The most significant force for health system transformation in the United States is employer activism.
This month’s decision to delay the Affordable Care Act’s employer mandate until 2016 coupled with dramatic increases in health insurance premium costs assures employers will play a stronger role going forward.
57% of all companies provide health insurance covering 149 million in the population. But participation varies widely by industry and size of company.
Participation: Manufacturing (72%), Services (65%), Transportation/Utilities/Communications (62%), Agriculture/Mining/Construction (60%), Wholesale (54%), Healthcare (51%), Financial services (49%), Retail (29%) (Kaiser/HRET Survey of Employers)
Size: Smaller companies under 199 are less likely to provide health benefits than larger companies, though premiums they pay to insurers are slightly lower than their larger counterparts.
Declines in employer sponsored coverage declines are due to costs, not the Affordable Care Act. Consider: the percentage of non-elderly workers with employer-sponsored coverage decreased from 68% in 2000 to 61% in 2009 before the law passed.
Employers pay 82% of health costs for singles and 71% of costs for those in their family health plans. Over the past decade, they have shifted more financial responsibility to their employees.
- Premiums for employers from 2003-2013 increased 80% but employee contributions increased 89%.
- At the same time, employers have reduced coverage for retirees and dependents, and in many industries, kept wages low to offset health cost increases.
A 26-year-old man who makes $36,000 a year in Philadelphia finds out that he is not eligible for a health insurance subsidy, and must pay his $205 monthly premium without any help.
This, despite the ACA’s subsidies for people earning up to 400% of poverty (about $46,000).
Has he fallen into the subsidy gap?
The latest talk about a subsidy gap into which some millennials are falling is mystifying to me. It seems to be a product of a misunderstanding about how the subsidies are calculated.
Let’s remember that the goal of the subsidies is to ensure that people earning between 100% and 400% of the federal poverty level (FPL) pay no more than a certain percentage of income on health insurance premiums.
This cap is set on a sliding scale, so that people on the higher end of the FPL scale are expected to pay a higher percentage.
The caps range from 2% for someone at poverty level up to 9.5% for someone earning between 300-400% of poverty level. That’s how the Affordable Care Act defines “affordable.”
The amount of subsidy is based on the difference between that cap and the premiums for the second-cheapest silver plan on the market. The subsidies are not an entitlement for all people earning 100%-400% of FPL, nor should they be.
They kick in only when the premium for that silver plan exceeds the stated percentage of income.
Below that cap, the premiums are considered affordable and people are not eligible for subsidies. That’s not a gap; that’s the way the law is designed.
The 18-34 year old segment of our population is large, growing and important in our society. They are 80 million strong. Their attitudes, beliefs, values and actions are re-shaping the way every organization, business and institution thinks about its future.
According to a Pew Research report released last week, Millennials are independents and skeptics: 50% have no political affiliation, 29% no religious affiliation, and 19% say they do not trust established institutions to do the right things (versus 40% for Baby Boomers).
Millennials worry about money. A study by the Investor Education Foundation of the Financial Industry Regulatory Authority concluded that their concerns about their auto, credit card and school debt trump other issues.
Most think economic stability should come before marriage and family life. Half who went to college have a student loan to repay, and one third moved into the homes of their parents at some point to make ends meet.
And they worry about the future. Paul Taylor’s The Next America: Boomers, Millennials, and the Looming Generational Showdown predicts economic battle between Millennials and Baby Boomers:
“Every family, on some level, is a barter between the generations…If I care for you when you’re young so you’ll care for me when I’m old…But many Millennials won’t be able to afford that…The young today are paying taxes to support a level of benefits for the old that they themselves have no prospect of receiving when they become old.”
Pew survey data supports his contention:
- 51% of Millennials do not think there will be any money for them in the Social Security system by the time they retire.
- 39% believe they’ll get reduced benefits
So what do Millennials want from the health system? Their view is likely to disrupt how industry leaders operate their businesses and how policymakers make laws that govern its commerce.
There are news reports indicating Republicans will be proposing such longstanding health insurance reform ideas as selling insurance across state lines and association health plans.
These ideas have been around for some time and have served Republicans as convenient talking points out on the campaign trail positioned as common sense alternatives to Obamacare.
When I discuss these ideas with people in the insurance industry––people who know how their market really works––these ideas generally command plenty of snickers.
Selling Insurance Across State Lines
Presumably, Republicans are targeting the many state benefit mandates that drive health insurance policy prices up. The idea is to allow the sale of policies from states with the fewest benefit mandates to be able to be sold in a high mandate state––thereby encouraging the state with more mandates to curtail them.
