topic 8: articles
oregon insurer files $5 billion class action suit against feds
"Health Republic did exactly what we were asked to do under the ACA: we designed and priced our plans for the market we hoped would materialize, not for the market we feared would materialize. Like every health insurer in the post-ACA market, we knew the costs of this new population could be astronomical, but we couldn't be sure until we learned who purchased our plans and analyzed their medical costs under the new ACA plans. Without the risk-sharing provisions in the ACA, especially risk corridor, we, along with every other health insurer across the nation, would have been forced to think long and hard about how to proceed in these new uncharted waters created by the ACA. It is unconscionable for the government to default on their obligation to pay the risk corridor amounts owed in a timely manner."
obamacare economics, you shouldn't be suprised
-But, under the ACA, you have to have them. You don't get a choice. -Further, under the various metal-type plans, the design is such that the "average" (not really an average, but perhaps typical) person will pay 60%, 70%, 80%, or 90% of their health care costs. -What this means is that healthier people who are less likely to require health services need to subsidize coverage for those more likely to require health services. Further, since people should make intelligent choices, heavy users of these benefits should opt into plans that provide more (and better) coverages and light users should elect the plans that are least expensive. This phenomenon is an example of antiselection and antiselection increases costs. -I also think it's great that there are no lifetime maximums under the Affordable Care Act. If you don't know, many health plans have historically had lifetime maximums of $1 million or $2 million. This means that once the plan has paid out that much on your behalf, they stop paying. Why do they have these provisions? They have them to that the insurer can limit its downside risk. It's good business practice. But they can't do it anymore. Since they are in business to make money (there's that nasty word again), they will spread the costs of not being able to impose lifetime maximums across all their customers
explaining health care reform: medicial loss ratio (mlr)
-Medical Loss Ratio (or MLR) requirement - limits the portion of premium dollars health insurers may spend on administration, marketing, and profits. -The Medical Loss Ratio provision of the ACA requires most insurance companies that cover individuals and small businesses to spend at least 80% of their premium income on health care claims and quality improvement, leaving the remaining 20% for administration, marketing, and profit.1, 2 The MLR threshold is higher for large group plans, which must spend at least 85 percent of premium dollars on health care and quality improvement. -Self-funded plans (i.e. where the employer or other plan sponsor pays the cost of health benefits from its own assets) are not considered insurers and are therefore not subject to the MLR provision. The MLR standard does not apply even when an insurer administers the self-funded plan on behalf of an employer or other sponsor. -f an insurer fails to meet the MLR standard and is required to issue a refund, it must notify enrollees of any rebates they will receive and how the rebate will be administered -beginning in 2011, all health insurers are required to publicly report aggregated state-level financial data, including income from premiums and expenditures on health care claims, quality improvement, taxes, licensing, and regulatory fees. Under the ACA, insurers report their MLR based on state-level data, across all of their plans, in each market segment in which they operate (i.e., individual, small group, and large group). -aca mlr = (health care claims + quality improvement expenses) / (premiums - taxes, licensing, and regulatory fees)\ -Credibility adjustments raise an insurer's MLR, making it easier to meet the threshold. Credibility adjustments are determined by enrollment levels on a state-by-state basis in each market segment. Insurers are grouped into the following categories: 1. noncredible: Insurers with fewest enrollees (less than 1,000 life years) are called "noncredible" and are therefore presumed to be in compliance with ACA's MLR requirements 2. partially credible: Insurers with moderately low enrollment (1,000 to less than 75,000 life years) are called "partially credible." These insurers receive an adjustment that increases their MLR (by adding 1.2 to 8.3 percentage points to the reported MLR). Insurers with partially credible experience that have higher average deductibles receive further upward adjustments. This deductible factor adjusts the MLR by increasing the insurer's credibility adjustment by a multiplier (ranging from 1.0 to 1.736). 3. fully credible: Insurers with 75,000 life years or more are considered "fully credible" and are held to the normal MLR standard (80% for the individual and small group market and 85% for the large group market). -Beginning in 2012, insurers failing to meet the applicable MLR standard for the prior year must issue rebates to consumers proportionate to the amount in premiums paid by each consumer.14 As medical loss ratios are calculated using aggregate data, rebates are not based on the experience of an individual enrollee or group. Instead, MLR rebates are based on an insurers' overall compliance with applicable MLR standards in each state it operates. -adjustments for special circumstances 1. Expatriate Plans: Insurance policies sold to Americans working abroad may have higher administrative expenses than other policies and therefore receive an adjustment (by multiplying the numerator of the MLR by 2.0). This means that an expatriate plan with a reported MLR of 40%, for example, would meet the 80% threshold in the small group or individual markets after the adjustment is applied (because 40% * 2 = 80%). 2. "Mini-Med" Plans: Insurance plans with annual benefit limits of $250,000 or less - which typically have lower MLRs because medical claims are low relative to administrative costs - will receive temporary MLR adjustments for the years leading up to the opening of insurance exchanges in 2014. Mini-Med plans may use a multiplier of 1.75 in 2012, decreasing to 1.5 in the year 2013, and 1.25 in 2014. After 2014, these plans will no longer receive an adjustment as annual limits will no longer be allowed in most plans. 3. Newer Plans: As new insurance plans tend to have fewer claims in their first year, applying the MLR standard to these plans could create a barrier to entry into the insurance market. The ACA therefore allows a one-year deferral for insurers with a high proportion of new plans (representing at least half of their business in a given state).
