The Affordable Care Act contains a number of provisions intended to incent “personal responsibility,” or the notion that health care isn’t just a right — it’s an obligation. None of these measures is more prominent than the law’s individual mandate, designed to ensure that every American obtains health coverage or pays a fine for choosing to go uninsured.
But one provision that’s gotten much less attention — until recently — relates to smoking; specifically, the ACA allows payers to treat tobacco users very differently by opening the door to much higher premiums for this population.
That measure has some health policy analysts cheering, suggesting that higher premiums are necessary to raise revenue for the law and (hopefully) deter smokers’ bad habits. But other observers have warned that the ACA takes a heavy-handed stick to smokers who may be unhappily addicted to tobacco, rather than enticing them with a carrot to quit.
Under proposed rules, HHS would allow insurers to charge a smoker seeking health coverage in the individual market as much as 50% more in premiums than a non-smoker.
That difference in premiums may rapidly add up for smokers, given the expectation that Obamacare’s new medical-loss ratios already will lead to major cost hikes in the individual market. “For many people, in the years after the law, premiums aren’t just going to [go] up a little,” Peter Suderman predicts at Reason. “They’re going to rise a lot.”
Meanwhile, Ann Marie Marciarille, a law professor at the University of Missouri-Kansas City, adds that insurers have “considerable flexibility” in how to set up a potential surcharge for tobacco use. For example, insurers could apply a high surcharge for tobacco use in older smokers — perhaps several hundred dollars per month — further hitting a population that tends to be poorer.
Is this cost-shifting fair? The average American tends to think so.
Continue reading “About Time? Smokers Face Tough New Rules Under Obamacare”
Filed Under: THCB, The Insider's Guide To Health Care
Tagged: Affordable Care Act, Cancer, Dan Diamond, Insurers, Medicaid Expansion, MLR, Obamacare, Premiums, smoking, smoking cessation, tobacco
Jan 25, 2013
The most remarkable thing about Health 2.0 this time around, at least for me? The growing number, and percentage, of attendees old enough to get a reference like “Hey, Known Spender.”
If that wordplay evokes the trumpet blare of the brass band that accompanied one of the more pernicious and offensive TV ad campaigns of the 1970s (derived from the 1966 musical Sweet Charity), then you would have had more company than usual at last week’s 2.0 conference in San Francisco.
For all you Gen X’ers, Y’ers, and Millennials pitching your ever more nifty wares this time around: those horrific ads featured a slinky woman – made-over from the ‘60s musical’s stripper chorus to a ‘70s “empowered” glamour-gal – crawling all over some dude in a tux and singing “Hey, Big Spender, spend a little time with me.” The ads were unambiguous proof that American culture’s direct equation of cash and sex pre-dated the 1980s.
The “Known Spenders” who spent a little time at Health 2.0 this year were, for the most part, old enough to remember that ad. And they are actually make a living today working in corporate health care jobs. They’re the people they call “The Suits” in Hollywood, and they can actually get your products out of beta and into the real world. The slow steady creep of relevance not just of Health 2.0 as a marker of the market, but of the entire dream of consumer health IT, can be measured by the slow steady influx of the salt-and-pepper folks my own age who work for health insurance companies, employer groups, hospital systems, and drug companies. Six years ago, at the inaugural 2.0, The Suits were nowhere in sight. This year, they were everywhere you looked, kicking tires and taking business cards. Skepticism was abundant among those I talked with, as it should be with industry lifers who have endured two full cycles of health IT hype. (Healtheon and Revolution Health were the market toppers of valuation, grandiosity, and absurdity; if the current boom goes bust, we lifers know exactly who it will be.)
Among the two dozen or so people I’ve known over the years and who have yet to be paroled from health care, the consensus at 2.0 was “these are mostly good products, not companies, there is too much overlap, they have too narrow a scope of functionality, and many need to be rolled up. But a few actually have replacement revenue potential.”
