Highlight on Minnesota: Health plans’ red ink worst in a decade

Nonprofit insurers in Minnesota reported an operating loss of $687 million on nearly $25.9 billion in revenue for 2016, according to a trade group for insurers, the Minnesota Council of Health Plans. The financial results were the worst in a decade, with losses in both the state public health insurance programs and the marketplace where individuals purchase coverage for themselves.

Overall, revenue from premiums increased 4 percent over the prior year, while expenses increased 6 percent to $26.6 billion. State public programs accounted for more than half of the overall losses, followed by continued losses in the individual market. According to the report, on average, health insurers paid $763 per second for care. To pay those bills, insurers withdrew nearly $560 million from state-mandated medical reserves. The bulk of the financial losses reported did not result from the employer group and Medicare markets, which remained steady, and where most Minnesotans get health insurance.

In the individual market, Blue Cross and Blue Shield of Minnesota said it lost $142 million for 2016, compared to a $265 million deficit the previous year. The decline mirrored the drop in enrollment, the insurer noted, rather than an improvement in the business. Over the last 10 years, health insurers returned a profit in seven. The numbers reported by the trade group focused solely on revenue and income from the health insurance business, as investment returns made by insurers were not counted in the numbers. Some saw hope in the overall numbers, however, noting that the market was not in a “death spiral,” as some health law critics have argued, because many insurers in 2016 saw slight improvements from the previous year.

Senate hearing on individual market goes off-track fast, gets partisan

A Senate committee hearing on how to stabilize the individual health insurance market quickly devolved into a platform to make partisan comments and score political points regarding the proposed repeal and replacement of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148). This occurred despite the efforts of the committee chairman to focus the committee on a transition plan for the individual market and the statements of the committee witnesses, which were non-partisan and conciliatory.

The Chairman’s remarks. In his introductory remarks, Sen. Lamar Alexander (R-TN), Chairman of the Senate Committee on Health, Education, Labor & Pensions, expressed his hope that the committee could put aside the partisan talking points and come together to find solutions to ensure the viability of the individual health insurance market during the transition from the ACA. The individual mandate to obtain health insurance was created by section 1510 of the ACA.

Alexander noted that the individual market makes up only 6 percent (18 million beneficiaries nationwide) of the total health insurance market, with only 4 percent covered through the ACA Exchanges. He further noted that some health care plans have pulled out of the Exchanges and many individuals may have only one plan to choose from. He asked the panel and the committee to focus on three questions: (1) Is there really instability in the individual markets? (2) If so, what needs to be done? (3) By what date must it be done?

The Ranking Member’s remarks. Ranking Member Patty Murray’s (D-WA) opening statement showed that she had no intention of following Alexander’s plea for a non-partisan hearing. Instead, she began by stating that while the individual market had always been a problem, the ACA helped to solve that problem, and now the Republican’s plan to repeal the ACA without a concrete plan for replacement is creating chaos in the health care system. She also went outside the individual market focus of the hearing and claimed that Republican policies would cut Medicare and Planned Parenthood. She termed the Trump Administration efforts as “TrumpCare by sabotage” and urged the Republicans to reverse their course and stop repeal of the ACA. She concluded by sarcastically suggesting that you “can’t repair the roof while Republican Party is burning the house down.”

Sen. Tim Scott (R-SC) responded to Sen. Murray’s comments with “the house may be on fire, but it was on fire before we got here.” He was also able to get one witness to concede that the individual market had already been destabilized by specific provisions of the ACA itself, including the essential health benefit requirement, special enrollment periods and extended grace periods that have allowed individuals to game the system, medical loss ratios, and having premiums for young people set higher than the penalties for not having coverage.

The witnesses. The committee witnesses included Julie Mix McPeak, Comissioner of the Tennessee Department of Commerce and Insurance; Marilyn Tavenner, former CMS Administrator and current President and Chief Executive Officer of America’s Health Insurance Plans; Janet Trautwein, Chief Executive Officer of the National Association of Health Underwriters; and Steve Beshear former Democrat Governor of Kentucky from 2007 to 2015.

All of the witnesses were in agreement that the individual health insurance market does not react well to the uncertainty that currently exists. And three of the four witness agreed that the number of plans available are dropping and the premiums are rising.

