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Health Insurance Exchanges

flying cadeuciiA few observations from my travels and conversations in the marketplace:

About half of the enrollments are coming from people who were previously insured and half are not. When I try to gauge this, I go to carriers who had high market share before Obamacare and have maintained that through the first open enrollment. Some carriers have said only a small percentage of their enrollments had coverage before but health plans only would know who they insured before.

By sticking to the high market share carriers who have maintained a stable market share and knowing how many of their customers are repeat buyers, it’s possible to get a better sense for the overall market. Other conventional polls have suggested the repeat buyers are closer to two-thirds of the exchange enrollees.

The number of those in the key 18-34 demographic group improved only slightly during the last month of open enrollment so the average age is still high. The actuaries I talk to think this issue of average age is made to be far more important than it should be. It is better to have a young group than an old group. But remember, the youngest people pay one-third of the premium that older people pay.

The real issue is are we getting a large enough group to get the proper cross section of healthy and sick?

The bigger concern continues to be the relatively small number of previously uninsured people who have signed up compared to the size of the eligible group. The recent report released by Express Scripts reporting on very costly pharmacy claim experience from January and February enrollees is far more concerning than the average age.

Continue reading “Obamacare Observations from the Marketplace”

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This morning, the tally of enrollees in health exchanges is between 6 and 7 million.

Many of these will not finalize their paperwork until April 15, and many more might not pay their premiums.

Nonetheless, given the underwhelming rollout of Healthcare.gov, and well-funded campaigns in some states to discourage enrollment, the number is impressive. But the rest of the story is more important.

In coming weeks, these questions will be answered:

How many of these new enrollees will actually pay their premiums next month and be insured?

Are the new enrollees healthy or sick and in need of medical attention? How will the delivery system respond to these needs?

Did the penalty induce enrollment, or were other factors more important to individuals? Was it the attractiveness of subsidies or something else?

How will employers that provide health coverage assess the viability of health exchanges in their benefits strategies? Can these exchanges serve as a viable marketplace for employee insurance purchases (and allow employers to shift purchasing responsibility to their employees)?

Continue reading “The Rest of the Story on Health Exchange Enrollment”

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Rumors have been circulating in the marketplace all week that the administration was thinking of extending the individual health insurance policies that Obamacare was supposed to have cancelled for as much as three more years.

Those rumors have now come out into the open with Tom Murphy’s AP story on Friday.

That the administration might extend these polices shouldn’t come as a shock. My sense has always been that at least 80% of the pre-Obamacare policies would ultimately have to be canceled because of the administration’s stringent grandfathering rules that forced almost all of the old individual market into the new Obamacare risk pool.

But with the literal drop dead date for these old policies hitting by December 31, 2014, that would have meant those final cancellation letters would have had to go out about election day 2014. That would have meant that the administration was going to have to live through the cancelled policy nightmare all over again––but this time on election day.

The health insurance plans hate the idea of another three-year reprieve. They have been counting on the relatively healthy block of prior business pouring into the new Obamacare exchanges to help stabilize the rates as lots of previously uninsured and sicker people come flooding in.

With enrollment of the previously uninsured running so badly thus far, getting this relatively healthier block in the new risk pool is all the more important. The administration’s now doing this wouldn’t just be changing the rules; it would be changing the whole game.

Republicans, and a few vulnerable Democrats, had essentially called for this last fall when legislation was floated in both the House and Senate with the “If You Like Your Policy You Can Keep It,” proposals. At the time, the administration and Democratic leaders rightly said if this sort of thing would have been made permanent it would have a very negative impact on what people in the new pool would pay––and on their already high deductibles and narrow networks.

At the beginning of this post I asked, Is Obamacare unraveling?

First, as I have said before on this blog, the law’s reinsurance provisions will mean Obamacare can keep limping along for at least three years. And, even making this change won’t alter my opinion on this. It will just cost the government more reinsurance money to keep the carriers whole.

By asking if it is unraveling, what I really wonder about is the whole sense of fairness in the law and the expectation that everybody needs to get the Democrat’s definition of “minimum benefits” whether they want them or not.

Continue reading “Is Obamacare Unraveling?”

