One of the most important responsibilities of the American government is to protect its citizens from harmful industry practices, from lead poisoning to dangerous pharmaceuticals to financial meltdowns. Its record is far from perfect, but government regulators usually act in good faith and in turn earn the trust of those they protect. As we head into Tuesday’s election, it’s important to shine a spotlight on the fact that the Trump administration has betrayed that trust yet again. They have allowed low-quality, unregulated forms of insurance called Short-Term Limited Duration Insurance (STLDI) to prey upon those who lost their jobs during this pandemic. Also known as “junk” insurance, this issue has gotten far less attention than the need to protect people with pre-existing conditions. But the consequences of its inadequate coverage can be just as devastating.
Only 57% of STLDI plans cover mental health care, only 29% cover prescription drugs, and virtually none cover pregnancy. These plans are also allowed to discriminate against the sick, which most do in order to save money. STLDI managed to penetrate the market through a combination of cheap prices, lucrative broker incentives, and deceptive marketing.
Consumers get very little back for their money with these plans. Plans on the Affordable Care Act’s exchanges must spend 80 cents out of every premium dollar collected on care. In 2018, the top five STLDI insurers spent only 43 cents.
Originally envisioned as short-term solutions to gaps caused by unexpected coverage loss, the Trump administration extended their maximum length from three to 12 months and allowed renewals that can essentially extend them to three years, thus drawing consumers away from the individual markets established under Obamacare. This was essentially a kick in the gut for the law, after the current administration was unable to win any legislative or court battles against it.
In the strangest healthcare business story of 2020, the major health insurance companies are thriving despite—or because of—the pandemic. As the second quarter reports of United, Anthem, Cigna and other insurers reveal, their COVID-19-related costs were outweighed by the sharp drop in claims for other healthcare services.
As a result, the second quarter operating gain for Anthem, one of the largest national carriers, jumped 65% from the prior-year period, while the portion of its premiums spent on member benefits dropped to 78%. The earnings of UnitedHealth, similarly, vaulted 98% as the percentage of its premiums spent on health care fell to 70.3%. Such a low “medical loss ratio” has probably not been seen since the 1990s.
At the same time, the big insurers’ membership has been rising, but not among workers covered by employer-sponsored plans. Commercial insurance members served by United, for example, fell by 270,000 to 26.8 million, following a drop of 720,000 in Q1. In contrast, the number of people in United’s Medicaid managed care plans rose by 330,000.
These trends track with the short-time fallout of the pandemic. Families USA reported that 5.4 million workers who lost their jobs from February to May also lost their health insurance. Another study predicted that by the end of 2020, 10.1 million people will lose employer-based insurance tied to someone in their household.
I’ve been covered by private insurance my entire life. Even more telling, I worked in the health insurance industry for — gasp! — some thirty years. It’s not just paid for my healthcare, it’s financed my life.
Today, though, for the first time in my life, I’m covered by public insurance — and I couldn’t be more relieved.
Now, I’m not going to go all Wendell Potter. I know many people have their health insurance horror stories, but, sadly, people have them about pretty much every part of the healthcare industry. I believe most people working in health insurance, like most people working in healthcare generally, sympathize with the people they serve and are just trying to do a good job.
The problem is that the health insurance model has outgrown the times. I’ll try to explain some ways how.
Once upon a time, most people had employer coverage, and those employers paid all or most of its cost. Those days are gone. Employer coverage is still the predominant form of private health insurance, and employers still pay the majority of its cost, but percentage of people with employer coverage continues to drop and the amount they pay for it continues to increase.
Among its less appreciated but more worrisome impacts, COVID-19 threatens to destabilize America’s health care provider infrastructure. Patients have largely been relegated to sheltering at home and, to avoid infection, are avoiding in-person clinical visits. The revenues associated with traditional physician office visits have been curtailed. Telehealth capabilities are gradually coming online, but are often still immature. The concern is that many practices will be financially unable to keep the doors open, compromising access and healthy physician-patient relationships.
Health plans have become health care’s bankers, controlling the funding that fuels larger care processes. Health insurance companies and health plan administrators rely on networks of doctors and hospitals to deliver health care services. They also rely on premium payments from employers to administer and pay for health care. In conventional fee-for-service, pay as you go arrangements, providers are paid after they have delivered care services. The stability of this approach, of course, assumes an unhindered flow of patients receiving care.
When the stability of that flow is disrupted, as it has been with COVID-19, physician practices become vulnerable. Solving that vulnerability would give members access to critical services – primary care, specialty care, urgent care and pharmacy coordination – during this epidemic. Without these resources, members will be forced to turn to overburdened hospitals, where they risk increased COVID-19 exposure.
RelianceHMO is a Nigerian-based health insurance startup that aims to turn the traditional health insurance world upside-down. CEO Femi Kuti delves into how his company is using mobile phones, telemedicine, data science, and even underwriting (!) to make health insurance cheaper — and more accessible. With more than 1800 hospital partners across Nigeria, RelianceHMO is making a name for itself, but how does it plan to scale throughout Africa? And, what can payers around the world learn from their approach as they seek to make health insurance easy and affordable for Nigeria’s 190M uninsured? We love talking about disrupting payment models in healthcare and after hearing Femi’s story, you’ll understand why.
Filmed at Bayer G4A Signing Day in Berlin, Germany, October 2019.