There are a number of problems with this idea:
- IF it did attract new carriers to a market, it would be a great way to blow up an existing health insurance market––for example, the high market share legacy Blue Cross plan whose business is in compliance with all of the existing state benefit mandates. A new carrier could conceivably come into the market with much lower rates––because it is offering fewer benefits––attracting the healthy people out of the old more regulated pool leaving the legacy carrier with a sicker pool.Stripping down a health plan is a great time tested way for a predatory insurance company to attract the healthiest consumers at the expense of the legacy carrier who is left with the sickest.
- It’s a 1990s idea that that fails to recognize the business a health plan is in in 2014. Health plans don’t just cross a state line and set up their business like they did decades ago when the insurance license and an ability to play claims was a all a carrier needed to do business. This idea was first suggested by the last of the insurance industry cherry pickers back in the 1990s and it has long outlasted its relevance.Continue reading…
In a recent New York Times opinion piece, Obama advisor Ezekiel Emanuel attempts to ease the minds of millions of Americans who may be selecting narrow network plans in the exchanges.
In defending narrow networks, Emanuel cites the well-known example of Kaiser, which has for decades required enrollees to choose among only Kaiser-owned hospitals and Kaiser-employed physicians.
He goes on to propose some “safeguards” for plans in the exchanges such as mandating that insurers disclose the criteria used to establish their network of providers and requiring that insurers pay for second opinions from elite out-of-network providers.
Perhaps surprisingly given our previous commentary, we agree with the general thrust of Emanuel’s argument, which is that freedom of choice is overrated. And while we do not agree with many of his recommended safeguards, our quarrel today is not with his proposals for even more new rules and regulations.
Rather, our primary quarrel is with the vast majority of the individuals who chose to comment on, and often lash out at, Emanuel’s article. These comments are emblematic of the general misunderstanding of the role of narrow network plans in controlling the future growth of health care expenditures.
In a nutshell, this is the archetypal response against Emmanuel’s claim: “Evil insurers have given us narrow networks. The government must intervene in this bloodthirsty lust for profits. Give us freedom of choice! (And preferably with the government taking over the business of insurance altogether).”
Given previous comments on this site, we suspect that many readers of our blog might share similar sentiments. So we would like to take our readers on a stroll down memory lane to explain how insurers ended up creating networks, and why we are all better off for it.
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.
Since mid-December, we’ve brought you the latest data on public opinion of the Affordable Care Act (ACA) from the RAND Health Reform Opinion Study (RHROS), a new way to measure public opinion of health reform. The RHROS allows us to observe true changes in opinion by surveying the same people over time.
The trend of overall stability masking churn in individual opinion that we discussed last week has continued with our latest data. This week, however, we delve deeper to look at differences in opinion between two groups: those who had insurance in 2013 and those who did not.
Understanding how the ACA impacts these groups differently is particularly important. While the ACA is currently changing the landscape of health insurance, its impact should be especially pronounced for Americans who lacked access to insurance through their employer or government programs in 2013.
The following graph illustrates the opinions over time of all individuals who had insurance, regardless of the source.
This includes those who had coverage through their employer, purchased it on the private market, or received it through a variety of government programs, such as Medicare and Medicaid.
This group represents about 85 percent of the overall sample.
This graph shows opinion of the ACA among those who were uninsured in 2013:
At first glance, what’s striking about these two graphs is how similar they are—more on that in a moment—but there are actually some very important differences.
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.
Last week I went to a panel presentation sponsored by the group NYC Health Business Leaders on the rollout of New York State’s health insurance exchange. Among the speakers was Mario Schlosser, the co-founder and co-CEO of the venture-capital-backed start-up health insurance company Oscar Health, which offers a full range of plans through New York’s exchange.
As NPR reported last month in a story about Oscar, “it’s been years since a new, for-profit health insurance company launched in the U.S.”, but the Affordable Care Act created a window of opportunity for new entrants.
Schlosser began his talk by giving us a tour of his personal account on Oscar’s website, www.hioscar.com. Among other things, he showed us the Facebook-like timeline, updated in real time, which tracks his two young children’s many visits to the pediatrician.
He typed “my tummy hurts” into the site’s search engine and the site provided information on what might be wrong and on where he might turn for help, ranging from a pharmacist to a gastroenterologist, with cost estimates for each option.
Additional searches yielded information on covered podiatrists accepting new patients with offices near his apartment and on the out-of-pocket cost of a prescription for diazepam (which was zero, since there is no co-payment for generic drugs for Oscar enrollees).
As an audience member noted, none of this is new exactly. What is new is to have this kind of data-driven, state-of-the-art user experience being offered by a health insurer. Schlosser told the audience that Oscar’s pharmacy benefit manager and other vendors are providing the company with real-time data that other insurers have not demanded.
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.