topic 4: articles

Critical issues in health reform individual mandate

-Adverse selection occurs in a voluntary market - individuals at greater risk of high health care spending are more likely to desire coverage, while low-risk individuals are more likely to opt out. -How the various rules and regulations that applies to health insurance markets are defined can affect the degree of adverse selection. -Increasing overall participation in health insurance plans could be an effective way to minimize adverse selection. Requiring individuals to have insurance coverage is one way to increase participation rates, especially among low-risk individuals; reducing AS -More ways to increase participation: limiting open enrollment periods with penalties for delayed enrollment, subsidizing premiums, and instituting automatic enrollment (i.e., opt-out rather than opt-in provisions). -Some degree of adverse selection is inevitable; example: If plan premiums are not allowed to vary to reflect health status or demographic characteristics, plans could be at risk for large losses as a result of this selection -The impact of an individual mandate and market reforms will vary across states, depending on their current market rules Example: In states that allow underwriting and premium variations by health status, the uninsured population may be less healthy, on average, than the uninsured population in states with guaranteed issue and community rating (this would increase participation rates). -Efforts to increase access to coverage through guaranteed issue and modified community rating rules will typically result in the high risk individuals being the first to enroll; if a mandate is to be implemented, it should be in conjunction with, or at least not too long after, any move to stricter issue and rating rules. -The impact of an individual mandate on the individual market will depend on what other coverage options people have and whether that coverage is subsidized.

Comparing Individual Health Coverage on and Off the ACA Insurance Exchanges

-The Affordable Care Act's health insurance market reforms are designed to encourage insurers to compete on the value of their products rather than on their ability to identify and segment people based on their risk of incurring medical costs. The ACA does this by: requiring insurers to accept all applicants; requiring them to charge consumers within a geographic area the same age-banded premiums, regardless of health status; and prohibiting other forms of so-called medical underwriting, like excluding preexisting conditions. In addition, the ACA's state and federal health insurance exchanges (also called marketplaces) help consumers shop for insurance by standardizing covered benefits and presenting information about costs in an accessible way -Accordingly, two distinct segments have emerged in the individual market: coverage sold on the exchanges, mostly to people who qualify for a subsidy; and coverage sold off the exchanges, through traditional channels to people who pay full price. This division of the individual market provides an opportunity to explore how effective the ACA has been at promoting good coverage at lower prices. - The ACA has several provisions that keep any potential for risk segregation in check. First, to keep insurers from segregating their risk pools, the ACA requires each insurer in the individual or small-group market to maintain a "single risk pool" for ACA-compliant plans.4 This means that insurers must use the same premium rating factors for all subscribers and plans within the relevant market, rather than using different rates for separate risk pools. If an insurer sells coverage both on and off the exchanges, rates must be identical for identical coverage. If coverage differs, rates may be adjusted only for actuarial value and not for differences in health status or overhead costs. Second, to counter insurers' incentives to avoid greater risks across the market, the ACA has a risk-adjustment mechanism in the individual and small-group markets that requires insurers with lower-risk subscribers to subsidize insurers that enroll people expected to incur more medical claims. -The Affordable Care Act's market reforms appear to be working well in the individual market, both on and off the exchanges. On a national level, we see little indication that risk segmentation is causing adverse effects in either market segment. All the major plan types (bronze, silver, gold) are being actively sold in both market segments, and general patterns of medical cost increase are similar in each segment. Of note, nonmedical overhead appears to differ. Insurers that sell only off the exchanges project that a higher percentage of total premium dollars will go to overhead and profits than do insurers that sell only on the exchanges—a testament to the exchanges' ability to sell coverage efficiently.

obamacare high risk pools are closing for real this time

-The high-risk pools were set up in each state four years ago as a bridge to Obamacare's coverage expansion this year, when insurers can no longer deny people coverage or charge them more because of a pre-existing condition. -The Obamacare program, known as the Pre-Existing Condition Insurance Plan (PCIP), at its height covered 115,000 people whose medical conditions made it difficult for them to find affordable coverage. -wanted to cover 375000 -closing down, not enough funds

why high risk pools still wont work

- In a nutshell, high-risk pools: 1. are prohibitively expensive to administer, 2. are prohibitively expensive for consumers to purchase, and 3. offer much less than optimal coverage, often with annual and lifetime limits, coverage gaps, and very high premiums and deductibles. -Even though state-based high-risk pools charged premiums of up to 250 percent of those charged to healthy beneficiaries in the individual insurance market, premium revenues paid just 53 percent, on average, of program costs. -By concentrating risk, high-risk pools also concentrate costs, resulting in greater expenses to administrators and consumers and driving plans to impose severe coverage limits that often serve to negate the benefit of having insurance. - Indeed, pronounced adverse selection is common in high-risk pools, because only the very sickest and most expensive individuals are willing to pay the high premiums for coverage, increasing administrative costs even more. This phenomenon was evident in several state-based high-risk pools, such as in California and Kansas, where enrollment declined from 2009 to 2011, but premiums totals and medical reimbursement costs increased, even with coverage limits in place

active employment california case

- The phrase "actively at work" in a supplemental life insurance policy refers to the employment status of an employee not the employment activities of a covered worker on any given day, a state appeals court in California has ruled. - "Interpreting 'Active Work' to mean full-time status provides a far more sensible result; it would allow an employee to obtain coverage despite taking a weekend off or calling in sick," the court ruled.

