Tag Archives: obamacare

High Time to Trust Patients, Physicians

The days of trusting your legislators to have your best interests at heart are in the rearview mirror. Apparently, their main interest is parroting the buzzwords of the moment to get elected and then being too busy banking lobbying money to listen to the voters. Our legislators have become spectators who wait for the perfect moment to pounce on their political enemy and then go on cable news shows to boast about it.

The “us against them” attitude, punctuated by hyperbolic, apocalyptic rhetoric, closes the door to finding solutions. Our interests would be better served by having town hall meetings where voters could state their concerns, air their differences and learn what legislators are doing about their issues. Caution: Meetings at 9 a.m. on Wednesday ,when paid activists are guaranteed to outflank the working general public, are prohibited.

There are strong differences of opinion on how to attain a healthy citizenry. Educating potential patients about what drives up medical care expenditures can start the conversation. Well-informed patients would demand solutions based not on corporate interests or government or political agendas but on a fair, competitive market that maximizes choices and achieves lower costs.

Eight years of the Affordable Care Act have borne out Congressional Budget Office predictions that abandoning basic principles of insurance—which compensates only for events beyond the insured’s control and is priced according to the degree of risk—would lead to higher and higher premiums, fewer participating insurers and unsustainable government expenditures to subsidize insurance premiums. The data in three recent Centers for Medicare and Medicaid reports on ACA exchanges show “individual market erosion and increasing taxpayer liability.” The average monthly premium for coverage purchased through the exchanges rose 27% in 2018, and federal premium subsidies increased 39% from 2017 to 2018.

See also: 10 Reasons Healthcare Won’t Be Disrupted  

A less frequently discussed cost driver is the disturbing trend of private doctors’ offices being scooped up by hospitals, health insurance companies and venture capital groups. Prices tend to rise when health systems merge, because of decreased competition. And not only do hospitals and health systems generally charge more than private physicians’ offices, the government compounds this problem by paying more to hospitals than independent offices for the same service. A review of 2015 Medicare payments showed that Medicare paid $1.6 billion more for basic visits at hospital outpatient clinics than for visits to private offices. Patients are the biggest losers: They paid $400 million more out of pocket and had their tax dollars wasted. The study also found hospital-employed physicians’ practice patterns in cardiology, orthopedic and gastroenterology services led to a 27% increase in Medicare costs. This translated to a 21% increase in out-of-pocket costs for patients.

Similarly, a U.C. Berkeley School of Public Health study of consolidation of California’s hospital, physician and insurance markets from 2010 to 2016 concluded: “Highly concentrated markets are associated with higher prices for a number of hospital and physician services and Affordable Care Act (ACA) premiums.” In consolidated markets (defined by the Federal Trade Commission’s Horizontal Merger Guidelines), prices for inpatient procedures were 79% higher, and outpatient physician prices ranged from 35% to 63% higher (depending on the physician specialty) than less concentrated markets.

Big medicine and third-party financing are taking the cost curve in the wrong direction. This speaks to the urgency of encouraging cash-friendly practices that bypass insurance and supporting direct primary care (DPC) practices. With DPC, all primary care services and access to low-priced commonly used medications are included in an affordable upfront price. Importantly, DPC’s time-intensive and individualized management of chronic diseases decrease hospital admissions, paring Medicare’s $17 billion spent on avoidable readmissions.

See also: How to Optimize Healthcare Benefits  

Why corporations want to marginalize private practice seems clear; the government’s motive is open to debate. Surveys consistently find that patients overwhelmingly want “personalized provider interactions.” Thus, herding patients into government-directed programs is not the solution. One core problem with government systems is their reliance on the goodwill of politicians. As President Ford said, “A government big enough to give you everything you want is a government big enough to take everything you have.”

It’s time for Congress to scrutinize anti-competitive health system mergers. It’s time to bring to the floor more than a dozen bills to expand and improve Health Savings Accounts (HSAs) to give patients more control over all facets of their medical care.

Congress, the clock is ticking on this legislative session. Stand up for patients. Or did the dog eat your courage?

More Opportunities for Reinsurers in Health

As insurers and regulators address uncertainties in connection with risk-adjustment, transparent health reinsurance emerges ever more forcefully as a marketplace solution for managing risk in connection with healthcare costs.

The immediate instance animating fresh reconsideration of health reinsurance is the early July Trump administration decision to desist from administering risk adjustment. The decision followed a federal court decision in New Mexico that found that the Centers for Medicare and Medicaid Services was being arbitrary and capricious in its risk adjustment.

There is nothing inherent in risk adjustment that makes rational and neutral implementation impossible. It is simply that CMS wasn’t doing that in New Mexico in the court’s determination, so the judge sided with Land of Enchantment insurers and rapped CMS’s knuckles.

Risk adjustment is a permanent element of the Affordable Care Act, or Obamacare, to transfer risk among insurers. Transitional reinsurance and risk corridors, elements of Obamacare that expired at the end of 2016, worked well… and badly. Transitional reinsurance had pooled enough money, coupled with $5 billion of Treasury subsidies over three years, to pay claims. Risk corridors, by contrast, paid but 12.5% on claims and put a number of insurers in the lurch. They had entered Obamacare markets on the supposition that risk corridors would pay vastly more.