with michigan closure, more than half of aca coops now out of insurance makretplaces
-coops are folding and moving out of marketplace -blame game between republicans and democrats
obamacare health insurance co-ops are unraveleing
-coops are public option for heatlh care instead of private insurers -all but one lost money in 2014 -wanted them to act like nonprofit and be able to beat profit insurers on price, despite how naive that sounds -capital model isnt great when you need alot of surplus to run an insurance company -were prevented from advertiisng -attracted individuals paying higher premiums and thus higher costs -some have pursued strategy of losing money to gain market share at taxpayers expense -purposely disrupting market -The strategic plan was simple: 1) underprice premiums to gain market share; 2) let taxpayers bail out the losses with emergency solvency loans and risk-adjustment distributions; 3) increase premiums after the dust settled.
new data shows large insurer losses on obamacare plans
-he ACA established a three-year risk corridor program to transfer funds from insurers with lower-than-expected medical claims on ACA plans, i.e., profitable insurers, to insurers with higher-than-expected claims, i.e., insurers with losses. Despite administration claims that incoming payments from profitable insurers would cover losses from unprofitable ones, the risk corridor program shortfall exceeded $2.5 billion in 2014. Insurers with lower-than-anticipated claims owed about $360 million, and insurers with higher-than-anticipated claims requested about $2.9 billion from the program. -There are two explanations for such large losses, with both probably true to some extent. First, a larger share of older and sicker people enrolled for ACA coverage than insurers projected. Second, some insurers underpriced plans in order to capture market share and then raise rates in future years. Many people will stick to an insurance plan because of the hassle involved with switching plans. Moreover, the ACA's reinsurance and risk corridor programs allowed insurers to price aggressively, anticipating that a large share of any initial losses would be heavily subsidized. -The risk adjustment program is a permanent, budget-neutral program that essentially transfers money from plans with healthier risk pools to plans with less healthy risk pools. In 2014, $4.6 billion was transferred among insurers through the risk adjustment program -Two other temporary programs—reinsurance and risk corridors—are in effect back-end subsidy programs for insurers offering ACA plans. -The reinsurance program compensates insurers for people with extremely high medical expenses. In 2014, HHS paid insurers the full cost for enrollee's claims between $45,000 and $250,000. This totaled $7.9 billion and was financed by a $63 tax on each person with private coverage. -Insurers make risk corridor payments if expected claims were at least 3% greater than actual claims, and the government pays insurers if actual claims were at least 3% greater than expected claims. -As the reinsurance program phases out and the risk corridor program provides much less relief than insurers had assumed, next year's high premium increases are likely to be replicated for at least one more year. While subsidized enrollees are somewhat insulated from premium increases, unsubsidized enrollees are not. Since ACA plans have already failed to attract many people with income more than twice the poverty line, sharply higher premiums will likely cause additional adverse selection in the individual market in the near term.