As for the first part of that consensus, nothing new here. Nor anything new about the classic chicken-and-revenue problem that has hampered Health 2.0 start-ups from the start. I’m hardly the first, and surely won’t be the last, to point out the obvious: health care is not lacking for great consumer information products, services, systems, or apps; those products etc. are lacking users, adoption, exposure, traffic, critical mass, revenue. By “revenue” I mean “cash,” from paying customers, not promises, sales pipelines, booked revenue, or even signed contracts with guarantees. And I certainly don’t mean investors’ cash. I’m talking about revenue from consumers, patients, providers, or any of the myriad third parties who are spending money today – just not happily.
Continue reading “Hey, Known Spender!”
Filed Under: Health 2.0, THCB, The Business of Health Care
Tagged: 6th Annual Health 2.0 Conference, AgeTak, Aidin, Beyond Lucid, Big Data, CarePlanners, DC to VC, Health 1.0, Health 2.0, Health IT, Health IT Investors, Healtheon, Healthgrades, HITECH, J.D. Kleinke, Known Spenders, Matthew Holt, Medicaid, Mentors, Missy Krasner, MLR, Morganthaler Ventures, Obamacare, Revolution Health, Suits, Supersuits
Oct 15, 2012
You may have received a refund check in the past few months from your health insurer. This is not your individual reward for staying healthy; it is your insurer’s punishment for making too much money because you did.
Obamacare includes what the health care technocracy calls the “MLR rule” – minimum requirements for medical-loss ratios – or the percentage of premiums collected by health insurers that must be spent on medical care or refunded. The inverse of the MLR is the percentage spent on administration and marketing, and earned as profit. Obamacare sets minimum MLRs of 80 percent for individual and small group plans, and 85 percent for large groups.
Aside from its obvious populist appeal, this profit regulation mechanism signifies a belief, now enshrined in legislation, that health insurance markets do not work. Without such a rule, the architects of Obamacare believe, insurers can name their prices, however inflated, and we all just pay.
In the short term, that is true. Most health insurance plans price only once per year, are subject to long delays in cost trending information and multi-year underwriting cycles, and endure the meddling of a carnival midway’s worth of employee benefits tinkerers, agents, brokers, consultants, and other conflicted middlemen. But in the long term, over multiple annual cycles, premiums do rise and fall, and the health insurance industry’s fortunes with them.
Continue reading “Good Business Models and Bad Business Models.”
Filed Under: Health Plans, THCB
Tagged: Aetna, Affordable Care Act, Amerigroup, Coventry, Fraud, Health Insurance Markets, health insurance premiums, Managed Care, MLR, Wellpoint
Sep 6, 2012
Gregg Masters reports on a recent Kaiser Health News article: Hospitals Look to Become Insurers, As Well as Providers of Care”.
This is the dumbest idea I’ve heard since “I’m going to invest all my money in Facebook’s IPO and get rich!”
Here are six reasons why:
1) You’re too late. Health insurance was an attractive and profitable business in the 00s, but after passage of the Accountable Care Act it’s been commoditized.
First, the health plan business model of the past decade is dead. That model was — “Avoid and shed risk” — or more simply, avoid insuring people who are already sick (preexisting conditions) and get rid of people who become sick (rescissions). Under the ACA, health insurers must take all comers and they can rescind policies only for fraud or intentional misrepresentation.
Second, the ACA institutes medical loss ratio restrictions on health insurers. Depending the the type of plan, insurers now must spend at least 80-85% of premium dollars on paying medical claims; if they spend less, they must return these “excess profits” as rebates to customers. As a result, health insurance has become a highly regulated quasi public utility.
This is why you see health plan CEOs like Mark Bertolini of Aetna declaring “Health insurers face extinction”. The old health insurance model is on a burning platform, and health plans are reformulating themselves as companies involved in health IT, analytics, data mining, etc.
2) You have bigger fish to fry. Focus on developing accountable care capabilities. The AHA estimated that hospitals will need to spend $11-25 million to develop an ACO. Get going.