impact of furloughs on benefit plans

- Under a furlough, employees remain employed, but under reduced work hours, or under an unpaid leave of absence until there is viable work again. Different than a layoff, where employees are terminated, a furlough refers to a partial or full reduction in work hours due to economic conditions. These involuntary furloughs may be short or long term as defined by the employer - Most plans require active employment, a minimum number of hours or similar criteria in order to be eligible for coverage. Regardless of the carrier, an employee who is not working, or working below a minimum threshold, will eventually be considered ineligible for coverage under the policy. Most benefit plans clearly state when coverage ends. It's important to pay careful attention to this definition and whether a furlough impacts plan eligibility- Under fully-insured coverages, the carrier must approve coverage through the furlough if employees no longer meet the policy's eligibility requirements. Employers can always amend their self-insured plans to offer coverage through the furlough; however, it's important that the stop loss carrier also agree in order to ensure coverage for the furloughed employees and their dependents- Finally, employees losing health plan coverage during a furlough are eligible for COBRA coverage, similar to terminated employees. - The primary possible effects are (1) suspension for accumulating hours of service toward vesting credits, (2) an inability to contribute to a 401(k) or other contributory-type retirement plan, and (3) possible default on outstanding loans

individual mandate penalty may be too low

-"Insurance through exchanges is a good deal for individuals who are heavily subsidized, especially as the individual mandate penalty increases," said Caroline Pearson, senior vice president at Avalere. "While the incremental cost of insurance becomes less significant as the mandate penalty grows, individuals earning more than double the poverty level may continue to forego coverage since paying the fine is still much more affordable than purchasing insurance." Consumers remaining uninsured may face significant costs, beyond the individual mandate penalty, if they need medical care. This analysis does not account for these potential out-of-pocket costs associated with obtaining healthcare services without insurance.

aca high risk pool failings offered as cautionary tale

-"People are no longer going to be put in a totally different pool because they have health problems," as insurers under the ACA no longer will be allowed to deny people coverage based on preexisting health conditions. -program's lack of premium subsidies could explain why enrollment was so low. "Its potential benefits are out of reach for the vast majority of this population," many of whom have annual incomes under 400% of the federal poverty line

For Obamacare to work, everyone must be in

-2 beliefs continue to shape debate on Obamacare: 1. Pre-existing medical conditions shouldn't prevent people from obtaining affordable health insurance. 2. People who don't want health insurance shouldn't be forced by the government to purchase it. -AS: If insurers charged everyone the same rate, buying coverage would be far more attractive financially for people with chronic illnesses than for healthy people; then the health would drop out forcing insurers to increase rates - eventually coverage would become to expensive for everyone -This is why no country leaves HC provision to unregulated private markets -Requiring private insurance companies to charge the same rates to everyone will make it prohibitively expensive for most people to buy individual health insurance; this happened in NY and rates soared -Alternatives? 1. Re-emphasize traditional employer-provided health plans. -Adverse selection is less serious under such plans, because the favorable tax treatment they receive requires insurers to cover all employees irrespective of pre-existing conditions but this is why Obamacare was created b/c not everyone has a job 2. The Medicare-for-all proposal favored by many health economists was one approach that the administration considered - means abandoning ER plans for something new and unfamiliar -We must ask those who would repeal Obamacare how they propose to solve the adverse-selection problem.

Health reform law's effect on premiums

-42 states currently have a 5:1 ratio or higher for age rating bands -The health reform law will limit age rating bands to 3:1 -This will shift costs from older people to younger people -Older patients tend to utilize more, and higher cost heath care services than younger people -By using age rating bands, this will spread the premium costs over a range of age groups 3:1 means → the ratio limits the amount an older individual will pay to no more than 3 times what a younger individual pays in premium dollars Example: 24 year old has a premium of $1200 60 year old has a premium of $6000 Now on Jan 1, 2014 the HC law limits age rating bands to 3:1 24 year old has a premium of $1800 (50% more) 60 year old has a premium of $5400 (10% less) -In the future: -The 24 year olds premium may become unaffordable, chooses not to purchase coverage -Young, healthy people drop coverage, premiums rise for everyone

Getting Frank with Robert Frank

-AS: If insurers charged the same amount to every person then insurance would be more attractive for ill people, and then healthy people will drop out forcing the insurers to increase the rate -That problem is not an abstraction invented by economists to justify trampling individual liberties. As experience in most countries around the world has confirmed, it is a profound source of market failure that renders unregulated insurance markets a catastrophically ineffective way of providing access to health care. -The answer to Frank is surely obvious: don't charge everyone the same rate or put everyone in the same insurance pool. -For the past several years, federally sponsored risk pools all over the country have allowed people with pre-existing conditions to pay the same premiums as healthy people and obtain health insurance. And about 107,000 people have been able to do this without interfering with the premiums of anyone else. -Voilà! We solved the problems of 107,000 without requiring anything (other than about $6 billion in taxes) from the other 330 million.