comments to naic on defining "actuarial value" under the aca
-"Actuarial value" measures the relative generosity of benefits covered by a health insurance plan. Under the ACA, a health insurance plan's actuarial value indicates the average share of medical spending that is paid by the plan, as opposed to being paid out of pocket by the consumer. The calculation takes into account a plan's various cost-sharing features, such as deductibles, coinsurance, copayments, and out-of-pocket limits -Actuarial values are calculated on an average basis and do not predict the out-of-pocket costs for any individual. Some individuals with coverage in the silver tier will have more than 70 percent of their medical spending paid by the plan and others will have less than 70 percent paid by the plan. -Actuarial values only reflect differences in cost-sharing provisions (i.e., deductibles, coinsurance, copayments, and out-of-pocket limits). They do not reflect information on how broad or narrow a plan's provider network is, the quality of the provider network, the plan's customer service and support, or premium levels, all of which are important for consumers to consider when choosing a plan.
california fines top health insurers for overstating obamacare networks
-As a result, some patients incurred big unforeseen medical bills because they unwittingly went out of network for care. -Anthem and attorneys representing consumers said they are close to settling a class-action case that would set aside money to cover past medical bills. -Both companies will report to regulators on the final number of enrollees reimbursed and the total amount paid out. The state urged consumers who have questions — or believe that they should receive reimbursement — to contact the companies. -He said he had checked Blue Shield's online listing of network doctors for his Silver PPO plan during the sign-up process and confirmed the information with a company representative by phone. -But he said Blue Shield's information was wrong and that he got stuck paying higher out-of-network charges. -"It was false advertising, and Blue Shield needs to pay for what they did," McCarthy said. He wasn't impressed by the state's fine of $350,000.
understanding the death spiral in obamacare exchanges
-At the beginning of the ObamaCare negotiations, insurers recognized that their actuaries would have trouble pricing the policies in the exchanges, which opened for enrollment on October 1. So, the law included "three R's" in order to backstop their risk: Reinsurance, risk corridors, and risk adjustment -The first "R" is reinsurance. Each year, ObamaCare levies a special premium tax on all insurers (whether participating in exchanges or not) as well as self-insured (so-called ERISA) plans (in which employers bear the risk of medical costs and insurers or administrators only process claims). This tax revenue is supplemented by a little extra from the U.S. Treasury. In total, the reinsurance sums are: $12 billion for 2014, $8 billion for 2015, and $5 billion for 2016 -For each of the three years, the U.S. Department of Health & Human Services (HHS) must publish a notice explaining how it will distribute this money. The notice must be published by the end of March the previous year. Last March, HHS issued its notice of payment parameters for 2014. The attachment point for reinsurance is $60,000, with a co-insurance rate of 80 percent, capped at $250,000 -The second "R" that operates for three years is "risk corridors." This is an unlimited taxpayer liability that compensates insurers in the exchanges for medical costs in excess of 103 percent of the target costs for each plan. For costs between 103 percent and 108 percent of target, taxpayers compensate the insurers half the excess loss. For costs above 108 percent of target, taxpayers will compensate plans 2.5 percent of the target medical cost plus 80 percent of the excess over 108 percent. -So, while Congress put significant amount of taxpayers' money at risk to induce insurers to participate in the exchanges, it did not fully immunize them from getting creamed if they underpriced their policies. -After one month, there are signs that insurers got their pricing significantly wrong. Because it is so hard to enroll in the ObamaCare exchanges, only the most persistent (that is, those who expect the highest medical claims) are wasting hours navigating the website to sign up. -It certainly looks like health insurers' ObamaCare exchange adventure will be very expensive. By 2015, they will likely be asking the federal government for a bail out. The Administration has no flexibility in this regard. Finally, the initiative will fall to the House of Representatives, which has pledged to repeal ObamaCare. It will be an interesting negotiation.
