Medicaid beneficiaries appear increasingly likely to participate in health benefit exchanges in at least some states in 2014. Two Medicaid-eligible populations may end up getting commercial health insurance via the exchanges: those whose incomes fluctuate above and below Medicaid eligibility levels and those residing in states that have opted not to expand the Medicaid eligibility cutoff to 133 percent of federal poverty guidelines. Both scenarios require waivers from the Center of Medicare and Medicaid Services (CMS).
The first group would be offered exchange products called Medicaid bridge plans authorized under guidance issued by CMS on December 10, 2012. This is the so-called “Tennessee Plan” since that state originated the concept and is designed to ensure continuity of medical care of Medicaid beneficiaries so they don’t have to change plans and providers as their incomes rise and fall.
The second population would participate in the exchange marketplace under the so-called “Arkansas Plan” in states that have not chosen to expand Medicaid eligibility to those earning up to 133 percent of federal poverty as authorized by the Patient Protection and Affordable Care Act.
In California, legislation that would expand that state’s Medicaid eligibility has failed to advance for nearly two months amid state fiscal concerns over the long term cost share impact and to what extent counties should participate in the cost share. Legislation authorizing Medicaid bridge plan products for those earning up to 200 percent of federal poverty, SBX1-3, has passed the Senate and awaits action in the state Assembly.
The California HealthCare Foundation has published an issue brief on pre-paid primary care plans, known as direct primary care. Direct primary care (DPC) unbundles physician office visits and some other limited services from health insurance coverage and is directly paid out of pocket by consumers, leaving insurance to cover hospitalizations and catastrophic care events. It has the potential to lower premiums since it eliminates the administrative burden on both payers and providers to process routine care reimbursements as well as potentially avoiding higher cost care by allowing primary care providers to offer more intensive preventative care and lifestyle coaching to ward off preventable, chronic conditions.
The issue brief notes some DPC providers have pegged overall health care cost savings in the 20 to 30 percent range. Cost reductions of that size can go a long way toward achieving the triple aim of better care at lower cost and with better outcomes and warrant independent research to more fully investigate the potential savings. The research should also examine how DPC might favorably affect the business model of primary care medical practice and its potential to attract more physicians to the field at the same time the number of people with insurance coverage – and the concurrent need for primary care practitioners – is expected to increase starting in 2014 under the Patient Protection and Affordable Care Act.
Changes in the individual market, adverse selection to have largest impact on 2014 premiums, Milliman projects
One month after it produced a projection of factors affecting 2014 premiums in California’s individual health insurance market segment for the Golden State’s health benefits exchange, Covered California, the actuarial consulting firm Milliman has issued a similar study with a national focus. Like its analysis of the California market, Milliman’s review examined the impact of new coverage requirements under the Patient Protection and Affordable Care Act as well as individuals opting to “buy up” to plans with richer benefits, premium and benefit subsidies and the underlying upward trend in the cost of medical treatment. It was commissioned by America’s Health Insurance Plans.
Milliman’s national study took into account additional factors including new taxes and fees on health plan issuers and premium stabilization programs including a transitional reinsurance program to protect plans from unexpectedly high care costs. It concludes “average individual market pre-subsidy premiums are anticipated to increase significantly from what standard rates are today.” It adds advance tax credit premium subsidies for coverage purchased through state benefit exchanges for those earning 400 percent or lower of the federal poverty level will produce “significant reductions from current premium levels.”
The Milliman study projects that Affordable Care Act changes in the individual risk pool and adverse selection — largely due to the law’s ban on medical underwriting of individuals looking to purchase or upgrade coverage — will have the largest impact on premiums. Those factors including the potential for younger, healthier individuals to remain in plans issued prior to 2014 and sicker people opting for 2014 plans with more extensive coverage could increase premiums by 20 to 45 percent, according to Milliman.
The study raises a red flag over the law’s restriction on the use of age as a rating factor for older individuals, predicting it will boost premiums for younger people and thus potentially drive adverse selection if they opt to forgo coverage until they need it — notwithstanding the Affordable Care Act’s tax penalties for not having some form of health coverage. “For the individual market risk pool to remain a stable market in 2014 and beyond, it is vital that young and healthy individuals enter and remain in the insurance market in addition to individuals with an immediate need for healthcare services,” the study concludes.
