Month: July 2013

A proposal to foster federal-state cooperation in the ACA era

Alan Weil, executive director of the National Academy for State Health Policy, foresees growing tensions between states and the federal government in the implementation of the Affordable Care Act relative to the law’s expansion of Medicaid eligibility, the creation of state health benefit exchanges and new rules governing individual and small group health coverage that supersede traditional state authority over these market segments.

To ensure cooperative federal-state relations and to avoid a merry go round of numerous state requests for federal relief from ACA requirements amid fiscal frugality at both levels of government, Weil proposes the feds and the states share cost savings generated by ACA mandates. Under Weil’s optional shared savings program, the federal government would share with the states any savings compared federal cost projections for programs that have federal financial participation. Weil suggests the scope of the program include Medicaid, the Children’s Health Insurance Program, and the state exchange marketplace.

Weil’s proposal published today in the journal Health Affairs can be read here.

Review of 6 states foresees chaotic, competitive exchange marketplace in 2014

A study of six states’ implementation of their health benefit exchange marketplaces concludes that while most observers believe the first year of the exchange marketplace will be “somewhat chaotic” as health plan issuers attempt to determine the correct balance between risk assumption and attractive pricing, there will be significant participation and competition among plans.  It will be a new market, a revamped risk pool and untested regulations certain to dominate the thoughts and strategy of health plan executives over the next 2-3 years.

The pricing of plans is a matter of great uncertainty. Carriers face many new requirements, including essential health benefits, actuarial value tiers, guaranteed issue, and rating rules, as well as uncertainty about characteristics of enrollees. Many plans indicate that they will set premiums cautiously to avoid losses. Those who price too cautiously could achieve protection against the costs associated with bad risks but have few enrollees. Others recognize the need to price more aggressively in order to gain market share. Most believe that the first year will be somewhat chaotic. When there is a better understanding of the health characteristics of enrollees and the ability of risk corridors and risk adjustment to protect plans against risk, pricing will become substantially more aggressive.

The six state exchange marketplaces reviewed as part of Robert Wood Johnson Foundation’s State Health Reform Assistance Network were Colorado, Maryland, New York, Oregon, Rhode Island, and Virginia).  Click on the title to read the full study, Cross-Cutting Issues: Insurer Participation and Competition in Health Insurance Exchanges: Early Indications from Selected States.

Exchanges await more info on Multi-State Plans, express doubt on their ability to foster competition

This recently issued paper on payer participation and competition in the health benefit exchange marketplace authored by the Urban Institute and the Georgetown University Health Policy Institute mentions Multi-State Plans that the Affordable Care Act mandates be rolled out over a four-year period in all state health insurance exchange marketplaces. At least two of these plans must be offered in each state exchange marketplace; one must be a nonprofit and one cannot offer abortion services. On May 30, the White House announced the federal Office of Personnel Management — which will charter the Multi-State Plans that must be licensed in each state — is reviewing applications for more than 200 Multi-State plan options.

Here’s what the paper’s authors write on Multi-State Plans:

State officials in the study states are still waiting for more information from OPM with regard to Multi-State Plans. In general, state officials seem resigned to the fact that the MSP will not necessarily mean more competition, since the MSPs are expected to be national insurers that already have a presence in the states. Informants reported that they have hard time envisioning how, for example, a national Blue Cross Blue Shield plan could come into a state without essentially replicating the Blue Cross Blue Shield products within the state, assuming the MSP would have to use the Blue Cross network and provider payment rates.

Paper discusses how states can share exchange marketplace knowledge, experience and functions

As has been pointed out on this blog, the Affordable Care Act contains options for health plan issuers to sell plans across state lines as well as for state health benefit exchange marketplaces to form regional exchange marketplaces with other states.

For those interested in an in depth discussion of the potential areas of interstate cooperation in the exchange marketplace, the National Academy of State Health Policy has published a paper on the topic, State Sharing of Insurance Exchanges: Options, Priorities, and Next Steps from the West Virginia Regional Exchange Study.

The project was initiated and funded by West Virginia out of that state’s concern that its relatively small, poor health status population may not make for an actuarially viable exchange marketplace. The paper posits that the current federal partnership exchange model where the federal and state governments jointly operate the exchange may provide the best environment to explore and develop sharing functions among exchanges as the partnership exchanges consider becoming state-based or regional exchanges.

Decision to delay employer mandate will cause more employers to drop coverage | LifeHealthPro

What Hilgers is referring to is the fact that offering coverage that is affordable for the employee blocks all “related individuals” — generally, the spouse and tax dependent children — from accessing a government subsidy. And the bar hasn’t been set very high: if the employee would not have to pay more than 9.5% of his household income for his portion of the single (employee-only) premium on the employer’s plan, his entire family is firewalled off from getting the subsidy.

It really doesn’t make any sense. The IRS has concluded that congressional intent was to block these individuals from obtaining the tax credits. Instead of basing the affordability determination on the cost of the family premium, they’re basing it only on what the employee would pay, which means that coverage will be considered affordable for most employees and their family members will be locked into the employer’s plan, even if it’s significantly more expensive and the employer isn’t contributing to the dependent premiums.

Many experts believe that, as employees learn how the tax credits work, they may ask their employers to stop offering health insurance altogether so that they can afford coverage for their families. And a lot of employers won’t have to be asked twice.

via Decision to delay employer mandate will cause more employers to drop coverage | LifeHealthPro.