Administration decision making on risk adjustment leads inescapably to uncertainty because of the potential for adverse selection, an escapable element of insurance.

Nicholas Bagley, a scholar, says that, “in one sense, the furor over the risk adjustment program may be overdrawn. The 2019 rule has been fixed, so we’re really talking about accounts receivable at this point. They’re big accounts receivable, amounting to hundreds of millions of dollars, but most insurers can handle a short delay in getting paid.

“In another sense, however, the needless suspension of the risk adjustment program is a signal that the Trump administration remains intent on sabotage. Already, insurers were stiffed on their risk corridor money. Then the cost-sharing payments evaporated. Now, even risk adjustment money may go up in smoke. What’s next? This is no way to run a health program, and no way to run a government.”

One practical solution is to embrace transparent health reinsurance, a proposal that ITL published in anticipation of fade-outs for risk corridors and transitional reinsurance just over two years ago.

If anything, conditions are more propitious now.

See also: Reinsurance: Dying… or in a Golden Age?  

This past fall, the president placed the foundation for association health plans. Last month, the Department of Labor issued implementation guidance, which will go into effect later in August, so associations of enterprises could jointly negotiate and purchase health care coverage. DOL says: “As it has for large company plans since 1974, the department’s Employee Benefits Security Administration will monitor these new plans to ensure compliance with the law and protect consumers. Additionally, states will continue to share enforcement authority with the federal government.”

Similarly, the Trump market liberalization for short-term, limited-duration insurance opens another market for reinsurers. As with association health plans, CMS says that, “in the final rule, we also strengthened the language required in the notice and included language deferring to state authority.”

The market liberalization initiatives, coupled with Department of Labor, CMS and state regulatory oversight, present signal opportunities for reinsurers.

For instance, in the emerging private flood insurance market, “market growth to date has largely been driven by the interest of global reinsurers in covering more U.S. flood risk,” the Wharton Risk Management and Decision Processes Center reported in July 2018.

Issuers would mitigate adverse selection.

Associations and issuers of short-term, limited-duration insurance would mitigate risk.

State legislators and regulators could enact statutes and set standards, their domain competencies.

Mandatory, state-based reinsurance is wholly feasible, particularly in densely populated states, for each marketplace offering.

This approach could go a long way toward creating foundations for accountable health organizations.

See also: The Dawn of Digital Reinsurance  

Innovators like Amazon Web Services could bring one element of available technologies, cloud computing, to provide fresh applications boosting asset values and volumes and increasing probabilities for effective service.

Associations, enterprises and individuals would experience greater healthcare security and quality.

Why Healthcare Pricing Stays Opaque

In almost every industry in the U.S., consumers can easily access price information to shop. There is one glaring exception to this rule: goods and services in our nation’s healthcare system. Why do we accept the concept that it’s OK that we have no idea what the costs will be until after we have received the service?

As a result, there is no price elasticity that would normally reward vendors who don’t overcharge and reward innovators that reduce costs while improving quality. Because the market for healthcare is broken, disparate prices bear no relationship to cost and quality. Table 1 shows very common examples of how the same medical procedure can have wild price variations within short distances.

Many believe there’s no fix without healthcare price legislation, and recently we have seen some regulations passed and additional measures discussed by our political leaders. But Americans already get consumer-based pricing models in nearly every other industry, and shopping comes naturally to most of us.

See also: Is Transparency the Answer in Healthcare?  

So why would anyone wait for the passage of special price transparency regulations before requiring their medical suppliers to support a normal shopping experience?

According to the Peterson Center on Healthcare, U.S. residents paid over $352 billion in out-of-pocket healthcare costs—along with another $3 trillion in healthcare premiums and taxes—to pay for commercial and government healthcare programs last year. This represents a staggering 10x, or 1,000% more than, what parents paid when baby boomers were teenagers. Unlike in the mid-‘70s, most medical tests and procedures vary in cost by 5–10x within a short distance of home, but very few of us recognize this. When we consider we’re just as likely to get the best care at the lowest-cost facility, you might think that we’d all take a personal interest in how we choose the providers and locations we use to receive “shoppable” medical tests and procedures. Yet most of us don’t.

The reason is that the continuing rhetoric among suppliers, legislators and payers—created by the combination of the quasi-regulated environment of healthcare with a third-party, indirect, payer system—interferes with normal market dynamics.

Most legislation aiming to mandate some sort of price transparency has simply provided plausible excuses for the industry to say “we use industry best practices” and “we complied.” This provides cover so the industry isn’t subjected to the same consumer protection laws that affect goods and services in every other market. What’s actually needed is less regulatory meddling and more free market principles to reward innovations that lead to higher-quality care at lower costs.