Does community rating have an economic rationale?

-An economic benefit from community rating: in imperfectly competitive markets, the gain to older buyers of insurance is less than the loss for younger buyers -This ignores the basic harm cause by mispricing health insurance; those who are over-charged will underinsure and those who are undercharged will over-insure -Ethical problem: older buyers are wealthier and have higher incomes -Better answer = let insurance markets become competitive

Why premiums will change for people who now have non-group insurance

-Before reform, the non-group market was widely acknowledged to be broken, with restricted access, limited benefits, high administrative costs, and frequent and large premium increases subject to inadequate oversight The ACA seeks to address many non-group market issues, essentially remaking the non-group market starting in 2014 by instituting new rules and a platform for increased transparency and price competition. We expect that average, unsubsidized premiums for non-group coverage will be somewhat higher under reform than they are today People will be getting better insurance; the law requires that all non-group insurance provide a package of essential benefits, which includes items like maternity care and mental health that often are not covered in non-group policies now. In addition, guaranteed access to coverage for people with pre-existing conditions may very well increase average premiums as well, as people with higher health costs come into the insurance system. -The ACA also redistributes the premium burden among different enrollees by eliminating premium differences for gender and limiting variation premiums due to age to a maximum of three to one -The ACA addresses access to coverage in two fundamental and related ways. First, insurers must accept all applicants, including those with pre-existing conditions, during open enrollment periods and charge sick people and healthy people the same premium. Second, the ACA provides significant premium and cost-sharing subsidies to assist low- and moderate-income people with the cost of coverage. -Non group coverage now: made up of people who have recently passed health screening - market experiences high turnover; can limit benefits to people with pre-existing conditions -Eliminating screening would result in increased premiums -The ACA design is intended to open access to the now restrictive non-group market, and, with a combination of market rules, tax credits and tax penalties, to produce stable risk sharing with risk pools that have a reasonable mix of people in good and poor health. -Additional protection will increase premiums for current enrollees with more limited benefits and very high cost sharing, but will also lower their out-of-pocket expenses when they need care. -Health plans under reform will be able to vary the premium for a non-group policy only to reflect a policyholder's family size, age (with a 3 to 1 limitation), location, and tobacco use. -The gender and age-rating limitations in the ACA, by themselves, will have the effect of raising premiums for younger people and lowering them for older people. -Younger men in markets where health plans vary rates by age and gender will be most affected, because premiums will adjust both to reflect the limit on age rating and the elimination of gender rating. -In the big picture, the ACA addresses many of the shortcomings of the current non-group market by providing access to a complete set of health benefits with protections against catastrophic out-of-pocket costs. The higher level of benefits, the better protection against catastrophic costs and wider access to coverage each tend to increase the average level of premiums, although out-of-pocket costs for enrollees will go down due to the better protection they receive.

How community rating causes adverse selection

-Community rating is bound to result in adverse selection -After AS, the oldest policyholder ends up paying more than he would have under free-market underwriting -A government policy aimed at forcing young people to subsidize premiums for the elderly ends up driving costs for everybody

The sleeper in health reform

-Currently the Medicaid program is our nation's primary payer and only safety-net program providing comprehensive long-term services and supports; but the only people who qualify for this is people who are or become poor -CLASS act: will provide individuals with functional limitations a cash benefit to purchase non-medical services and supports necessary to maintain community residence. -Benefits would be paid out of a trust fund consisting of enrollees' premiums and interest earned on its balances. Monthly premium amounts will be determined by the Secretary with respect to maintaining 75-year program solvency. -To qualify must be 18 or older and have contributed monthly premiums for at least 5 years; Functional disability that lasts more than 90 days -The act would work with in conjunction with other LT supports systems such as Medicaid -The estimated reduction in the federal budget deficit over the 10-year period is the result of the five-year vesting requirement; the payout of benefits would not begin until 2016, five years after the initial enrollment in 2011. If enacted, the CLASS Act would significantly expand long-term services and support options for millions of Americans with chronic and disabling needs.