This analysis — which is relevant to large employers with large numbers of low wage employees — suggests the delay in enforcement of the employer mandate combined with the so-called “kid glitch” will spur enrollments in the individual health benefit exchange marketplace for plan year 2014.

WellPoint’s Anthem Blue Cross spurns Calif. small-business exchange – latimes.com

Health insurance giant Anthem Blue Cross said it won’t participate in California’s new insurance market for small businesses.

Anthem, a unit of WellPoint Inc., is California’s largest insurer for small employers. This surprising move could hamper the state’s ability to enroll businesses in its new exchange called Covered California that opens Jan. 1 as part of the federal healthcare law.

Instead, Anthem said it will keep selling coverage to small firms outside the exchange in direct competition with the state-run market. Anthem also remains one of 13 health insurers that will offer policies to individuals in Covered California.

via WellPoint’s Anthem Blue Cross spurns Calif. small-business exchange – latimes.com.

This development isn’t a propitious one for the California Small Business Health Options Program (SHOP) exchange marketplace. Not having a payer with such a significant market share could make it harder for the SHOP to attract small employers. Unlike the individual exchange marketplace, the SHOP relies almost completely on market aggregation forces to improve affordability, competition and choice in this market segment. Covered California is expected to announce participating SHOP plans for 2014 early next month.

In 2011, the California HealthCare Foundation estimated Anthem Blue Cross had 22 percent of the Golden State’s small group market, covering 548,000 enrollees.

 

Multi-State plans likely to be initially offered on federally facilitated and partnership exchange marketplace in 2014

Section 1334 of the Affordable Care Act creates a federally chartered (via the Office of Personnel Management) Multi-State health plan that must be offered in 60 percent of the state health benefit exchange marketplace in 2014. Section 1334 requires each state exchange to offer at least two Multi-State plans (one must be a nonprofit) in their individual and small business exchanges. The policy intent for the plans is to bolster competition in state markets, particularly those with smaller populations and fewer payers.

Conveniently, the 60 percent figure overlaps nicely with the percentage of state exchanges the federal Department of Health and Human Services will operate either directly or in partnership with a state in 2014. Expect to see most if not close to all Multi-State plans rolled out next year to be in these federally administered exchange marketplaces. The federal state exchange marketplace would also be a more logical choice than state-based exchanges since Multi-State plans will be more easily able to integrate with the federal web portal than various web portal architectures developed by state-based exchanges. On May 30, the White House announced OPM is reviewing more than 200 proposed Multi-State plan options.

Iowa, South Dakota Blues Skip Obamacare Exchange Next Year – Capsules – The KHN Blog

The fewer insurers that sell through exchanges, the less competition there will be for customers through price and service. Many insurers are approaching the exchanges cautiously because of concerns that the technology may not be ready and that the first customers will be disproportionately sick and expensive, analysts say.

via Iowa, South Dakota Blues Skip Obamacare Exchange Next Year – Capsules – The KHN Blog.

This is the key paragraph of the story relative to its implications for these and other state exchanges next year, particularly in smaller states where the absence of a major plan issuer can adversely affect the ability of the exchanges to attract individuals and small employers.

Participation in the exchange marketplace is voluntary for sellers and buyers.  But it won’t function as intended to make coverage more affordable and of better value unless it can generate sufficient economies of scale from both sides of the market.

ACA’s individual, employer mandates aimed at frayed edges of U.S. private health coverage

Daniel Weintraub penned an opinion piece appearing in today’s Sacramento Bee that laments the likely continuation of employer-sponsored health coverage under the Affordable Care Act – notwithstanding the Obama administration’s decision this month to delay enforcement of penalties against employers of 50 or more who don’t offer their employees health coverage meeting minimum standards of quality and affordability.  Weintraub argues – and many across the political spectrum would agree with him – that employers shouldn’t be in the business of providing health coverage to their employees (and might not be, but for a 1940s quirk of history) and that it should be left to individuals and families to buy what’s best for their needs. In this vein, Weintraub favors a 2011 proposal to amend the ACA to allow employees of companies with 100 or fewer workers to take their employer’s health care contribution and buy coverage in the state health benefit exchange marketplace.

That sounds a lot like an existing provision at Section 10108 of the ACA that allows employers to provide “free choice vouchers” to their employees to buy coverage on the exchange marketplace.  Employers however would still have to offer their employees minimum essential coverage and could only offer the vouchers to employees whose share would be between 8 and 9.8 percent of their household income. Plus the employee’s household income could not exceed 400 percent of the federal poverty limit.

The debate over both the employer and individual mandate is heating up again, a little more than a year after the U.S. Supreme Court upheld the constitutionality of the latter in NFIB v. Sebelius.  Both mandates are aimed at the frayed edges of the pre-ACA health insurance market and don’t affect the majority of Americans covered through their employers or government programs such as Medicare and Medicaid. In the large group market, the employer mandate is directed at a small minority of large employers that pay low wages and provide little in the way of health benefits. At the other end of the market, the individual mandate hopes to help restore that market segment to actuarial and functional health. Both are governmental market interventions intended to trim these rough, problematic margins of the current system of private health coverage.  Whether they are ultimately successful won’t be known for several years.