I’ve had several telephone calls in the last two weeks from a 40-year-old woman with abdominal pain and changed bowel habits. She obviously needs a colonoscopy, which is what I told her when I saw her.
If she needed an MRI to rule out a brain tumor I think she would accept that there would be co-pays or deductibles, because the seriousness of our concern for her symptoms would make her want the testing.
But because in the inscrutable wisdom of the Obama Affordable Care Act, it was decided that screening colonoscopies done on people with no symptoms whatsoever are a freebie, whereas colonoscopies done when patients have symptoms of colon cancer are subject to severe financial penalties.
So, because there’s so much talk about free screening colonoscopies, patients who have symptoms and need a diagnostic colonoscopy are often frustrated, confused and downright angry that they have to pay out-of-pocket to get what other people get for free when they don’t even represent a high risk for life-threatening disease.
But, a free screening colonoscopy turns into an expensive diagnostic one if it shows you have a polyp and the doctor does a biopsy – that’s how the law was written. If that polyp turns out to be benign, or hyperplastic, there is no increased cancer risk associated with it, but you still have to pay your part of a diagnostic colonoscopy bill because they found something.
Today, I’m closing out the year of Health in 2 Point 00 from the ski slopes. In Episode 103, Jess asks me about the ACA ruling that the individual mandate is unconstitutional, whether Sutter Health got what they deserved after the $575 million settlement, health insurer Bright Health raising a huge $635 million round, and a rumor about a $250M Softbank investment coming next week. Wishing you all a very happy 2020! —Matthew Holt
At kitchen tables everywhere, ordinary Americans have been grappling with the arcane language of deductibles and co-pays as they’ve struggled to select a health insurance plan during “open enrollment” season.
Unfortunately, critical information that could literally spell the difference between life and death is conspicuously absent from the glossy brochures and eye-catching websites.
Which plan will arrange a consultation with top-tier oncologists if I’m diagnosed with a complex cancer? Which might alert my doctor that I urgently need heart bypass surgery? And which plan will tell me important information such as doctor-specific breast cancer screening rates?
According to Matt Eyles, president and chief executive officer of America’s Health Insurance Plans (AHIP), insurers over the last decade have made a “dramatic shift” to focus more on consumers. That shift, however, has yet to include giving members the kind of detailed information available to corporate human resources managers and benefits consultants (one of my past jobs).
What’s at stake could be seen at a recent AHIP-sponsored meeting in Chicago on consumerism. Rajeev Ronaki, chief digital officer for Anthem, Inc., explained how the giant insurer is using artificial intelligence to predict a long list of medical conditions, including the need for heart bypass surgery. Information on individual patients is passed on to clinicians.
It’s great news to read headlines that the average health-insurance premium will drop by 4% next year in the 38 states using federal Obamacare exchanges. As millions of Americans entered open enrollment this year to choose their health insurance plans, it is important to remember that premiums are only one of the ways that we pay for our medical coverage.
many plans lower premiums (paid by everyone) often mean a higher deductible —
or paying more out-of-pocket before insurance coverage kicks in. This burden is
paid only by those who use medical care services.
Deductibles are rising, and so is the number of
Americans enrolled in so-called high-deductible health plans
(HDHPs). Thus, more people with health insurance are being asked to pay
full price for all their care, regardless of its clinical value. Although
it may be better for many people with significant medical needs (and less
disposable income) to avoid plans with high deductibles, more and more people
who receive health insurance through their employer no longer have a choice
except to choose a plan with hefty costs in addition to premiums.
In a previous post, I described how some features of the Affordable
Care Act, despite the best intentions, have made it harder or even impossible
for many plans to compete against dominant players in the individual and small
employer markets. This has undermined aspects of the ACA designed to improve
competition, like the insurance exchanges, and exacerbated a long
term trend toward consolidation and reduced choice, and there is evidence it
is resulting in higher costs. I focused on the ACA’s risk adjustment program
and its impact on the small group market where the damage has been greatest.
The goal of risk adjustment is commendable: to create
stability and fairness by removing the ability of plans to profit by “cherry
picking” healthier enrollees, so that plans instead compete on innovative
services, disease management, administrative efficiency, and customer support.
But in the attempt to find stability, the playing field was tilted in favor of
plans with long-tenured enrollment and sophisticated operations to identify all
scorable health risks. The next generation of risk adjustment should truly even
out the playing field by retaining the current program’s elimination of an
incentive to avoid the sick, while also eliminating its bias towards incumbency
and other unintended effects.
One important distinction concerns when to use risk
adjustment to balance out differences that arise from consumer preferences. For
example, high deductible plans tend to attract healthier enrollees, and without
risk adjustment these plans would become even cheaper than they already are,
while more comprehensive plans that attract sicker members would get
disproportionately more expensive, setting off a race to the bottom that pushes
more and more people into the plans that have the least benefits, while the
sickest stay behind in more generous plans whose premium cost spirals upward. Using
risk adjustment to counteract this effect has been widely beneficial in the
individual market, along with other features like community rating and
However, in other cases where risk levels between plans differ
due to consumer preferences it may not be helpful. For example, it has been
documented that older and sicker members have a greater aversion to change (changing
plans to something less familiar) and to constraints intended to lower cost
even if they do not undermine benefit levels or quality of care, like narrow networks.
These aversions tend to make newer plans and small network plans score as
healthier. Risk adjustment would then force those plans to pay a penalty that in
turn forces enrollees in the plans to pay for the preferences of others.