Adverse selection and the CLASS act

-Funding LT care for the elderly and disabled is a problem; LTC costs are expensive and can quickly exhaust an individuals savings -Not enough people purchase LTC coverage from the individual insurance market -Public and private strategies to improve this have been proposed -The community living assistance services and support act (CLASS act) -The CLASS act is a voluntary federal program financed from participants premiums without any federal subsidy for an individual over age 18 that meets an actively-at-work requirement -Monthly premiums are based on age at enrollment and year of enrollment; supposed to be level over a lifetime; individual must pay premiums for a 60-month vesting period -Provides a cash benefit of at least $50 a day indexed to the CPI for an impaired individuals living in the community; must be unable to perform at least two or three activities of daily living or be cognitively impaired -May increase adverse selection 1. By the time someone realizes they need LTC coverage, their options may be limited 2. The government ends up paying a majority of LTC 3. Voluntary enrollment and guaranteed issues means no one can be denied coverage -Other provisions may exacerbate potential selection issues: Guaranteed issue for those actively at work Opt-out and opt-in provisions Premium subsidies Lack of marketing Cash benefit design Presumptive eligibility trigger -Overall, the CLASS act is intended to increase planning and financing of the LTC risk, however the potential for adverse selection and LT impact on public and private financing of LTC is potentially devastating

Gender Considerations in a voluntary individual health insurance market

-In a voluntary market, individuals at greater risk of high health care spending are more likely to purchase coverage, while low-risk individuals are more likely to forgo coverage -Women generally incur more medical spending than men -Gender differences will vary across insurers and plans -If policymakers were to decide to prohibit health insurance premium variations based on gender, rates would increase on average for men and at least initially decrease for women -In a voluntary system this could result in AS -Achieving universal health insurance coverage could reduce the need to charge different premiums by gender

Risk Classification in the Voluntary Individual Health Insurance Market

-Information on a specific individual's risk characteristics, such as health status, is not used to determine eligibility for most employer-sponsored and government-sponsored health insurance programs. However, such information is often used in the voluntary, individual health insurance market where individuals decide whether or not to purchase coverage based on how their premiums compare to their expectations for future medical expenses. -Millions of privately insured Americans rely on the individual health insurance market. There are three primary types of insurance systems: (1) social insurance, (2) group insurance, and (3) individual insurance. -For each application it receives, a health insurer in the individual market must 1) decide whether or not to accept the application and issue a policy (risk selection). 2) If the application is accepted, it must be appropriately categorized to ensure that the policy provisions and premiums are consistent with the level of risk involved (risk classification). The process of selecting and classifying insurable risks is known as underwriting. Ensuring that the premiums for any two individuals with a similar risk status are comparable. This is known as financial equity. -Risk classification helps maintain the financial soundness of the voluntary, individual health insurance market. Among the key points highlighted in this brief: -To avoid insolvency, insurers must charge adequate premiums to pay policyholder claims. -The risk classification process groups together individuals with similar levels of risk and expected medical costs, and permits insurers to charge an adequate premium. -If individuals purchase insurance on the basis of adverse health information or other risk characteristics that are unknown to or not considered by the insurer, adverse selection results. Adverse selection means that otherwise similar people at lower risk for high health spending subsidize those at greater risk. This may drive lower risks from the insurance system and lead to higher premiums or even insurer insolvency. -Banning the use of information that helps insurers classify risks potentially leads to higher costs and reduced access to individual insurance. -Because applicants for individual health insurance choose the timing of their insurance purchase, as well as the benefits and type of plan selected, they have the opportunity to make decisions that favor themselves, potentially at the expense of the insurance program. -This phenomenon is known as adverse selection, anti-selection, or biased selection, and occurs when applicants make purchase decision based on risk characteristics that are known or suspected by them but unknown to, or not considered by, the insurer or administrator of the program. Underwriting at renewal generally prohibited UW at renewal generally prohibited - typically, the insurer can only raise premiums if the increase is applied uniformly to a "class" of policyholders, usually defined as all policies of a particular type sold in a given state.

implications of proposed changes to aca in response to king vs burwell

-Insurance markets must attract a broad cross section of risks. In other words, they must not enroll only higher-risk individuals or groups; they need to enroll those who are lower risks as well -The ACA imposes guaranteed issue and modified community rating requirements on the individual market. To avoid premium spirals due to these provisions, the ACA includes an individual mandate and premium subsidies, both integral components of the law. They provide incentives even for individuals in good health to obtain coverage, thereby reducing adverse selection -If a set of plans or insurers operate under rules that are more advantageous to higher-risk individuals or groups, then higher risks will migrate to those plans; lower risks will migrate to the plans more advantageous to them. In other words, the plans that have rules more amenable to higher-risk individuals or groups will incur adverse selection -For long-term sustainability, health spending growth must be reduced. -Even if a temporary extension of premium subsidies would help avoid disruption in the short term, it is likely that the disruption would be only delayed, not avoided altogether. If the subsidies are ultimately eliminated, potentially millions of individuals will drop coverage and premiums will increase substantially, unless other equally strong mechanisms are implemented that would encourage participation by a broad cross section of risks. -without access to premium subsidies, many individuals would be exempt from the mandate because they would not be considered to have an affordable health insurance option available to them. -higher risk individuals could purchase plans licensed in states with stricter regulations (e.g., guaranteed issue, community rating, comprehensive benefit requirements), and lower-risk individuals could purchase plans licensed in states with looser regulations. Premiums for the plans licensed in states with stricter regulations would increase accordingly, which could lead to even fewer insurance purchases of those state-licensed plans among the low-risk population. However, allowing insurance purchases across state lines could increase the number of issuers offering coverage, thereby increasing competition and consumer choice. Such competition could result in lower premiums. - Another proposed approach would be to allow small businesses to band together to offer health insurance through an association health plan.As with purchasing coverage across state lines, the more that the rules governing AHPs are consistent with those governing traditional insurance, the less adverse selection concern there is regarding AHPs. Although the ACA harmonized many of the rules applying to the individual and small group markets, if coupled with increased flexibility for states to change their issue, rating, or benefit requirements, AHPs could threaten the viability of the insurance market in states with more restrictive rules

