The administration has confirmed that the individual policies that were supposed to be cancelled because of Obamacare can now remain in force another two years.
For months I have been saying millions of individual health insurance policies will be cancelled by year-end––most deferred until December because of the carriers’ early renewal programs and because of President Obama’s request the policies be extended in the states that have allowed it.
The administration, even today, as well as supporters of the new health law, have long downplayed the number of these “junk policy” cancellations as being insignificant.
Apparently, these cancelled policies are good enough and their number large enough to make a difference come the November 2014 elections.
As a person whose policy is scheduled to be cancelled at year-end, I am happy to be able to keep my policy with a better network, lower deductibles, and at a rate 66% less than the best Obamacare compliant policy I could get––presuming my insurance company and state allow it.
But for the sake of Obamacare’s long-term sustainability, this is not a good decision.
The fundamental problem here is that the administration is just not signing up enough people to make anyone confident this program is sustainable.
Late last Friday after the financial markets closed, the Centers for Medicare and Medicaid Services (CMS) issued its annual notice of 2015 payments to private insurers who sell Medicare Advantage plans to seniors. Its determination that a 3.55% cut is in order was spelled out in a complicated 148-page explanation of its methodology.
The net impact of changes to “coding intensity” adjusted for geographic variation essentially means insurance companies would see a 1.9% cut in their payments per Avalere’s calculations.
But there’s more to the story than the Medicare Advantage payment adjustment. The difference between last year’s Round One rate negotiation and this year’s Round Two is significant.
Medicare Advantage (MA) plans enroll 28% of seniors. It is popular: enrollment increased from 5.3 million in 20104 to 16 million today—a 9% increase last year alone. MA plans are required to offer a benefit “package” at least equal to Medicare’s covering everything Medicare allows, but not necessarily in the same way.
Some health plans sold through the Affordable Care Act’s (ACA) health insurance marketplaces use “narrow networks” of providers: that is, they limit the doctors and hospitals their customers can use.
Go to Doctor A or Hospital A and the plan will pay all or most of the bill. Go to Doctor B or Hospital B, and you may have to pay all or most of the bill yourself.
The narrow network strategy emerged long before the ACA, during the managed care era in the 1990s, and insurance companies and large, self-insured employers have used narrow networks ever since to control health care costs.
In fact, for the first time, the ACA creates new consumer protections requiring that insurers provide a minimum level of access to local providers. A number of states have exceeded these federal standards using their discretion under the new law.
Nevertheless, some consumer advocates and ACA critics still find narrow networks objectionable. Narrow networks mean that some newly insured people are no longer covered for visits to previous providers, or, if they didn’t have a doctor before, are limited in their new choices. Not infrequently, narrow networks exclude the most expensive doctors and hospitals in a community, including some specialists and academic health centers.
More expensive doctors and hospitals are not necessarily better, but for patients with a rare or complex health problem, such restrictions can be problematic.
Welcome to the world of competition in health care, because that is what narrow networks are about. Narrow networks are used by competing plans to control health care costs, and perhaps improve quality as well. In fact, if you don’t like narrow networks, you’re saying, in effect, that you don’t like competitive solutions—as least under current market conditions—to our health system’s problems.
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.
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.
President Obama rarely shies away from an opportunity to tout successes in U.S. health care, but in last night’s State of the Union oddly omitted any mention of the new and optimistic report about U.S. health spending from actuaries at the Centers for Medicare and Medicaid Services (CMS).
The finding: from 2009 through 2012, health care spending in the U.S. grew at the slowest rate since the government started collecting this data in the 1960s.
The actuaries found that in 2012 spending “stabilized,” growing by 3.7 percent in 2012, and health care accounted for a slightly smaller percent of GDP than the prior year, 17.2 percent versus 17.3 percent in 2011.
Perhaps an actuarial report proclaiming stable growth doesn’t make for much of an applause line for a State of the Union speech. But for confessed policy wonks like me, it’s as good as a Hollywood blockbuster.
So get out your popcorn, here are five Hollywood moments in the report.
1. Ninja Combat
When the report came out in early January, the Obama administration quickly ascribed the good news to Obamacare. But, lo and behold, the actuaries wielded their slide rules like weapons.
They respectfully disagreed with their president, pointing out that few of the provisions in the health reform law were actually in place during the slow-growth years in question. The actuaries conclude that most of the cost stability results from the economic recovery process.
Given the silence in the State of the Union, they may have been given the last word on the subject.
The U.S. House of Representatives thinks it’s an important topic. They just passed legislation requiring weekly updates on the operation of healthcare.gov.