Continue reading “Hospitals…Thinking About Getting Into Health Insurance? 6 Reasons To Lie Down Until the Urge Goes Away.”
Filed Under: Hospitals
Tagged: Aetna, Gregg Masters, Health Plans, Hospitals, Insurance, MLR, Vince Kuraitis
Aug 28, 2012
Today’s headline was “Millions Expected To Receive Insurance Rebates Totaling $1.3 Billion.”
The Kaiser Family Foundation estimates that 3.4 million people in the individual market will receive $426 million in consumer rebates because of the Affordable Care Act’s new MLR rules. In the small group market 4.9 million enrollees will see $377 million in rebates, and 7.5 million people will get $540 million in the large group market.
But take a closer look at the report. Only 19% of those in the large group market will be getting a rebate and that rebate will average $72.31 per person. In the small group market 28% of those enrolled in these plans will get a rebate averaging $76.37. And, in the individual market 31% of consumers who have these plans will get a rebate averaging $126.81.
The Wall Street Journal, citing a Goldman analysis, is reporting that Aetna will be paying out $177 million in rebates. But Aetna has $11 billion in premium so that’s only a 1.6% rebate. UnitedHealth will be paying out $307 billion but that is only 1% of its $28.8 billion in premium. Wellpoint will pay out $94 million in rebates but that is only .28% of its premium for the year.
The average cost of employer-provided family health insurance is now about $13,000 per year. A family rebate of perhaps $200 will amount to only about 1.5% of premium for the relatively few people who will even get one.
Continue reading “The Medical Loss Report: Fiddling while Rome Burns”
Filed Under: Health Plans
Tagged: Aetna, Broker Comission, MLR, Premium, Rebates, United Health, Wellpoint
Apr 26, 2012
Last week, the U.S. Supreme Court heard six hours of oral arguments for and against the constitutionality of the new health care law. As a small business owner, I am not a constitutional scholar, but I can definitively say this: the Affordable Care Act is cutting my health care costs and helping my business.
My wife and I run an auto repair shop in Columbia, MD. We started as a small, family-business in 1978. Now, we’re a well-respected business with 19 employees, a long string of awards and a reputation for service.
One of the biggest barriers to growing a successful business has been the rising cost of health insurance. We’re committed to offering insurance coverage, but over the past 10 years it has become a real struggle to keep up with the costs.
We’ve become accustomed to rates going up 10 percent to 20 percent each year (sometimes even more), and we’ve had to look at many different ways to deal with the extra expense. We’ve got a great agent who does a lot of research and works hard to find the best options for us. But in the end, we’re the ones who have to decide what to do — and foot the bill.
Continue reading “Health Care Reform: Good for Business”
Filed Under: THCB, Uncategorized
Tagged: Affordable Care Act, Employers, Health insurance, MLR, Small Business
Apr 3, 2012
What is a payer/insurer?
Typically, payer organizations collect premiums from employers and individuals, process claims, and engage in a variety of case management/disease management activities to encourage the appropriate use of medical resources. If they collect more premiums than claims paid, their medical loss ratio is less than 100% and they earn a profit.
In a world of accountable care organizations and healthcare reform, new reimbursement methods will include global payments to providers, which implies the risk of loss will shift from the payer to hospitals and clinicians. Payers will no longer need their large claims processing staff, nor create complex actuarial models. They’ll become very different organizations.
My prediction is that payers will become the health information exchange and analytics organizations that help hospitals and clinicians manage risk in a world of capitation.
I’ve said before that ACO=HIE+Analytics.
The payers are already making strategic acquisitions to build these new business models
Aetna acquired Medicity to gain expertise in healthcare information exchange. Aetna had already acquired Active Health to gain access to its CareEngine analytics platform.
Continue reading “Will Payers be the Business Intelligence Services of the Future?”