California’s individual health insurance marketplace is shaping as a bifurcated one for 2014 and beyond based on household income and whether coverage is purchased through the state’s health benefit exchange marketplace, Covered California, or outside of it.
California households earning 400 percent or less of federal poverty level will be eligible for advance tax credit subsidies that can be applied toward Covered California plan premiums. While those with incomes above this level ($45,960 for singles; $92,200 for a family of four) can purchase unsubsidized coverage thorough state exchanges, health plans appear to be preparing to offer plans outside the exchange aimed at households earning above 400 percent of federal poverty. Without directly referring to the Covered California plans, Charles Bacchi, executive VP of the California Association of Health Plans, said there may be more variation among these plan products than Covered California plans, which are based on standard benefit designs for each of the metal tier plan values (bronze, silver, gold and platinum). Bacchi, who spoke on a panel of speakers at the annual State of Health Care Conference held earlier this week in Sacramento, added there may be “certain advantages” to plans purchased outside of Covered California but didn’t elaborate.
Bacchi’s comments came the same day Covered California Executive Director Peter V. Lee reported at the organization’s board meeting that plan issuers were invited to submit alternative benefit designs and those alternative plans differed significantly from the standard plan designs Covered California adopted in February, 2013. Plan issuers and Covered California continue to negotiate to the terms of the contract that will govern qualified health plans sold in the Covered California marketplace for coverage effective in 2014. The Covered California board has scheduled a special meeting in Sacramento for May 7 to discuss the contract.
A 2011 paper by The Commonwealth Fund warned of the possibility of higher cost individuals concentrating in the exchange market, noting that exchanges could face adverse selection if predominantly high-risk individuals and groups enroll in the exchange while younger, healthier people and groups purchase coverage in the individual or small-group markets outside of it:
This type of market-level adverse selection would primarily stem from the existence of different rules for health plans inside and outside of the exchange. If non-exchange plans are permitted greater flexibility around benefit design and rate setting, those plans could offer lower prices to attract lower-risk individuals.
While the Affordable Care Act consolidates individuals and small employers into a single state risk pool, thus barring plan issuers from segmenting their exchange population risk, adverse selection against the exchange marketplace could reduce plan issuers’ interest in exchange participation despite tax subsidies for individuals and potentially jeopardize the market’s long term viability.
“Loophole” has potential to delay health insurance market rules, disrupt exchange marketplace in 2014
Health insurers could have the option to take an extra year to overhaul their individual and small group offerings to meet Patient Protection and Affordable Care Act requirements effective in 2014 and to decide if they want to participate in the state exchange marketplace. Such are the startling implications of a Los Angeles Times story early this month that reported that some health plan issuers are considering waiting until 2014 to revamp their plans to comply with the law. The Times story cites “a little-known loophole” in the Affordable Care Act “that enables health insurers to extend existing policies for nearly all of 2014.” The story quotes Timothy Stoltzfus Jost, a law professor and health policy expert at Washington and Lee University as saying that insurers have discovered the loophole, raising the question of “how many will try to game the system.”
The likely loophole? The Affordable Care Act qualifies certain health plan requirements as applying in “plan years beginning on after January 1, 2014.” So when does a plan year – the key operative term – begin? 45 Code of Federal Regulations 144.103 defines “plan year” relative to employer-sponsored coverage (such as would be offered through the exchange marketplace Small Business Health Options Program) as follows:
Plan year means the year that is designated as the plan year in the plan document (emphasis added) of a group health plan, except that if the plan document does not designate a plan year or if there is no plan document, the plan year is—
(1) The deductible or limit year used under the plan;
(2) If the plan does not impose deductibles or limits on a yearly basis, then the plan year is the policy year;
(3) If the plan does not impose deductibles or limits on a yearly basis, and either the plan is not insured or the insurance policy is not renewed on an annual basis, then the plan year is the employer’s taxable year; or
(4) In any other case, the plan year is the calendar year.
For individual coverage:
Policy Year means in the individual health insurance market the 12-month period that is designated as the policy year in the policy documents (emphasis added) of the individual health insurance coverage. If there is no designation of a policy year in the policy document (or no such policy document is available), then the policy year is the deductible or limit year used under the coverage. If deductibles or other limits are not imposed on a yearly basis, the policy year is the calendar year.
