Tag Archives: transparent health reinsurance

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.

Healthcare Debate Misses Key Point

As Congress considers another healthcare bill, the conversation continues to be about insurance, even though a form of reinsurance could solve many of the problems we face as a nation. The money for what I call “transparent health reinsurance” is already even in the various bills that Congress has considered; the more than $100 billion that has been designated for stabilizing healthcare insurance in the individual states would simply have to be redirected.

See also: Transparent Reinsurance for Health  

Transparent health reinsurance enables more people to receive better health care at less cost. As I wrote on this site in May 2016, “Transparent reinsurance programs could emerge as significant opportunities for healthcare providers, issuers, reinsurers, technology innovators and regulators to address health insurance.”

Transparent health reinsurance, pioneered by Marketcore, creates robust technologies that enable better, patient-centered health care through predictive analytics.

“Sharing information generates participation and creates cross-network efficiencies to enhance quality, improve delivery and reduce costs,” remarks Constance Erlanger, Marketcore’s CEO. “For healthcare insurers and providers, there are two key value-adds. First, the technologies incorporate any and all specific features a state and insurers in its jurisdiction may or may not include in state healthcare markets. Second, risk lenses clarify quality, delivery, outcome and cost across the 56 states and territories for transparent health insurance and healthcare services. Such robust information symmetry could rationalize healthcare insurance, quality and delivery. Such technologies, created by Marketcore, are already in development for bankers and insurers in multiple markets for complex risk assessments to finance recoveries from large-scale natural disasters.”

Everyone experiences strategic and financial advantage

Transparent health reinsurance supports these innovations by providing incentives that tackle the “widespread lack of transparency about both the costs and the effectiveness of treatments,” as Dr. Brian Holzer calls for in a timely article.

Any state could create a high-claim reinsurance pool managed by a recognized reinsurance operative. With supervision by the Centers for Medicare and Medicaid Services (CMS) and the Department of Health and Human Services (HHS), a state insurance commission or its designee could invite qualified firms to function as a recognized reinsurer. These recognized reinsurers would work with qualified, innovative health service providers that demonstrate abilities to improve health outcomes at reduced expense.

The reinsurers would be part of a matrix solution, where some firms provide health management solutions, while others provide disease- specific solutions and others provide innovations in treatment. A state could, perhaps, elect to focus on the largest drivers of healthcare costs in its jurisdiction, such as chronically ill individuals or those with acute conditions that are difficult to predict.

Due to the technology’s granularity and clarity, a state could just as readily specify participation among all issuers for any plan being offered in its jurisdiction, including every participant in every plan or defining reinsurance participation for individuals with chronic conditions in employee-sponsored or state-managed plans.

Or, states could fund a high-claim reinsurance pool with a payment per covered life, preferably covering everyone in the state, thus lowering the per-life charge.

Pending state decision-making, employers would have the right to move employees into this pool, and would want to do so if it was clear that the innovative approaches reduced costs while improving health outcomes. Clearly, the lowest per-capita contributions would occur with the widest participation.

If a state targets the largest cost drivers, reinsurer and insurers would then work together to assign “high-claim” individuals to reinsurance pools once those individuals cross a defined expense threshold. Each individual would be assigned to one or more innovators under contract to deliver better health outcomes at reduced costs. An innovative tracking mechanism would measure and rank outcomes and savings. Crowd-sourced information would drive confidence scores.

Burgeoning digital applications managing chronic illness would yield voluminous, timely data, and blockchain technologies afford accountability.

Scoring would rank service providers and eliminate failed providers.

A state insurance commission or its designee as reinsurer could manage transparent health reinsurance as states reach management decisions with stabilization funds. A single designated entity could oversee a system that would reward innovative, successful healthcare delivery and quality. To that end, participating firms would be for proposals detailing expected improved health outcomes and costs.

The technology leverages continuing achievement. Some studies indicate 40% cost reductions for some chronic conditions. By adding transparency to these achievements, the technology scales to yield much lower overall healthcare costs, healthier populations and stabilized or lower insurer premiums.

At the end of each year, a new reinsurance pool would be formulated with adjustments based on actual experiences. If the previous pool ended up in surplus, a portion of that surplus would be retained in reserve, and any remaining amount could be returned to individuals, providers or both. If the previous pool ended up in deficit, the reinsurer could choose to fund that, with contributions in the following year meant to provide for recovery.

Several states could decide to form an umbrella reinsurance pool to cover some or all of their high-claim individuals.

All activities focus on improving health outcomes at reduced costs.

No state residents are asked to fend for themselves.

States are encouraged to develop innovative firms.

Overall health of state residents should improve, which would lead to a healthier economy.

Ultimately, state-related healthcare costs would decline.

In the process, transparent health reinsurance would animate highly profitable growth for corporations with domain strengths in mobile data, operating systems, search and social media. These firms could tap data and metadata markets by creating valuable, time-sensitive risk information and metrics. (With such robust technologies, privacy matters, and all platforms are HIPAA-compliant.)

As healthcare reform faltered in the Senate, Govs. John Kasich (R-Iowa) and John Hickenlooper (D-Colorado) called for bipartisan solutions. Technologies and tools are at hand to make those solutions possible.

“If I am for myself alone, who will be for me? If not now, when?” the prophet Hillel remarked centuries ago.