But here is one proposed measure that can help cut through the maze of competing claims and partisan spin:
The percent of persons with either 1) “silver” or 2) “bronze” plans who have gone two or more months without paying their insurance premium.
Why, you ask? The silver and bronze plans, because their monthly premium is lower, will attract a disproportionate number of persons who were previously unable to afford health insurance and are now newly insured.
According to this just published JAMA article, even if their monthly premiums are fully or partially subsidized, these lower-cost insurance plans cover only up to 60% to 70% of medical expenses.That means cost sharing that can be excess of $6000 and $12,000 for individuals and families, respectively.
If the Obamacare health insurance exchanges are not able to get a good spread of risk––many more healthy people than sick––the long-term viability of the program will be placed in great jeopardy.
Given the early signs––far fewer people signing up than expected, enormous negative publicity about website problems, rate shock, big average deductibles, narrow provider networks, and a general growing dissatisfaction over the new health law––it is clear to me that this program is in very serious trouble.
But that trouble would not necessarily transfer to the health insurance plans participating on the state and federal health insurance exchanges.
Obamacare contains a $25 billion federal risk fund set up to benefit health insurance companies selling coverage on the state and federal health insurance exchanges as well as in the small group (less than 50 workers) market. The fund lasts only three years: 2014, 2015, and 2016.
There is one aspect of the ACA that isn’t being discussed a lot, but is pertinent to the future landscape of health care in this country — the extent to which the ACA is causing a sort of reset, or wiping of the slate, when it comes to insurance policies and procedures.
Previously, there were multiple insurers and multiple policies, many of which had been around for a long time. If an insurer wanted to suddenly change providers in its network, ratchet down provider reimbursement, alter covered procedures or make other adjustments, this was feasible, but too much of a change would entail an outcry limiting insurers’ freedom of action. The overall system had a certain air of stability or inertia, making any changes stand out, any big changes cause for scrutiny and possibly rebellion.
Now, with the ACA, everything is being tossed up in the air and when things land, much can and will be different. Some changes are mandated by the ACA, such as minimum coverage, and insurers are cancelling inadequate policies, substituting very different ones. But even when a policy doesn’t need to be changed, insurers will justify change by pointing to the ACA.
“Given the requirements of the ACA, we must make certain changes to your policy. In particular…”
We are at the beginning of a totally new insurance landscape, even if most of the insurers remain the same. The public has been primed to expect major change and insurance companies will certainly make use of this expectation.
The result is likely to be more restrictive networks, decreased reimbursements to providers and other measures to limit cost. Everything is now up for grabs.
If you have questions about the Affordable Care Act or your buying insurance on the federal state exchanges, drop us aa note. We’ll publish the good submissions.
If you had a health insurance policy that was cancelled, you are now exempt from the individual mandate and its tax penalty should you not decide to buy a replacement policy. In addition, you can now sign up for the very high deductible Catastrophic Plan that was originally reserved only for those under the age of 30.
If you did not have a health insurance policy that was cancelled, you are still subject to the individual mandate and you are not entitled any special treatment toward signing up for the Catastrophic Plan. You must pay the full price for an exchange plan and accept whatever out-of-pocket costs and network limits it might have for the money.
The administration made this change under the “hardship” provisions already part of the law. They have simply defined hardship as having lost your old individual plan and your not being able to find something without it being a “hardship” to purchase, presumably over price or coverage.
This change was brought about when a number of Democratic Senators, some of them facing a tough reelection battle, demanded this concession.
The change was made without consulting the health insurance industry and it was a surprise to them. It is another Obamacare change months after their 2014 rates were set under the presumption all of these cancelled policyholders would be paying a lot more premium into the pool than they pay today.
One has to believe this will not be the last concession to Democrats under reelection pressure.
One has to wonder how this can’t other than undermine further how people feel about Obamacare––particularly its fairness––and taking their “social responsibility” to sign-up seriously.
Shifting Millennial Attitudes on Obamacare December 2013.
Harvard Institute of Politics. Dec 4th, 2013. Poll
A few observations after 10 weeks of Obamacare implementation.
The Obama administration released the first two months enrollment figures this week. With HealthCare.gov still struggling in November, the enrollment of 137,000 people in the 36 states was expected. The main event for the federal exchanges will play out in December now that most people can navigate it
What I found notable in the report was the lack of robust enrollment in the states. In states where the exchange has been running at least adequately for many weeks now, the enrollment numbers are far from what I would have expected.
California enrolled 107,000 people in private plans in the first two months. But California has cancelled 800,000 current individual health plans effective January 1––all of whom have to buy a new plan by January 1 or become uninsured. The only place those who are subsidy eligible can get a subsidized plan is in the California exchange.