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Risk adjustment is a key mechanism to ensuring appropriate payments for Medicare Advantage plans, Medicare Part D drug plans, and Medicaid health plans.  Since health plans vary in their mix of healthy and sick enrollees, risk adjustment modifies premium payments to better reflect the projected costs of members served and compensate plans that enroll high-cost patients.

Historically, risk adjustment was only used in Medicaid and Medicare – in effect, redistributing some revenue from health or drug plans with a relatively healthier mix of members to those plans with a more costly enrollment profile.  However, the Affordable Care Act (ACA) extends risk adjustment to the individual and small group health insurance markets starting in 2014.

A new brief from The Synthesis Project tackles the issue and makes several interesting recommendations for how to improve risk adjustment methods for the post-ACA market. Without accurate risk adjustment, health plans have a strong financial incentive to seek out only the healthiest enrollees, especially under ACA-mandated adjusted community rating.  Under adjusted community rating, health plans may not vary premiums based on health status or sex and are limited in how much they may vary premiums based on age.  Under ACA, the healthy, the young, and men subsidize the health costs of the unhealthy, the older, and women.

Risk adjustment is therefore a necessary factor in stabilizing the dramatically new post-ACA health insurance marketplace, particularly the new Health Insurance Exchanges.  Even then, the ACA is a giant game of musical chairs.  The market under ACA will be chaotic and challenging, with a mix of winners and losers once the music stops and the dust settles, which will take at least three to five years.

Continue reading “How Health Plan Risk Adjustment Models May Change Under the ACA”

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Confusion about Affordable Care Act (ACA) deadlines is rampant. That’s because there are lots of them and they keep changing. The fact is that some of them matter a lot more than others.

In my view, the BIG deadline is:

MARCH 31, 2014: Under the ACA, all Americans must have health insurance, and this is the latest date you can acquire it if you wish to avoid paying a penalty on your 2014 income tax. Some individuals will be exempt from penalties, including, as of last week, people whose policies were canceled because their plans’ benefits did not meet new ACA standards of adequacy.

Another date that has drawn attention but, in my view, doesn’t matter as much:

JANUARY 1, 2014: This is not a deadline so much as an opportunity. It is the first day, when, if you signed up in time (now December 24 for the federal website, but a few states have later deadlines)—and paid your premium in time (at the administration’s urging, many insurers are allowing a grace period through January 10 for the federally run marketplaces and some states have also moved this date)—you could enjoy the subsidized coverage available under the ACA. But if you miss these so-called deadlines, you still have until March 31 to sign up for coverage to avoid a penalty.

For the millions of Americans who are uninsured, or who could have enrolled in improved insurance through a state or federal exchange, missing these deadlines merely means you failed to make yourself better off as soon as you possibly could. BUT YOU WILL BE NO WORSE OFF THAN YOU WERE BEFORE.

There are also some dates that are consequential, but have received less attention, or have receded from the headlines:

NOVEMBER 2014: This is when the Obama administration promises online enrollment for the Small Business Health Options Program (SHOP) in the 34 states where the federal government is operating the small-business marketplaces for companies with fewer than 50 workers. For now, small businesses in these states can apply via paper application or an insurance broker or navigator.

Online access is available already in most of the 17 states and the District of Columbia that are operating their own SHOP exchanges.

JANUARY 1, 2015: The date by which employers with 50 or more employees will become liable for a tax penalty if they are not offering health insurance that meets minimum standards, and an employee becomes eligible for subsidized private coverage through the marketplaces.

The changing dates associated with the ACA are troubling to some, since they suggest confusion and even mismanagement by the Obama administration. It would obviously be reassuring if every declared date were honored and announced rules and intentions never changed.

On the other hand, I’m doing some long-delayed repairs in my home. The contractor said the work would be done by Thanksgiving, but there were unanticipated problems. We’re hoping now for Christmas.  I’ll be happy if it’s done by mid-January, but the key thing is whether, a year from now, I’m satisfied with the result.

Health insurance is obviously way more important to millions of Americans than any home repair project could ever be. But few things in life go exactly as planned, and it would be totally astonishing if the implementation of massive reforms to a sector accounting for 20 percent of our economy rolled out without a bump or a detour.  We should keep that in mind as we think about those changing ACA deadlines.