Rhetoric around “personal mandates,” “lifetime caps,” “pre-existing conditions,” “market stabilization,” “Cadillac tax” and other things that relate only to who will pay for healthcare coverage create a smokescreen that ensures that we never talk about the most basic issue in delivering services to this mass-market – price of medical procedures.

Unfortunately, severe unintended consequences were created when many of our state legislators created a set of rules known as Medical Loss Ratio (MLR) rules, and, more recently, these rules have been codified in federal law known as the 80/20 rule. The intended effect was to limit the amount a healthcare carrier could charge a customer in insurance premiums to no more than the actual medical charges plus a fixed percentage to operate the business and provide a reasonable return to shareholders. This type of rule or contract is often referred to as “cost plus.”

The unintended consequence is that carriers have no incentive to reduce medical claims, and therefore premiums and out-of-pocket expenses. Regardless of the carrier’s wish to help you, as long as there are MLR rules (a.k.a. 80/20, “cost plus”), carriers have a financial disincentive that makes them likely unable to survive if the amount of spending on medical procedures and drugs dropped substantially.

Because research has shown that medical price transparency alone (shopping) could knock more than 50% out of healthcare expense, you can see why some might want to slow the movement to consumerism by continuing to maintain secrecy on procedure prices, while beating the drums of healthcare rhetoric. This approach will keep us ignorant of the root cause of the outrageous cost of care in the U.S. – overpaying for medical procedures.

See also: The Search For True Healthcare Transparency  

The good news is that more and more individuals have high-deductible health insurance plans, with roughly 36% of all people under the age of 65 currently enrolled in an HDHP. Now there’s a grassroots movement, debunking lies and empowering patients and employers—not lobbyists—to take action.

Intuitive decision support tools continue to be adopted by those who want to be able to compare their options for healthcare based on price, in addition to quality and convenience. Eventually, as price-elasticity is restored to our broken healthcare market, we will see a full reversal of the unsustainable cost trends we’ve experienced over the last decade.

ACA Liabilities Still Need Management

Employers and health plans! Don’t let the prospects of reform dupe you into failing to manage past and current Obamacare liability exposures.

Contrary to popular perception, President Trump’s health plan executive orders do not insulate employers or their health plans from all Obamacare compliance or enforcement exposures. Among other things, the Internal Revenue Service continues to enforce Internal Revenue Code rules that require employers to self-identify and report any violations of the 40 listed federal health plan mandates on Form 8928 and pay resulting excise taxes unless and until reform passes.

Furthermore, even if reform eventually passes, reform is unlikely to insulate health plans, their fiduciaries or sponsors from costs and liabilities arising under plan terms and the laws in effect before a post-reform amendment.

Employers and other health plan sponsors, their fiduciaries, insurers and reinsurers, administrative service providers and other vendors should review plans to continue in compliance, while promoting and shaping common sense reforms for the statutes and regulations affecting health plans.

See also: 13 Steps to Take Now to Prepare for ACA  

Employer and other health plan sponsors, fiduciaries, insurers and other vendors also should discuss processes for responding to changes and amending plans and associated contracts, to be able to respond as quickly as possible if reform happens.

4 Trends to Expect in Health Insurance

As debate continues to swirl about the future of U.S. healthcare regulation, here are the four high-level trends we may expect, and how stakeholders could be affected:

1. Healthy people may start leaving the individual market

Recent changes eliminate the penalty for not having health insurance. Under the ACA, consumers were charged a penalty for the year they lacked coverage. But now, when consumers file their taxes, they won’t be charged a penalty. Without the penalty, younger and healthier consumers may choose to not have individual coverage. However, this doesn’t mean they don’t need or want health insurance coverage. Expect employers to play an increasingly important role in filling the gap. That being said, not all employers offer health insurance. It’s still ambiguous what the self-employed (think contract, freelance or gig workers) will do. Under the likely scenario in which many of the self-employed forgo insurance under the new regulation, the uninsured rate may increase.

See also: A Road Map for Health Insurance  

2. Carriers may have to adjust their business

The premiums received from healthy people are generally a great hedge for the unhealthier, or higher-risk, populations for carriers. With the changes occurring in the individual market, carriers can expect a worsening loss ratio: The ratios paid by the premiums to the insurance company to cover settled claims begin to decrease. With the risk pool looking worse, carriers may concentrate on boosting their sales in relatively more stable segments.

3. Employer-sponsored coverage will be critical for employee retention

If the ACA’s employer mandate is repealed, small businesses may no longer be required to provide affordable, minimum-value coverage to their full-time employees to avoid penalties. That being said, with many people losing their individual health coverage, employees may increasingly expect health coverage from their employers. Employer-sponsored benefits have always played a critical role in attracting and retaining talent, but, with the current instability in the market, many employees will appreciate the security of an employer-sponsored coverage plan more than ever.

4. States may have increasing regulatory power

States may gain further flexibility to develop new healthcare models, including changes to affordability and choices offered. A number of states are pushing for their own legislation that could potentially give additional protection to residents beyond the federal level. Keep an eye on states like New York and California, which seek to create programs to increase benefits and requirements set by the ACA.