 and older who pay higher premiums based on the higher actuarial risk of their utilizing high cost medical services.

They may feel resentment toward low income adults (like the one featured in the Times article) who qualify for Medicaid under the Patient Protection and Affordable Care Act’s reforms and who receive free care as they struggle to cover both monthly premiums and high out pocket costs. Previously, the two components had a distinct inverse relationship. High premiums meant low deductibles and vice versa. Not anymore. The financial stress on household budgets now cuts both ways in the non-group medical insurance market.

The couple mentioned in the Times article, Gwen and Matt Hurd, could drive the policy debate because their situation is likely to draw political sympathy from both liberals and conservatives. While though their numbers are relatively tiny in the overall voting population, families like the Hurds appeal to American cultural values of working hard and “playing by the rules,” as former President Bill Clinton put it. Policymakers of all political stripes will find it difficult to leave them to their own ends as they face the onslaught of rapidly rising medical costs that translate into steep premiums and out of pocket costs. Particularly when their dire circumstances receive national media attention. They are poster families that make the case for further reforms in the post Affordable Care Act period.


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. 

Rulemaking authorizing “364 day” short term individual medical insurance policies aimed at enhancing affordability and access for the young, healthy

The Trump administration’s proposed rulemaking authorizing “364 day” short term individual medical insurance policies is apparently aimed at improving access and affordability for the young adults and those in relatively good health — particularly those who earn too much to qualify for premium tax credit subsidies for non-group plans sold on state health benefit exchanges. The proposed rulemaking would eliminate the current 90 day limit on short term, limited duration medical insurance put in place by the Obama administration, allowing policy terms not exceeding 12 months.

[W]hile individuals who qualify for premium tax credits are largely insulated from significant premium increases … individuals who are not eligible for subsidies are particularly harmed by increased premiums in the individual market due to a lack of other, more affordable alternative coverage options,” the preamble of the proposed rule states. It points to a nearly 25 percent enrollment drop among unsubsidized households between the first quarters of 2016 and 2017 based on issuer regulatory filings, representing about 2 million households. In 2018, about 26 percent of exchange enrollees have access to just one insurer, the preamble adds.

The preamble notes individuals who are likely to purchase short-term, limited-duration insurance are likely to be relatively young or healthy. Unlike plan issuers in the non-group market, short term policy issuers would have latitude to medically underwrite applicants and charge older applicants more than younger applicants than allowed under Affordable Care Act rules governing the non-group market.

The administration estimates that in 2019 after the elimination of the individual shared responsibility payment in the recently enacted budget continuation measure, between 100,000 and 200,000 individuals previously enrolled in exchange coverage would purchase short-term, limited-duration insurance policies instead. That would likely decrease the quality of state non-group risk pools, the rulemaking notes. Consequently, non-group plan issuers would have to increase premium rates to compensate for the higher risk. Those higher premium rates would in turn require the federal government to pay more in premium tax credit subsidies to those qualifying for them. The administration estimates they will annually range from $96 million to $168 million.

The liberalizing of the availability of short term policies is indicative of Trump administration policy favoring employer sponsored coverage over non-group coverage.

Comment on the proposed rulemaking is due by April 23, 2018.


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. 

Idaho says no Obamacare needed for some new insurance plans – ABC News

Concerned about soaring health care costs, Idaho on Wednesday revealed a plan that will allow insurance companies to sell cheap policies that ditch key provisions of the Affordable Care Act.It’s believed to be the first state to take formal steps without prior federal approval for creating policies that do not comply with the Obama-era health care law. Health care experts say the move is legally dubious, a concern supported by internal records obtained by The Associated Press.Idaho Department of Insurance Director Dean Cameron said the move is necessary to make cheaper plans available to more people. Otherwise, he said he fears the state’s individual health insurance marketplace will eventually collapse as healthy residents choose to go uninsured rather than pay for expensive plans that comply with the federal law.

Source: Idaho says no Obamacare needed for some new insurance plans – ABC News

It’s unclear whether these stripped down plans would be included in Idaho’s single state nongroup risk pool. If not — most likely since they would not be compliant with Affordable Care Act requirements — they wouldn’t reduce the risk of an adverse selection death spiral of which Cameron warns.


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. 

California health benefit exchange forecasts statewide 2019 premium increase of 16 to 30 percent

Citing ongoing regulatory uncertainty, the California health benefit exchange forecasts statewide premiums could rise 16 to 30 percent for individual plans next year, assuming medical treatment costs will account for seven percent of the increase. In some states, rate increases could even be larger, the exchange noted in an analysis titled The Roller Coaster Continues — The Prospect for Individual Health Insurance Markets Nationally for 2019: Risk Factors,Uncertainty and Potential Benefits of Stabilizing Policies.