Fight erupts over health insurance rates fir businesses with more women

-Insurers say woman under the age of 55 are more costly to cover b/c they use more health services -Gender rating is the norm today -Women are saying this is discriminatory and unfair -Even with the health reform it would still allow insurers to continue to consider the gender, health status, and age of workers when setting premium rates -Insurers argue insurance is about risk - and women display more risk -Maternity care, reproductive care, prescription drugs, cervical and breast cancer -If all Americans must carry insurance, then gender rating could be eliminated -"time to level the playing field"

Sick sense

-Internal factors taken into account when giving a rate quote: Claims experience Previous dealings with insurers A new insurer also may want to know what renewal rate the old insurer offered Plan details The insurer also will want details on any other health insurance you carry Employee demographics What % of EE's participate in the plan Is ER in growth mode Geography of business Industry -External Factors Small ER's get put into sub-pools with other small ER's Trend rate; overall increase in GC costs from year to year Underwriting cycle Share all the info you can

High risk pools closing - Money running out

-Many Americans who cannot get health insurance b/c of preexisting medical problems will be blocked from a program designed to help them b/c funding is running low. (Launched in 2010) -The state-based "high risk pools" set up under the 2010 HC law will be closed to new applicants -The people currently enrolled in the pools will not be affected -The program was always designed as a temporary bridge for the uninsured - supposed to last until 2014; questioned if the 5 billion the Congress appropriated for the pre-existing conditions insurance plan as enough from the start -The plans sold through the pools are often expensive, weeding out people who couldn't afford them -The pools are open only to people who have gone without coverage for at least 6 months; proving to be far more costly to insure than predicted -Many uninsured go untreated → worsening their medical problems → by the time they get coverage they need immediate (expensive) care -Not requesting additional money from Congress -Joyce - diagnosed with breast cancer - insurer pulls out and no insurer wants to cover her - finds out about the pool and scrambles to get an application by the new deadline

Adverse selection and the Individual mandate

-Many reforms have common goal: movement away from a voluntary system of obtaining health insurance through ER plans or in HI market directly and toward one of the expanded eligibility for Medicaid and a mandate for virtually all individuals to maintain coverage -Transformation to a new paradigm of pricing, offering, purchasing, and managing HI -If the mandate to obtain insurance coverage is not strong enough ad cannot prevent AS, premium levels are determined to escalate significantly in the markets involved; selection spiral which would result in increasing the total number of uninsured -Is the cost of having health insurance justified by the benefit of having coverage? -This is a personal decision that lies @ the heart of consumer choice; drives AS -Implications of mandated coverage: 1. The need to have access to coverage 2. Price to purchase must be reasonably within one's means -People can choose between diff levels of plans so AS can still occur, however it narrows the options and does not give the choice to opt out -Defining an effective individual mandate: The carrot is a subsidy, voucher, or other financial mechanism to help make insurance more affordable and put uninsured people of limited means in a position where the cost/benefit decision bears a more realistic relationship to their respective income levels The stick is a financial penalty of some sort on individuals who fail to purchase coverage -A carefully designed reform that can effectively balance financial incentives and disincentives, cost, and pricing, along with the move toward a new consumer environment in health insurance, may help deliver better access without creating undue pressures on the cost of HC -If the mandate is not effective then the new approach to rating & UW will at a minimum cause costs to increase and could potentially threaten the ongoing financial viability of private health insurance