David Blumenthal, M.D., M.P.P., is president of The Commonwealth Fund, where this post originally appeared.

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When envisioning what public insurance exchanges of the future can and should look like when it comes to technology and structure, one only needs to look at the successful private exchanges that have paved the way over the past several years.

This experience has taught those who administer private exchanges that open enrollment—the phase that the federal government’s Health Insurance Marketplace is struggling through currently—is only the beginning. Public exchanges could benefit from lessons already mastered by private exchanges—starting with open enrollment but extending to even more complex technology-based transactions.
There are 10 scenarios that vendors must be able to handle.

1. Life Events. In today’s individual Health Insurance marketplace, consumers can generally add or drop coverage for themselves or their dependents anytime they want. In other words, it’s a relatively “rule-free world.” In January 2014, that world changes to look more like the current group health marketplace in which many rules are defined by the federal government’s existing tax code (e.g., Section 125) and HIPAA requirements, and consumers must select and “lock in” their coverage once a year for the following 12 months, unless they experience a qualified life event.

As a result, each qualified life event – e.g., marriage, divorce, birth of a child, loss of spouse’s coverage and many more – must be configurable within the Exchange technology to enforce the appropriate rules. For example, if a person gets married, is that person allowed to drop coverage or change plans and carriers? How about with the birth of a child? Or with a loss of spouse’s coverage? For a truly scalable Exchange technology, thousands of scenarios must be configured in advance to enable consumers to make enrollment choices online without administrator involvement.

Continue reading “What Public Insurance Exchanges Will Look Like 5 Years From Now”

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Obamacare is impacting the small group insurance market in many of the same ways as the individual health insurance market. While employers with less than 50 workers don’t have to provide coverage, if they do they are required to comply with the same essential benefit mandates, age rating changes, and pre-existing condition reforms the individual market faces.

That means essentially all small group policies cannot continue as they are––they have to be discontinued.

What makes things a bit easier, if not any less expensive, is that small employers typically have health insurance brokers to run interference for them and help them through this change where individual consumers often get that dreaded cancellation letter telling them they will not have health insurance after a certain date if they do not act quickly in what is a confusing marketplace in the best of times.

The first small group renewals are now occurring––the January 1 renewals that typically have to be delivered during the month of November under state law.

Many employers are facing significant changes in order to comply with Obamacare and therefore price increases. One Maryland broker I spoke to this week has 90 small group accounts and he reports his smallest increase was 15%, his largest was 69%, and most are in the 30% – 40% range.

(By comparison, Mercer just announced the average large employer health care cost increase for 2014 will be 5.2%, meaning small groups could have reasonably expected an increase under 10% without Obamacare.) The biggest rate increases are generally going to those employers with the youngest groups the most impacted by the new “age compression” rules.

Does this mean these small employers’ coverage has been outright cancelled and they will now send their workers to the exchanges, as I have heard some commentators argue?

No, at least not anytime soon.

But that does not mean that lots of these small employers aren’t angry and confused.

What are these small employers doing?

Continue reading “The Next Shoe to Drop: Small Group Health Insurance Cancellations”

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Last week President Obama announced that he will try to keep his oft repeated promise to Americans in the individual market that they can keep their plans if they like them … for a year. The media have done an excellent job explaining why President Obama’s temporary patch to the ACA may endanger its existence; in the process the American public has learned more than it ever wanted to about adverse selection, cream skimming, and most importantly crass politics.

Though the full costs of adverse selection will be muted in the first year by risk corridors and reinsurance, it is clear that the failing website, the bad press, and the recently announced delay are placing maximal stress on even those backup provisions of the bill.

Even if the ACA survives this additional insult against the economics that support its very existence, we have witnessed yet another missed opportunity for positive reform to President Obama’s signature legislative achievement. And this time we can’t just blame intransigent tea-party Republicans and their quixotic efforts at repeal; here the buck stops at 1600 Pennsylvania Ave, NW.