final guidance issued on ehb's and cost sharing requirements
-Beginning in 2014, all non-grandfathered health plans sold in the individual and small group markets (both inside and outside ACA Exchanges) must: Cover all ten categories of essential health benefits (EHB) Meet annual cost-sharing limits on EHB Meet actuarial value limits for EHB -Although large group health plans do not have to cover EHB, they must satisfy "minimum value" requirements toavoid potential liability for the ACA shared responsibility penalties. In addition, they cannot impose any annual or lifetime dollar limits on EHB. - In 2014, this enrollee cost-sharing limit will be based on the amounts allowed for high-deductible health plans (HDHPs) coordinated with health savings accounts (HSAs). (In 2013 these amounts are $6,250 for self-only coverage and $12,500 for other than self-only; 2014 HSA limits will likely be announced in May, 2013.) The 2014 limits will be indexed in future years. - Importantly, under this transition rule, plans that do not have an out-of-pocket maximum on non-major medical coverage (e.g., prescription drugs), administered by a separate service provider, do not have to implement an out-of-pocket maximum for 2014 for that coverage. -If a health plan is expected to reimburse, on average, 80% of the eligible EHB covered under the plan, the AV is80%. An individual covered by the plan would pay, on average, the remaining 20% through features such as deductibles, copayments, and coinsurance. AV can be considered a general measure of generosity - the higher the AV, the more generous the coverage provided by the plan
most new york exchange plans lacking coverage for out of network care
-Except for offerings by a few insurers in far western New York and the Albany area, the only options available elsewhere in the state, including the entire New York City metro area, are health maintenance organization-style plans that cover care provided only by doctors and hospitals in the plan's network. People who go out of network for anything other than emergency care are generally going to be responsible for the entire bill. -Experts point to a number of factors that contributed to the New York marketplace's dearth of plans such as preferred provider organizations that typically have some coverage for out-of-network doctors and hospitals. In those plans, consumers generally have to pay more out of pocket than they do for in-network care, because deductibles and co-insurance charges are higher. -But it was difficult to maintain a customer base that wasn't too costly for the insurers to cover since healthy people were not required to buy insurance. "That out-of-network product attracted a lot of high users of medical care, and prices went through the roof," -Having access to out-of-network benefits is generally high on consumers' wish list, but it can be a double-edged sword, say consumer advocates. When beneficiaries go outside the network, even if the plan pays some of the bill, the doctor or hospital can refuse to accept the insurer's rate and, depending on the state, may demand that the consumer pay the balance. "It's not much of a consumer protection because they can be balance billed,"
insurers paid close to $500 million in health plan rebates last year
-In addition, MFA broke down the findings by individual, small groups and large groups. Rebates in 2014 for the individual segment amounted to $238 million, or 0.5 percent of the $51.5 billion collected in premiums. Small group rebates amounted to $142 million -- 0.2 percent of the $70.2 billion collected -- and the $203 billion large group segment netted $90.5 million. -"Overall," said the report, "the rebates paid to consumers were a relatively small portion of industry premiums."
risk corridor stabilization fund: another aca failure
-Insurers requested $2.87 billion in so-called "risk corridors" payments for 2014, but will only receive $362 million, or 12.6%, said the Centers for Medicare & Medicaid Services, which oversees Obamacare. -The risk corridors program's goal is to help insurers transition into the individual exchanges, which opened in 2014. Insurers had a tough time setting premiums since they didn't know how sick their new customers would be. -Under the three-year program, insurers whose premiums exceeded claims pay into the fund, while their peers who didn't charge enough premiums to cover claims could draw from it. But too many insurers miscalculated when they set their rates for 2014. -Insurers are still getting billions from two other Obamacare risk programs. They will receive $7.9 billion from the reinsurance program, designed to spread the cost of very large insurance claims across all insurers. And they will receive $4.6 billion from the risk adjustment program, which requires insurance companies with healthier consumers in a state to help offset some of the costs of those insurance companies with sicker customers in that state.
how the mlr requirement could increase health insurance premiums and insurer profits at taxpayer expense
-It is possible that the MLR rule will have the opposite of its intended effect. Instead of limiting profit and reducing premiums, the MLR rule may prevent insurers from accumulating reserved in low -claim years, and thus require higher premiums to allow them to pay claims in high-claim years. The interaction between the MLR rule, insurer reserves, and state sufficiency requirements could limit HHS's ability to restrain premiums through rate review while allowing insurers to stay in business. -Furthermore, the MLR's associated rebate system may encourage insurers to increase premiums, and allow them to profit from doing so. Starting in 2014, income-based premium subsidies will insulate a majority of the individual market population from higher premiums, but still allow them to collect the MLR rebates. The structure of the subsidies and the MLR rule implies that higher nominal premiums would be associated with lower effective premiums for the subsidized population. For some consumers, the rebate might meet, or even exceed, the unsubsidized portion of the premium. In all cases, a higher premium would, due to the structure of the MLR rule, allow insurers to keep a higher profit. And in all cases, higher premiums will be met dollar fordollar by higher premium subsidies at taxpayer expense for a majority of consumers. In effect, the MLR rebates could be become a vehicle for funneling taxpayer dollars from the federal government to subsidized consumers and to insurance company profits.
do you have your ducks in a row for the employer mandate?