Filed Under: Health Plans, THCB
Tagged: ACOs, HIE, MLR
Mar 14, 2012
One of the provisions in the Patient Protection and Affordable Care Act (a.k.a ACA, a.k.a. Health Reform, a.k.a. Obamacare) is that it limits the profits of health insurance companies. The ACA imposes a minimum medical loss ratio (MLR) on all insurers. The MLR is the amount of money spent on covered person medical care divided by the total revenue received through premiums. There is some debate of what constitutes ‘medical care’ (e.g., do investments in electronic health records count as medical care?), but insurer profits certainly are non-medical.
The ACA requires health insurers in the individual and small group market to spend 80 percent of their premiums (after subtracting taxes and regulatory fees) on medical costs. The corresponding figure for large groups is 85 percent. According to a recent Kaiser tracking poll, 60 percent of the public views the MLR concept favorably, although only 38 percent was aware that the provision is in the ACA. Insurance brokers may be getting squeezed for insurers to meet this amount.
Even though the MLR is a national law, it may not apply in your state. Continue reading “Does Obamacare Limit Profits for Health Insurance Companies in Your State?”
Filed Under: THCB, The Insider's Guide To Health Care
Tagged: 2012 Election, Affordable Care Act, Health Reform, HHS, MLR, Obamacare
Feb 4, 2012
Payers, as with the rest of the healthcare industry, have a lot on their plate right now. Healthcare reform, via the Affordable Care Act (ACA) continues its march forward despite legal and political uncertainty. Struggling to define the payer role in Accountable Care Organizations (ACOs), understanding the impact of Health Insurance Exchanges (HIXs) on their business (McKinsey survey results likely have many payers wondering how to market to what may be an enormous uptick in individual purchasers of coverage – something that most are ill-prepared for), and how to better engage consumers/members in proactively managing their health are a few of the top issues that were addressed at the AHIP Institute last week.
But when one sits back and reflects on the AHIP Institute – all of the sessions, all the discussions, the chatter in the halls, underlying messages within the message, the exhibit hall – it boils down to three key themes that this sector of the healthcare industry is grappling with, which much like the three stages of meaningful use, build upon one another: Continue reading “Looking at Healthcare Through Payer Lenses”
Filed Under: Health Plans, THCB
Tagged: Affordable Care Act, Health insurers, John Moore, MLR, Pharma
Jun 24, 2011
The Medical Loss Ratio (MLR) policy written into the Patient Protection and Affordable Care Act (PPACA) requires health insurance companies to deliver more direct value to consumers by mandating that they spend a higher percentage of premium dollars collected on medical care, as opposed to administrative costs.
The new law requires that at least 85 percent of all premium dollars collected by insurance companies for large employer plans be spent on healthcare services and quality improvement. For plans sold to individuals and small employers, at least 80 percent of the premium must be spent on benefits and quality improvement. If insurance companies do not meet these goals because of administrative costs or high profits, they must provide rebates to consumers starting in 2012.
While much debate exists on if this is requirement is “fair,” those on both side of the argument can agree that any reduction in administrative costs is a step in the right direction, especially if it frees up dollars to be spent in areas that will directly impact members. Moving beyond politics and percentages, payers can save up to 30-50 percent in operating costs when working with a partner to streamline back office processes. Examples include:
- Claims processing, billing and provider maintenance: By outsourcing standard transactional services, payers can increase data quality and accelerate turnaround time on claims processing and lower costs.
- Enrollment processing: Payers can turn to partners to handle standard enrollment functions including setting up new member accounts, staffing call centers for member questions and issuing satisfaction surveys.
- Auditing solutions: Recovering funds from incorrectly paid claims is a service payers can outsource that can recoup funds by having an outsourcing partner track and even litigate wrongful payment claims on an insurance company’s behalf.
- Customer care: Using a partner to help communicate plan information and answer questions from members allows payers to focus on quality of care and new product introduction, while reducing costs and complying with regulatory demands. Continue reading “Medical Loss Ratio: Putting Percentages and Politics Aside”
Filed Under: Health Plans, THCB
Tagged: Affordable Care Act, Connie Harvey, Insurance companies, Medical Loss Ratio, MLR
Apr 5, 2011