Tell us again why we need young people

-Obamacare only works if young people show up -Strange thing about the market for health insurance is that no one really sees the price b/c get it from ER and they pay about ¾ of the price -The only people who face real premiums are the ones in the "individual market" -This is why Obamacare is different -When premiums reflect expected costs, people are essentially paying their own way; it doesn't really matter who chooses to buy insurance and who chooses to self-insure and bear the risk themselves -Health insurance is different because it is regulated and based on the fact that it is unfair to charge "real" premiums -Common belief is everyone should pay the same premium no matter what their level of risk is -Obama deceived people... made it seem that this reform would help people who couldn't afford health coverage and leave everyone else alone -Only a few people (107,000) were denied HC coverage b/c of pre-existing conditions -Obamacare will only work if the government controls the premiums paid by everybody in the country Traditional indemnity insurance basically does not exist - its more of a health plan rather than health insurance -When premiums cannot reflect expected costs four things will happen: 1. People who are under-charged will over-insure and people who are over-charged will under-insure 2. In order to avoid attracting high cost enrollees, health plans will respond by scaling back their benefits and their provider networks until the richest plans look pretty much like every other plan 3. Heath plans will seek to attract the healthy; healthy people tend to buy on price and sick people tend to buy on benefits 4. The perverse incentives do not end at the point of enrollment; health plans will have perverse -If you have problems and need help it is difficult to get help from vendors who don't want your business and people are not friendly and take a while -So the Market for health insurance should: 1. The premium paid should reflect the expected cost of your care 2. You should be able to purchase "change of health status insurance" in case of a change in your health status

Class act cancelled

-On October 14th, in a surprising development, the Obama Administration announced the cancellation of the Community Living Assistance Services and Supports (CLASS) program. -There were initial concerns that the CLASS program would not be financially viable as it was constructed in the proposed bill -The CLASS Act was designed to raise approximately $86 billion of the projected $213 billion of tax revenue raised by PPACA. The $86 billon revenue shortfall will have a significant impact on the total cost impact of PPACA, and strengthens doubts about the cost projections for the healthcare reform law as a whole. -Terminated b/c they decided it was not a financially sustainable program -Concerns it was not properly designed and could leave the federal government responsible for millions of dollars -High cost of participation, so would be unappealing to workers -"In general, voluntary, unsubsidized and non-underwritten insurance programs such as CLASS [Act] face a significant risk of failure as a result of adverse selection by participants... Individuals with health problems or who anticipate a greater risk of functional limitation would be more likely to participate than those in better-than-average health."

Actuarial Issues and Policy Implications of a Federal Long-Term Care Insurance Program

-Our actuarial analysis indicates that the proposed structure and funding approaches in the CLASS Act, as introduced on June 9th, will not only be unsustainable within the foreseeable future, but are unlikely to cover more than a very small proportion of the intended population -Project that the Fund will be insolvent as early as 2021 -The opt-out and guaranteed issue provisions of the plan pose a significant and likely risk that, in a relatively short time period, the program will either need increased premiums and/or significant reductions. -There is considerable risk of adverse selection, which could necessitate future increases in premiums or reductions -Estimate that the actuarially sound average monthly premium level would be $160 using an entry-age level premium approach and assuming an average daily benefit of $75. -Under an annual increasing premium approach, the average monthly premium would be $125 per month increasing annually with CPI. -Each of these premium estimates is significantly in excess of the $65 monthly average initially proposed in the CLASS Act -A voluntary federal LTC program can be developed so that the program is sustainable and minimizes the impact of adverse selection; this includes: The use of a stronger actively-at-work definition An underwriting approach for the coverage of non-working spouses Stronger participant opt-out/opt-in restrictions Consistent eligibility definitions for benefits Potential program design changes that would result in more affordable premiums A strong marketing and education effort

Grandfathered status for 2013

-Sponsors of "grandfathered" health plans - those that were already in existence when the ACA was enacted in March 2010 and that have not undergone significant changes since then - will once again have to assess whether the plan can and/or should try to retain such status for 2013 -Need not comply with the recent extension of the guidelines for women's preventive care benefits to include contraceptive coverage and certain breast-feeding equipment -All of the criteria for a grandfathered plan to lose its status is measured against a static point in time: March 23, 2010; incremental changes to a plan are cumulative, making it harder to preserve its grandfathered status each year -Examples: Will lose status If the rate of employer contributions to the plan decreases by more than 5% points If it increases its copayment y more than $5 (plus the medical inflation rate since March 23, 2010) -Sponsors should remember that the regulations condition a plan's grandfathered status on the sponsor taking the following affirmative steps: Including "in any plan materials provided to a participant or beneficiary that describes the benefits provided under the plan" Maintaining records that document the terms of the plan as in effect on March 23, 2010 along with any other documents necessary to verify, explain, or clarify the plan's status as a grandfathered health plan

Premium subsidies - what you need to know

-The ACA provides premium tax credits and cost-sharing subsidies to help low and moderate income Americans afford coverage -Subsidies will help many people purchase coverage, however millions are not eligible for subsidies and for those that are eligible the amount of the subsidy declines as income rises -$100 billion health insurance tax, costly benefits requirements and restrictions on age rating that will drive up the cost of coverage; this increase the likelihood that young people will wait to purchase coverage until after the get sick or injured, further driving up the costs -Subsidies DO NOT lower the underlying premium -Due to how the subsidies are indexed, "the shares of the premiums that the subsidies cover will decline" Many individuals who receive subsidies will still pay more for their premiums than they do today -Under the ACA, individuals from 100-400 percent of the federal poverty level will not have to pay more than a certain % of their income in health insurance premiums, however the caps will increase with inflation, and medical costs continue to risk much faster than inflation