Issuers and states faced considerable challenges preparing for the 2018 plan year due to federal policy uncertainty. During the course of 2017, federal executive action shortened the open-enrollment period for the 2018 plan year, reduced the marketing and outreach budget for the 39 states in the federally facilitated marketplace by 90 percent, and ended cost-sharing reduction payments to issuers in October. The 2019 plan year has the potential to be just as uncertain and volatile, if not more so. Major policy changes for 2019 include setting the individual mandate tax penalty to zero for plan years 2019 and beyond, potential continuation of the minuscule marketing spending for the federal marketplace and the implementation of association health plans (AHPs) and short-term, limited-duration insurance plans, which could affect the market as early as 2019.

Households that earn above the 400 percent federal poverty level cutoff to qualify for premium tax subsidies will feel the pain of the increases most acutely. This comprises some six million households nationally with an estimated median income of $75,000 that struggle with the burden of high premiums, according to the report. Some observers argue that double digit rate increases for 2018 plans have already pushed those households over the affordability threshold. Covered California’s analysis pointed to policy options that could significantly mitigate the potential 2019 rate hikes in California and other states including:

  • Funding state-based invisible high-risk pools or reinsurance programs could produce an average rate reduction of 12 percent with a range of 9 to 16 percent depending on the state;
  • Restoring marketing and outreach funding in the federally facilitated state exchanges in 2019 could reduce rates between 2 and 4 percent; and
  • Reinstituting the health insurance tax “holiday” for 2019 could reduce rates between 1 to 3 percent.

Covered California’s outlook comes as health plan issuers must determine their market presence and rates during the first half of this year. Consequently, it notes federal policymakers have only a short window of time to enact stabilization measures that could mitigate a significant share of the 2019 premium increase and keep issuers in the individual market that might otherwise exit in the current uncertain regulatory and market environment.


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. 

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

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

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

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

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

  • The exit of households earning in excess of 400 percent of federal poverty and therefore ineligible for premium subsidies offered though state health benefit exchanges, particularly for family plans and for individuals aged 50 to 64. Premium rates are already considered out of reach for many of these households. According to the CBO analysis, premiums will continue to rise by 10 percent a year over the next 10 years. The CBO analysis notes non-enforcement of the tax penalty would help drive the increases as healthier people would be less likely to obtain insurance, requiring plan issuers to make up the lost premium revenue by raising rates.
  • The replacement of Affordable Care Act compliant individual plans with short term plans. In October, the Trump administration directed three federal agencies to consider new regulations or guidance that would expand the availability of short term policies beyond the current 90 day limit. If short term policies are defined as up to 12 versus three months and be renewable for another year, they would offer a medically underwritten, lower cost alternative to those who can pass underwriting standards. That would reintroduce medical risk selection mostly barred by the Affordable Care Act, which permits premium rating based only on age, location, family size and tobacco use. According to  Modern Healthcare, at least two plan issuers – UnitedHealth and Aetna – are looking into issuing short term plans, potentially offering covered benefits on a par with individual plans. That would create a bifurcated non-group market rather than the single state risk pooling under the Affordable Care Act’s reforms and has raised concerns among stakeholders and state regulators according to Modern Healthcare. This would effectively unwind the Affordable Care Act’s reforms and return to the period preceding 2014 when plan issuers limited benefits and employed medical underwriting as strategies to cope with rising medical treatment costs. The question is whether these pre-reform strategies will sufficiently mitigate those costs in order to avoid the adverse selection that threatened the market segment’s viability pre-2014.

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. 

Issuer churn continues among non-group plans despite ACA’s statewide risk pooling

Cyndee Weston has navigated the shifting ground better than many. For years she has had the same insurer — BlueCross BlueShield of Oklahoma — which has dominated that state’s market for individual plans and is the only marketplace player for 2018. But even though the carrier is the same and the health law requires insurers to take all comers, canceled plans each year force her to learn a new coverage design, file new paperwork with doctors and worry her primary physician will be dropped from the network.

Source: Churning, Confusion And Disruption — The Dark Side Of Marketplace Coverage | California Healthline

Before the Patient Protection and Affordable Care Act’s non-group market reforms took effect in 2014, plan issuers frequently shut down plans, placing them in runoff mode once the pool quality declined too much and they fell into the adverse selection death spiral. It appears however the pattern nevertheless continues even with the Affordable Care Act’s requirement that all non-group risk be pooled into single statewide risk pools, making it tough on plan members seeking stability.


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. 

Rising medical costs undermine America’s largest coverage silo: Employer-sponsored medical benefit plans.

But the longer-term risk for job-based coverage is the inability of most employers — despite their power as the largest purchasers of health care services — to stem rising health care costs. Though some very large employers that run their own health insurance plans, like Comcast and Boeing, show considerable sophistication in managing their workers’ health care bills, they are the exceptions.

Faced with these structural handicaps, employers trying to limit their exposure to health care costs fall back on a simple strategy: shifting more of those costs to their employees. That winds up increasing the number of Americans with employer-sponsored health plans who are underinsured. The Commonwealth Fund survey found that underinsured adults reported health care access and medical bill problems at nearly the same rates as adults who lacked coverage for part of the year.