While many of the plans that are affected by the President’s temporary patch might actually be plans that don’t qualify as “insurance” (i.e. they have low lifetime caps on expenditures or don’t cover hospital services), numerous others actually offer quite good coverage that just don’t meet the exceptionally high standards of the newly developed minimum essential health benefit (EHB).

In many ways, the first dollar coverage for preventive care and the wide ranging number of services covered by the ACA aren’t truly insurance either. Instead, these features amount to a very generous pre-payment plan for medical services supported by the United States treasury.

These elements of the EHB are too costly and unnecessary. Perhaps even more concerning, they are just the ante. As time goes on, vested interests for everything not included in the EHB will work tirelessly to insure that their favorite benefits are included. If you want evidence of this eventuality, you need look no further than the remarkably long and growing list of benefits mandated by most states.

Keep in mind that as the EHB grows more generous the premiums and subsidies on the exchanges will also grow. And we know who will pay their “fair share” of those increases.

Continue reading “The Real Fix? The Exchanges Aren’t Working. Here’s Why …”

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On February 16 of last year, I was in a New Orleans hotel room preparing for a meeting when my wife Becky called and said simply, “I have cancer.”

We knew it was possible, but that didn’t in any way lessen the impact of those three words.

I have cancer.

Everything that was right and comfortable was in that instant washed away by a million questions with no answers. At a time when we needed nothing more than certainty and clarity, there was only confusion and doubt.

Upon landing in Philadelphia hours later, I called to see how she was doing with her newly diagnosed breast cancer. Feeling numb, I managed to make one other call soon after landing. Not to friends. Not to family. Instead, it was to our insurance company.

That’s right: Other than my wife, the one person I most wanted to speak to in the world was a Cigna call center operator.

We hadn’t even had a chance to meet with her oncologist to discuss potential courses of treatment, but we had questions because we had recently changed our plan to carry higher out-of-pocket costs and lower deductibles. We needed answers to those questions so we could go about worrying about more important things.

What procedures are covered? Are the doctors at the cancer center in plan? What is the maximum out of pocket? What other limits should we know about?

A 15-minute conversation later, we were comfortable that insurance wouldn’t be an issue and had a decent understanding of what our share of the costs would be. At a time of absolute fear and confusion, our insurer provided a moment of comfort and clarity.

That is the kind of financial and emotional stress that millions of people face every day in the United States. That is also the kind of financial and emotional security the Affordable Care Act was supposed to provide — especially to those who currently lack health insurance.  Continue reading “My Wife Has Cancer. I Need to Know: Will She Have Insurance On January 1st?”

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A THCB reader in New York writes in with this timely observation:

“If you want everyone to be able to get insurance, everyone has to actually have insurance.

Most people agree that one shouldn’t be denied insurance because of illness and pre-existing conditions.  This is probably the least controversial aspect of healthcare reform. The problem is, you can’t insist that insurance companies sell to all comers at reasonable rates unless you also guarantee a sufficiently large risk pool that includes the healthy as well as the sick.

If you don’t see to it that the healthy sign up, people will go without insurance until they get sick, and the pool of the insured will become so costly that premiums will quickly spiral out of control.

So, to make sure everyone CAN get insurance, everyone MUST get insurance.

This isn’t a moral or political stance, it’s not something you can choose to believe in, it’s basic economics.

The problem with the ACA’s approach to ensuring universal coverage is that the incentives for the healthy to sign up are too weak.
The healthy who decide not to purchase insurance will have to pay a penalty, but that penalty will usually be substantially lower than the price of insurance. Perversely, this weakened approach to ensuring universal coverage could make things worse than they are today.  How?

Today, if I’m healthy and uninsured, I know that if I develop a serious illness, I won’t be able to get coverage.  At all.  This is an incentive for me to go out and spend the money on insurance. Once the ACA is in full force, if I decide that I would rather pay the (cheaper) penalty than buy insurance, I have the security that should I become sick, assuming it’s not a super emergency, I will be able to get insurance to cover future costs, since policies will have to be offered to all.  This security blanket for those who choose to remain uninsured is a major problem.”

Continue reading “Sorry. If You Want The ACA to Work, You’re Going to Have To Actually Make People Buy Insurance”

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