Shrink Obamacare's Costs by Removing Rule Driving up Young People's Premiums

-The Supreme Court will soon decide King v. Burwell, the case that will determine whether tax credits being paid in at least 34 states without their own exchanges are legal. If the Supreme Court makes the administration follow the letter of the law, billions of dollars of federal tax credits will continue to flow to 16 states, but not the rest. This will result in a political crisis giving Congress and President Obama the opportunity to fix the worst aspects of Obamacare. -Nevertheless, scholars at the Heritage Foundation conclude that Obamacare's age rating restrictions increase premiums for younger adults by about one-third - Obamacare disguises these true premiums by offering health insurers tax credits to reduce the net premium people pay, thus fooling many into thinking premiums have gone down. - If the age rating restrictions were lifted, the premium for the second-lowest cost silver plan could easily be expected to drop to $270, a reduction of $66. The tax credit would drop by the same amount. $66, which amounts to a drop of over one-third from $191. Aggregated over the entire Obamacare population, this would dramatically reduce Obamacare's claim on taxpayers.

Insurance market reform: Guaranteed issue and insurance rating

-The central objective of the Affordable Care Act is to significantly improve on the accessibility and affordability of quality healthcare to all Americans -Fair Health Insurance Premiums limits rating (i.e. limit premium variability) strictly to the following 4 factors: 1. Two coverage tiers - an individual or family (using per-member rating or community rating) 2. Defined rating area - geographical rating areas must be based on the geographic divisions of counties, three-digit zip codes, or metropolitan statistical areas 3. Age, except that such rate shall not vary by more than 3 to 1 for adults 4. Excess rating for tobacco user to vary by no more than 1.5; factors such as health history, medical condition, gender and industry of employment can no longer be considered for rate setting beginning on January 1, 2014. -Guaranteed availability of coverage: each health insurance issuer that offers health insurance coverage in a state must accept every employer and individual in the State that applies for such coverage. A health insurance issuer however may restrict enrollment in coverage to open or special enrollment periods and establish special enrollment periods for qualifying events -Guaranteed Renewability of Coverage: when a health insurance issuer offers health insurance coverage in the individual or group market, the issuer must renew or continue existing coverage at the option of the plan sponsor or the individual. -Special Risk Pool: a health insurance issuer shall consider all enrollees in all health plans (student health insurance will be exempt) offered by such issuer in- or outside the Exchange to be members of a single risk pool. -Age bands: single age band for children (0-20); one year age bands for adults (21-63) - meaning a slight increase every year; single age band for older adults (64+)

Revisited: The Total Evisceration of the Individual Mandate. 98.8% of Americans Won't Pay It

-The individual mandate has been wholly gutted for purely political reasons and its not coming back to life. -We are up to 22 different ways a person can opt out of Obamacare. In fact, if you can't generate an exemption for yourself, you aren't even trying. If you can fog a mirror, you have a 99% chance of excusing yourself from the individual mandate. -Almost 90% of the nation's 30 million uninsured won't pay a penalty under the Affordable Care Act in 2016 because of a growing batch of exemptions to the health-coverage requirement. -The penalties were intended as a cudgel to increase the number of people signing up, thereby maximizing the pool of insured. Insurers are concerned that the exemptions could make it easier for younger, healthier people to forgo coverage, leaving the pools overly filled with old people or those with health problems. That, in turn, could cause premiums to rise. -With a stronger penalty and less broad exemptions, that would be better for the risk pool

Obamacare pre-existing conditions coverage: low enrollment, high costs

-The plan to provide those with pre-existing conditions HC is failing to help those it was intended to help -The pre-existing conditions rule incentivizes people to wait until they are sick to purchase HC, so Obama created the "individual mandate" -Since Obamacare did not take effect until 2015, from 2010-2014 the law set up the PCIP which funded new high-risk pools in each state -Estimated that 375,00 would enroll in these pools, but less than 29% of original projections enrolled -Even with low enrollment, PCIP is running out of money -Claims costs were 2,5 times greater than anticipated -They have thus suspended enrollment, leaving people discouraged -Also made major benefit adjustments in an effort to control program costs by consolidating three plans into one, increasing co-insurance, and increasing maximums for out-of-pocket costs -The issue was overestimated and the costs were underestimated