Increasing underinsurance among working families should raise alarm bells for policymakers and advocates both for and against increased government involvement in health care. If employer-sponsored health insurance continues to become less and less adequate over time — and we have every reason to believe it will — the discontent of middle-class working Americans with the cost of their health care will inevitably increase.

Source: The Decline of Employer-Sponsored Health Insurance – The Commonwealth Fund

Employer-sponsored medical coverage covers as many Americans as Medicare, Medicaid and the non-group individual market combined. As such, it’s the biggest coverage silo of the nation’s multifaceted scheme to cover the costs of medical care.

According to this Commonwealth Fund analysis, the structural integrity and long term viability of that largest and traditionally quite generous of coverage silos is under enormous stress from the ever growing cost of medical care. Another appearing today in Health Affairs warns that rising medical care costs could reduce commercial medical insurance, including employer plans.

Those cost pressures could cause it to tip over. If it topples, the analysis accurately observes, it would create an environment where a wider expansion of government plans beyond Medicare and Medicaid becomes more politically possible, even probable. It could spark a consolidation of the four big coverage silos into one or two. History appears poised to turn a page over the next decade.


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

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

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

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

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

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


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

Non-group segment clouded in uncertainty amid questions of market and actuarial sustainability

Four years after the start of open enrollment under the Patient Protection and Affordable Care Act’s reformation of the non-group medical insurance market, the market’s future is clouded in uncertainty. The biggest questions are whether it can sustain itself as a market and as a functional risk pool.

First the market. Alarm bells are being sounded that that the segment will undergo buy side market failure as households with incomes exceeding 400 percent of federal poverty levels that don’t qualify for premium subsidies on state health benefit exchanges will no longer be able to keep up with large premium rate increases. This is complicated by the fact that these households perceive low value in high deductible plans that have become commonplace. Their expectations of fair value are under assault by high premiums for high deductible plans. The expectation is high premiums should have an inverse relationship with out of pocket costs such as deductibles and co-insurance as they historically have. That’s no longer the case.

Many of these 401 percenters ineligible for premium assistance have income tax incentives to continue to purchase non-group plans. For all of them, there is the stick of the tax penalty for going without coverage. For the many that are self-employed, there is the carrot of being able to deduct premiums from taxable income on their Form 1040. Both of these incentives however can only go so far if premium costs are unaffordable. The perception of poor value due to high plan deductibles might be enough to push a vacillating 401 percent plus household to make the decision to go without coverage and pay the tax penalty instead. Particularly if that self-employed household has dependent children or is comprised of adults over age 50. Premiums hit these households particularly hard since household size and age are two key premium rating factors in the non-group market.

The out migration of the 401 percenters combined with the reluctance of under 30 “young invincibles” to purchase a plan and instead pay the tax penalty would shrink and distort the non-group risk pool, calling into question its actuarial sustainability. The primary members would be adults aged 30-50 and a declining number of those over age 50 who are high utilizers of medical care eligible for premium subsidies though the exchanges or willing and able to pay rising premiums in the off-exchange market. With these populations, there may not be enough people in the pool to achieve a sufficient spread of risk among high and low utilizers to keep the segment from falling into adverse selection, further accelerating premium rate hikes.

The aversion of the young invincibles to comprehensive standard non-group plans would be reinforced under a Trump administration that’s exploring relaxing the rules governing short term “gap” policies. That liberalization would create a large degree of parity between short term and standard non-group plans. Both would have annual terms and be renewable. That would shrink the individual risk pool by providing a lower cost replacement for non-group plans for young adults and those who use little medical care, even when tax penalties for lacking comprehensive coverage are taken into account.

In sum, these factors leave the non-group market segment vulnerable to a relatively rapid unwinding over the next three or so years.


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

Politicians focus on wrong part of health-care problem: Advisor

Carolyn McClanahan, a certified financial planner and physician, believes there are some commonsense solutions to fixing the health-care system, and she feels the politicians are actually the problem and not the problem-solvers. “With the health-care system being so complicated, one of the problems I have is that the politicians are focusing on the wrong things,” said McClanahan, founder and director of financial planning at Life Planning Partners. “The No. 1 concern with health care right now is that we have a broken system and we need to fix the system. “And politicians are unfortunately focusing on how we pay for health care and not focusing on the cost of health care.”

Source: Politicians focus on wrong part of health-care problem: Advisor

McClanahan’s right. A far more holistic analysis is necessary whenever dealing with a complex system such as medical care costs and their financing. Since most agree costs have grown to unstainable levels and chew up far too many public and private dollars, that deserves a lot of attention. As well as thorough root cause analysis that takes into account population wellness and specifically how to increase it.

McClanahan’s thinking is on the right track. Fortunately, most people don’t need much medical care. The goal should be to ensure that cohort remains the majority and grows. We can’t get there with more medical care. Instead, more health care – engaging in health promoting behaviors and lifestyles — and developing health education and social values that support that are key.


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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