-Of critical importance is the so-called "nuclear" or Tier I penalty that applies if minimum essential coverage (MEC) is not offered to at least 95 percent of full-time employees (FTEs) and their biological and adopted children. For 2015, the bar was set at 70 percent, a threshold few companies had difficulty exceeding. -For 2016 and for future years, the bar is set at 95 percent. In other words, if an employer does not offer MEC to more than five percent of its FTEs (as defined by the ACA) in a month, the Tier I penalty applies. The annual Tier 1 penalty amount is $2,160, and it accrues on a monthly basis ($180/month), multiplied by each FTE of the employer, including those FTEs who were offered coverage (but the first 30 FTEs are disregarded in the penalty calculation). Because the penalty is an excise tax, it is not deductible when calculating corporate income taxes. -Even if an employer satisfies Tier 1 of the employer mandate, and avoids its massive penalties, to avoid all employer mandate penalties it must also satisfy Tier 2 of the mandate, which requires the employer to ensure that each FTE is offered, at least with respect to the FTE alone (i.e., employee-only coverage), coverage that has at least a 60 percent actuarial value, and is considered "affordable" to the FTE. Coverage is considered affordable if does not cost the FTE more than 9.66 percent of his or her household income. Because employers won't know an employee's household income, the IRS offers employers several "safe harbors" within which it may price its offer of employee-only coverage, to guarantee compliance with Tier 2. -Employers that rely on a contingent workforce are likely to face special scrutiny. This includes employers that use independent contractors and workers supplied by staffing agencies. While the employer mandate does not apply to persons who are independent contractors, it would apply to individuals who meet the ACA definition of being the employer's FTEs but who are misclassified as independent contractors
small group employers, are you facing community rating
-Prior to 2014 and for the purpose of setting health insurance rates, insurance carriers determined a "small group" to be "community rated," meaning rates for those employers would be based on the insurance carrier's total book of business claims experience, and not the claims experience of that individual employer's participant population. Small-group community rates would, however, be impacted by the employer group's demographics, including age, gender, geography, industry and health status. -One caveat: Each state has the option to grandfather the status of those employers with between 51 and 100 employees allowing for the continuance of experience rating. So, if you fall into this group, you need to know what's happening at the state level. -Healthier businesses, those whose claim experience has been good in the past, will now receive higher than expected rate increases, because they are now being pooled with the less healthy employer plans. Conversely, unhealthier organizations that have had higher levels of utilization can expect to get a break in their rates, as they'll now be grouped with healthier companies and will, in effect, have their insurance subsidized. -everal insurance carriers, including Cigna and Aetna, are offering "level funding programs," which have the feel of a fully insured plan—with even monthly rates and a capped liability, but with the advantage of being partially experience-rated. -Insurance carriers are faced with the dilemma of whether to promote these types of self-funding arrangements to smaller groups, because driving groups with good claims experience away from their fully-insured community rated pool likely will result in an inordinate percentage of "poor risks" remaining in the community rated pool, and the need for even higher rate increases to that remaining pool. You can be sure carriers will be monitoring the impact of adverse selection on this pool and adjust their pricing and product offerings accordingly.
year two of medical loss ratio rebates: tips for erisa health plan sponsors
-The Affordable Care Act's medical loss ratio ("MLR") rule requires health insurance companies (but not self-insured plans) in the group or individual market to provide an annual rebate to enrollees if the insurer's MLR falls below a certain minimum level, 80% and 85% -if an employer and its employees each pay a fixed percentage of the cost (e.g., employer pays 80% of the premium; employees pay 20% of the premium), a percentage of the MLR rebate equal to the percentage of participants' cost (i.e., 20% in the example) would be attributable to participant contributions and would be plan assets. Based on this guidance, some employers amended their plans last year to clarify how premiums are divided between employer and participants. -As a general rule, TR 2011-04 states that the MLR rebate should be provided to individuals who were enrolled in the plan during the determination period (for the recently issued rebates that would be the 2012 calendar year). However, TR 2011-04 provides that if a plan fiduciary finds that the cost of distributing shares of the MLR rebate to former participants approximates the amount of the proceeds, the fiduciary may decide to distribute the portion of the MLR rebate attributable to employee contributions to current participants