ACA high-risk pool failings offered as cautionary tale

-The suspension of enrollment was meant to ensure that funds are available through 2013 to continuously cover people currently enrolled in PCIP -Actual results: fewer but much more expensive enrollees -The suspension limited many people's options to obtain coverage; it already limited b/c options b/c of the "6 months without coverage" rule -As lawmakers seek additional funding to reopen enrollment, it is encouraged that states are given control and flexibility -Ohio officials faced difficulties; forced some Ohioans out of the program b/c their previous coverage had been deemed "creditable" even though they were clearly eligible for the high-risk pool -The programs lack of premium subsidies could explain why enrollment was so low -Once 2014 comes, these problems will be a thing of the past

individual mandate exempt a palooza 32 ways to opt out of obamacare

-There actually would be 33 total but the second list from Healthcare.gov repeats numbr 14 on this list with slightly different wording. Notice that numbers 31 and 32 on this list are truly doozies. You can simply "believe" that Obamacare plans are too costly or experience any of another limitless form of hardship and get yourself out of the law. So in reality, the 4 million Americans that are estimated to pay this fine should receive an "F" in creative writing and imagination. -The individual mandate does not exist. It is a mirage. We need to repeal it now so that we don't have citizens wasting countless hours this tax season trying to comply with pages of complex, conflicting and incomprehensible documentation as to their healthcare coverage or 32-flavors of exemption.

Adverse selection at every turn

-This paper highlights (i) that inertia can be substantial in health insurance markets and (ii) that efforts to improve choices in health insurance markets with consumer inertia should take into account the potential impact on incremental adverse selection. -Inertia: a tendency to do nothing or to remain unchanged Inertia has a substantial impact on health plan enrollment as the choice environment evolves over time. -While reducing inertia increases welfare in the naive setting where health plan prices are held fixed, in the setting where health plan premiums adjust as enrollees switch plans reduced inertia leads to incremental adverse selection and a welfare loss -When inertia is reduced by three-quarters, this incremental welfare loss effectively doubles the welfare loss from adverse selection in the observed environment Policies to improve consumer choices in health insurance markets should consider the potential for incremental risk- based plan selection -In English: The difficulty consumers face in appreciating the value of plans and the resistance they exhibit in plan switching has a risk pooling effect. For example, if everyone could pick the plan that minimizes their cost, sicker individuals would end up in generous plans with higher premiums and healthier individuals in less generous plans with lower premiums. This is adverse (favorable) selection into the more (less) generous plans. That consumers don't perfectly identify their costs under each plan and have status quo bias (inertia) undoes some of this selection.

risk classification in the Voluntary Individual Health Insurance Market

-To avoid insolvency, insurers must charge adequate premiums to pay policyholder claims. -The risk classification process groups together individuals with similar levels of risk and expected medical costs, and permits insurers to charge an adequate premium. -If individuals purchase insurance on the basis of adverse health information or other risk characteristics that are unknown to or not considered by the insurer, adverse selection results. Adverse selection means that otherwise similar people at lower risk for high health spending subsidize those at greater risk. This may drive lower risks from the insurance system and lead to higher premiums or even insurer insolvency. -Banning the use of information that helps insurers classify risks potentially leads to higher costs and reduced access to individual insurance.

Why is the Obamacare tax/penalty not needed at all?

-W/o sufficient government incentives, people will wait until they are sick to buy HC -If people are allowed to go uninsured, they would show up at the hospital unable to pay their bills -Real problem is the sheer cost of health insurance

New rules on 90-day waiting period limitation

-Waiting period = the period that must pass before coverage for an EE or dependent who is otherwise eligible to enroll under the terms of a group health plan can become effective -Once eligibility requirements are met, coverage must begin; can not delay coverage past that 91st day -The new safe harbor is to ensure that coverage begins no later than 60 days after the first day of the first month following the date of hire -A plan may impose eligibility criteria such as completion of a period of days of service, attainment of a specific job category, or other criteria, so long as they have not been designed to avoid compliance with the 90-day period -Cumulative service requirement - the hours of service requirement may not exceed 1200 -When a variable hour or seasonal EE is hired or part-time EE, an ER is allowed to classify the EE as full-time over a measurement period not to exceed 12 months

2014 Obamacare "Uninsured Penalty" Not Expensive Enough to Make Consumers Buy Health Insurance

-Will the $95 IRS penalty motivate you to shop this October for an Obamacare health plan? 63% say no 29% uncertain 8% say yes -To make health insurance premiums affordable, the Affordable Care Act (ACA) aims to maximize the number of people with health insurance, creating a larger risk pool with more healthy people paying premiums alongside less healthy people who consume more medical services -The $95 tax penalty proved as ineffective for younger respondents as it was for survey respondents as a whole. -If young people, who are more likely to be healthy, are not likely to purchase Obamacare plans, then the system will prove inadequate because there will be a disproportionate of young healthy people to older sick people -Varying degrees of premium and out-of-pocket expense assistance will also be available for individuals and families making less than 400% of the Federal Poverty Level; people still answer "no" to this as a motivation -The uncertain group presents another challenge - that people don't understand the reform -$95 isn't a large enough penalty