Here’s my read on how the loophole might come into play. The italicized text basically allows plan issuers to define the plan or policy year as they choose. Theoretically, they could issue coverage on December 31, 2013 and designate it for plan or policy year 2013, thereby avoiding Affordable Care Act requirements for plan years beginning on or after January 1, 2014.
If health plan issuers opt exploit the loophole, there could well be litigation over how the relevant provisions of law are to be interpreted and applied, creating uncertainty and delay in the application of the Affordable Care Act’s health insurance market rules as well as the planned rollout of the exchange marketplace in 2014. The uncertainty also has the potential to complicate contract negotiations currently underway between “active purchaser” state exchanges and health plans seeking qualified health plan status with those exchanges. Plan issuers could opt to exercise the so-called loophole and issue “plan year 2013” coverage as late as December 31, 2013 if they are unable to reach negotiated contracts with these exchanges.
A study prepared for the health plan industry group America’s Health Insurance Plans by the actuarial consulting firm Milliman would appear to support the notion of having plans designated plan year 2013 still in force in 2014 and exempt from Affordable Care Act provisions such as offering essential health benefits (EHB) and minimum actuarial value of 60 percent of projected claims costs. “The final market and rating regulation released by the (federal) HHS at the end of February made clear that individual policies can stay in place until their scheduled renewals in 2014 instead of requiring all individual plans to convert to an ACA-compliant EHB plan on January 1, 2014,” Milliman opined in its projection of factors affecting premium rates in 2014 dated April 25, 2013.
Health economists predict that in states that already have robust competition among insurance companies—states such as Colorado, Minnesota and Oregon — the exchanges are likely to stimulate more. But according to Linda Blumberg of the Urban Institute, “There are still going to be states with virtual monopolies.” Currently Alabama, Hawaii, Michigan, Delaware, Alaska, North Dakota, South Carolina, Rhode Island, Wyoming and Nebraska all are dominated by a single insurance company. The advent of the exchanges is unlikely to change that, according to Blumberg.
This story needs some additional context. Section 1334 of the Patient Protection and Affordable Care Act establishes a shared federal-state regulatory regime requiring health benefit exchanges to offer at least two “multi-state plans” (one must be a nonprofit) in their individual and small business exchanges. These plans would be established under federal charter through the Office of Personnel Management (OPM) and licensed in all states. The idea behind multi-state plans is to bolster competition in state markets, particularly those with smaller populations and fewer payers, as well as to create a larger risk pool to help assure affordability of premiums and ward off adverse selection.
Lancaster is also hoping to make its communities more pedestrian-friendly. Last month, the City Council revised its residential zoning ordinance to provide incentives for infill development and to require developers to include pedestrian and bicycle connections to nearby amenities.
Lancaster Mayor R. Rex Parris said residents’ long commutes concern him, adding that he knows hundreds of families who endure debilitating treks to the office.
“The mother and father spend most of their productive hours on the freeway,” Parris said. “It’s just not a good way to live.”
Parris is right. It’s not only not a good way to live, research indicates the daily commute has adverse health implications. The Antelope Valley is located in California, an automobile-driven state noted for having some of the longest and most congested commutes in the United States, with the San Francisco Bay Area and Silicon Valley leading the nation in so-called “super commutes.”
The state recently formed a Let’s Get Healthy California task force made up of the Golden State’s top health experts. Inexplicably given that commuting is such a big part of Californians’ daily lives, the role of commuting and its adverse affect on health is not discussed anywhere in the task force’s final report. As Mayor Parris implies, if residents are spending all their daily hours working and commuting, once they get home they aren’t going to have time or energy to get the exercise they need for maintaining good health on the pedestrian and bike trails that his city envisions.
Ironically, while Silicon Valley companies produce some of the longest and worst commutes, they have also innovated much of today’s modern information and communications technology that allows those who perform knowledge and information work to get their work done from their communities. It’s absurd Californians would jeopardize their health to drive hours each day to use a computer and telephone in some distant centralized office. And it’s a major oversight this was not addressed by the Let’s Get Healthy California task force.