using a "reasonable, fair, and objective" method of allocation. -As explained above, the MLR rules require insurers of group health plans to pay rebates directly to the policyholder. The policyholder is then responsible for ensuring that employees covered by ERISA group health plans benefit from the rebates to the extent they contributed to the cost of coverage. Once a plan fiduciary decides who will receive MLR rebates attributable to plan assets, it must then determine the form and tax consequences of the distribution. - if the employee portion of the premium is paid by the employee on an after-tax basis, MLR rebates that are distributed as a reduction of future premiums or cash will not be subject to federal income tax (unless the employee deducted the premiums to which to the rebates relate on the employee's tax return). -when employees contribute to the cost of coverage on a pre-tax basis, MLR rebates should be returned to employees in the form of a premium reduction or a cash payment, both of which are treated the same way for tax purposes. -while plan participants will receive general information from the health insurers about the MLR rebates, the plan sponsor should notify participants of the decisions made with respect to the use and allocation of those rebates. -
employer groups oppose expanded aca small group definition
-The problem, they say, is that businesses with 50 to 99 workers will be subject to the employer mandate in 2016, and some of them will have to buy coverage from the small group market, where many policies are more expensive because they are regulated the same way as individual policies are under the ACA. -Meanwhile, larger companies with 100 and more workers, also subject to reform's pay-or-play mandate, will be free to buy large-group coverage; also, larger (100+) companies are in a better position to self-insure their health benefitss, resulting in freer and more economical coverage options. -Some companies in the 50-99 group will react to the employer mandate by self-funding if they have young, healthy populations, while those with older, sicker populations will be relegated to the Small Business Health Options Program to buy more expensive small-group coverage. In turn, that will change the composition of the risk pool, driving up premiums even more in that market -Congress is moving legislation (S. 1099 in the U.S. Senate, and H.R. 1624 in the House) to indefinitely keep the current definition of small-group market as 1-50 employees, and to give states the flexibility to expand the group size if the market conditions in their state make that necessary. A number of trade groups, including the National Federation of Independent Business, National Association of Manufacturers and the U.S. Chamber of Commerce, support the proposal. -States can allow grandfathered small-group policies to continue until 2017 in spite of not covering the insurer mandates, but only in states that allow insurers to renew existing noncompliant policies. But that form of relief will not be available to newly written small-group policies. New entrants will have to get compliant small-group coverage, purchased from or outside a SHOP exchange. -Eight million people are covered by small businesses in the 50-99 category. After groups leave to go self-fund, according to Fox's estimate, those that remain will see an average 18-percent increase in their premium. -Sales of small group insurance coverage on SHOP exchanges (in operation since 2014) have been low. That is because the credit is too small to justify the amount of paperwork it takes to get it, and the credit remains available for too short a time, Gardiner explained.
new aca definition allows small employers to continue as large group insurance plans
-The revision updates the definition of "small employer" under the health law so that companies with 51 to 100 workers will not become subject to the small group insurance reform provisions next year. Instead, the new law allows those companies to continue as large group plans, unless states step in to define them differently. Lawmakers from both parties argued that classifying these companies as small businesses would increase their health insurance premiums significantly because they would have to comply with requirements to offer a comprehensive package of benefits, among other things. -Coverage in the small group health insurance market has historically tended to be skimpier and pricier than coverage in large group plans. The health law established new rules for employers with 50 or fewer workers who offer insurance that took effect in 2014: It required all plans to cover 10 "essential health benefits" and established standardized cost-sharing limits and maximum annual spending caps. In addition, instead of taking workers' health status into account when setting premiums, under the health law insurers can now base premiums in the individual and small group markets on only four things: where people live, family size, tobacco use and age. -But self-funding can be a chancy proposition for smaller companies, who become financially responsible for their workers' medical claims. -But if larger small businesses were folded into the small group market and many of the companies with healthy employees decided to self-fund, the small group market could become a magnet for companies with sicker employees, says Blumberg.
risk adjustment threatens obamacare
-The specific issue that so seriously threatens the ACA is risk adjustment, one of the so-called 3R's of the ACA. Risk adjustment is intended to smooth out the unpredictability of the health insurance marketplace, which is the result of the vital ACA requirement that all Americans be offered affordable coverage regardless of health condition. While well-intended, the implementation of this safeguard has had the unintended consequence of a "reverse Robin Hood effect"— taking money from predominantly new, small, innovative plans (the new competitors that the ACA hoped would add both choice and innovation to health insurance markets around the country) and giving it to the big, established insurance carriers. The enormous risk adjustment windfall that went to the big multi-state insurance corporations is partly responsible for the current merger frenzy that will certainly result in less choice for Americans in insurance markets nationwide. -However, the impact goes far beyond the fate of these new insurance carriers. A lack of movement to level the risk adjustment process severely threatens the attainment of the ACA's primary goal: encouraging new competition in previously stagnant health insurance markets around the country, thus providing more choice, more innovation and lower prices in those markets. Co-ops have done just that: In states with co-ops, premiums are 6 to 9 percent lower than in states without co-ops. Co-ops have also brought innovative approaches to the marketplace and, thus, additional choices to consumers -Ironically, as it is now, if an insurance carrier keeps its patients healthy, it could very well result in larger risk adjustment payments to its competitors. -Even worse, by knocking many of the new entrants out of their respective markets, CMS will be complicit in reducing the affordability of health coverage in those markets, due to lack of competition. In short order, as premiums continue to rise, young and healthy individuals (who previously concluded that getting covered was a financially viable alternative to paying the tax penalty for not having coverage) will be priced out of the market. As they leave, premiums will continue to rise to cover the costs of sicker and more expensive patients. In short order, the so-called "death spiral" will likely develop in affected markets, effectively destroying the Affordable Care Act. -The simplest option is a percentage limit on risk adjustment payments assessed to insurance carriers. This solution, supported by numerous state insurance commissioners throughout the country, would act as a "circuit breaker," where a risk adjustment payment assessed to any insurer would be capped at no more than 2 percent of a carrier's premium for the year. This action would avert significant financial damage to the small insurance carriers that are so important to the success of the ACA. This cap could even result in the carrier's own policyholders receiving a premium rebate that would not have been possible under the current risk adjustment process.
united health says it should've have avoided obamacare longer
-UnitedHealth Group Inc. should have stayed out of Obamacare's new individual markets longer, the chief executive officer of the biggest U.S. health insurer said Tuesday, after announcing last month that it will take hundreds of millions of dollars in losses related to the business. -Losses from the plans this year and next will total more than half a billion dollars, the company has said, and UnitedHealth will scale back efforts to market coverage to millions of people shopping for 2016 insurance on the Affordable Care Act's new marketplaces. -UnitedHealth is not alone in its Obamacare struggles. Other insurers, including competitors Anthem Inc. and Aetna Inc., have also either suffered losses in the markets or said they haven't seen the margins they expected. Next year will be the law's third of providing coverage. "It will take more than a season or two for this market to develop," Hemsley said. "We did not believe it would form this slowly, be this porous, or become this severe." -Across all of its insurance businesses, UnitedHealth said it expects to spend about 81.5 cents of every dollar it takes in from premiums on medical expenses.
united health might pull out of aca market
-UnitedHealth sent letters early this week informing brokers it was cutting or eliminating commissions for those who sell its policies on the exchanges. -Ronnell Nolan, president and CEO of Health Agents for America, criticized UnitedHealth for the timing of the commission cut. Brokers are in the middle of open enrollment period, where new clients are signing up for health insurance. Other health insurers are also taking losses on the exchanges, but announced commission cuts prior to open enrollment, Nolan explained. -The exchanges offered a potential growth boom to insurers, but also risk because UnitedHealth and others had little sense of the health needs of new customers. They also didn't know whether the new business would attract enough healthy customers to balance the expected enrollment of sicker customers who had previously not been able to find coverage. -Insurers have struggled to entice healthy customers to buy high-deductible insurance commonly sold on the exchanges. The plans require patients to first pay deductibles that can top several thousand dollars before most coverage begins. Several nonprofit health insurance cooperatives established to compete with insurers on the exchanges announced earlier this year that they would fold. Those plans have been hurt in part by lower-than-expect payments from overhaul programs designed to support the insurers while they learn how to price coverage on the exchanges. -UnitedHealth initially sold coverage on only 4 exchanges before expanding to 24 this year. Despite the expansion, the exchange coverage remains a small part of its business. -UnitedHealth Group Inc. now expects 2015 earnings of about $6 per share, down from its previous forecast for $6.25 to $6.35 per share. The company had raised that forecast twice so far this year before reaffirming it last month.
health care law: are you an ale?
-have specific reporting requirements -shared responsibility provisions -determined by current year workforce for next year -ale if 50 or more full time including equivalents -30 hours per week -add monthly hours of non full time -if part of larger group, can still be considered ale as part of aggregated group, ale status of combined group
hidden costs of aca's millenial mandate
-millenial mandate: requirement that employers who offer health coverage for employees dependents must continue to offer until dependent turns 26 -workers pay 100 percent of health benefits -millenial mandate could cost premiums to rise to cover those people in plans, dont realize its their money being spent
health insurance coops sunk by sick newcomers
-risk corridor defaulted on payments\ -risk was alot worse than anyone expected -medicaid was up to states decision to lower the underwriting selectivity to take more bad risks from coops, but most red states didnt so bad risks went to coops
critics say aca "risk" strategies are having reverse robin hood effect
-stemmed from an obscure part of the Affordable Care Act designed to support health plans with lots of sick, expensive customers by giving them money from plans with healthier customers. -The goal is to help keep insurance markets stable by sharing the "risk" of sicker people and removing any incentive for plans to avoid individuals who need more medical care. Such stability is likely to encourage competition and keep overall prices lower for consumers, while its absence can undermine both and limit coverage choices — the basic principles of the law. -The administration defends its approach, but critics say the "risk adjustment" program is having a reverse Robin Hood effect — taking money from some plans that are small, innovative or fast-growing, while handing windfalls to some of the industry's most entrenched players. -Then, on June 30, HHS published its first risk-adjustment list, and Viva learned that it owed the $1.7 million payment based on its 1,100 small-group customers during the previous year. Blue Cross and Blue Shield of Alabama, by contrast, would get a $1.55 million check for its small-group insurance and nearly $1 million more for individual health plans. -"It's hard to swallow," Velasco said. Alabama's insurance commissioner wrote to Burwell, questioning the "integrity" of the data and calling for program improvements. -To determine an insurer's degree of risk, the government relies on records of medical diagnoses by doctors. But when a plan is new or has many new members, for example, not everyone sees a doctor right away, potentially making its customers appear healthier than they are. Wellness programs that help cut down on treatment also can skew a risk level. The formula does not include prescription-drug records, which might give clues to customers' health problems. -Viva and other plans encountered other issues, including in submitting data to HHS because of problems with the federal server. Officials "would give us reports back that basically looked like hieroglyphics," Velasco said. With no advance warning about low risk, the HMO did not scramble to fill in diagnostic records more thoroughly — as some large insurers did with help from consultants. -Belatedly, the administrator said, the plan hired an outside consultant who discovered what HHS had not pointed out: When a patient had more than one diagnosis, the plan had listed them vertically, in a way the federal computer server could not read. The glitch made the plan's customers appear healthier than they actually were. Given the costs, the plan now expects to stop selling coverage in one area.
president signs pace act changing small group market defiinition
pace act changed small group market definition to up to 100 full time employees - Concerns about steep price increases andloss of benefit design flexibility from many businesses with 51 - 100 employees who would be reclassified as a "small employer" prompted this bi-partisan amendment to the law. -When and how will each state determine the size of the small group market (50 or 100 employees)? Will this require state legislation or some other form of action to address this issue? Will insurance carriers be able to modify small group rates as this market space may no longer expand? Will employers with 51 -100 employees be able to shop for other coverage in the large group market? Will they be able to do this for January 1, 2016 or will it be possible to modify coverage at some time during 2016? Will the state allow some form of transition? Will each state have the flexibility to determine the methodology for calculating employer size? Will the state be able to revert back to the prior method such as considering only "eligible" employees or will they need to use an ACA counting method to determine employer size?
kenticky coop blames inadequate risk corridor funding for closure
risk corridors reinsurance programs not paying out as much as they need cause coops expenses are that much more than their premiums earned
pace act provides relief for some midsized employers
the PACE Act gives states discretion to limit the small group market to only employers with 50 or less employees or to expand it to include employers with 100 or less employees. -Here are some of the more "notable" insurance market reforms that only apply in the small group market: 1. Essential Health Benefits: Group health policies must cover services and items in all 10 essential health benefit categories. 2. Actuarial Value: Group health policies must fit into one of the following four actuarial value levels that are defined by Health Care Reform: bronze, silver, gold or platinum. 3. Rating Requirements: Group health policies cannot be "experienced rated" (i.e., underwritten based on the participants' previous claims experience). Rather, these policies must be underwritten on a member-by-member basis using "adjusted community rating." Under adjusted community rating, premiums may only vary by: (1) coverage tier (i.e., individual or family coverage); (2) geographic rating area; (3) age; and (4) tobacco use.