When asked by Alexander for a deadline for when Congress must act, the witness stated by the end of March at the latest. This, they stated, was because rates must be set by mid-July and plans approved by the various states by August.

McPeak. In her statement, McPeak testified that, “In short, Tennessee’s ACA individual market experience since 2014 has meant fewer marketplace carriers for Tennessee consumers, less competition across the state, and higher priced premiums for available products. In addition, we have seen existing FFM carriers move towards narrower networks, further limiting consumers’ access to providers of their choosing.”

She stated that there are only three ACA carriers in Tennessee, with only one choice in 73 of the 85 counties. In addition, she stated that premium rate increases have ranged from 42 to 62 percent in her state. She did not call for a delay in the repeal of the ACA, but, instead, asked Congress to allow states to tailor health care plans to fit their needs and urged an open and transparent repeal and replace process so that carriers can prepare adequately.

Tavenner. In her statement, Tavenner admitted that parts of the ACA have not worked well. She stressed that certainty in the individual market is essential. She recommended: (1) continuing to provide subsidies such as the advanced premium tax credits and cost-sharing reduction payments in their entirety; and (2) making full federal reinsurance payments for 2016, as this funding is important for plans to effectively cover the needs of high-need patients, including those with chronic conditions.

Tavenner also recommended several policies to help promote a more stable and workable transition for consumers and families, including:

  • Using premium tax credits to encourage younger people to get coverage.
  • Creating incentives for people to keep their coverage through the transition.
  • Beginning in 2017, establish a federally funded, transitional risk pool program would offset some of the costs of serving patients who have the most complex health conditions and need the most care.
  • Eliminating taxes and fees such as the health insurance tax, which will reduce premiums and promote affordability.
  • Effectively verifying the eligibility of those signing up for coverage during special enrollment periods, and shortening the 3-month grace period for non-payment of premiums so that it is better aligned with state laws and regulations (e.g. 30-day period).
  • Protecting people who are eligible for public programs from being inappropriately steered into the commercial insurance market.

Trautwein. Trautwein called for immediate stabilization of the individual market. She attributed the higher cost of individual plans to rules allowing healthy individuals to drop in and out of plans without consequences and allowing special enrollment periods without requiring upfront documentation and allowing inappropriate coaching by enrollers. She recommended:

  • Requiring guaranteed access to individual coverage and with state-level financial backstops for catastrophic risks.
  • Giving pre-existing condition credit for prior individual market coverage to ensure true heath insurance portability from one individual market policy to another.
  • Standardizing state requirements regarding the consideration of pre-existing conditions.
  • Improving federal group-to-individual coverage portability provisions so that people can transition directly from employer coverage to individual coverage without hurdles.
  • Stabilizing individual market rates by requiring more standardization as to how individual market carriers determine pricing.
  • Increasing consumer protections regarding individual market coverage rescissions.
  • Making it easier for employers to help people purchase individual health insurance.
  • Providing federal financial assistance to keep individual health insurance coverage affordable, including enhanced deductibility, subsidies for low-income individuals, and federal financial support for qualified state financial backstop programs.
  • Ensuring that all Americans have health insurance coverage.
  • Allowing state implementation of enhanced consumer protections with a federal fallback enforcement mechanism.

Beshear. In his statement, Beshear gushed about the ACA and what it did to increase the number of people with health coverage in Kentucky. He claimed that his creation of a state exchange and the expansion of Medicaid added 500,000 to the insured roles in Kentucky. He stated that he does not view the ACA as a partisan issue, but rather a tool to address health insurance problems. He believes that the ACA works and that Congress’ challenge is to make it work better.

Primary care physicians favor ACA over repeal

In a survey conducted between January and March 2015, only 15 percent of primary care physicians supported a complete repeal of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148). With the Republican party intent on changing the healthcare landscape dramatically over the next year, researchers from Johns Hopkins University School of Medicine, the University of Pennsylvania Perelman School of Medicine, and Massachusetts General Hospital found that primary care physicians were split on their views towards the ACA, with approximately 48 percent favorable and 52 percent unfavorable. The survey, published in the New England Journal of Medicine, also found that a majority of the physicians reported that they had seen an increase in the number of Medicaid or newly insured patients, without a decrease in their ability to provide high-quality care.

About 95 percent of all respondents said they did not believe insurers should be allowed to deny coverage to those with pre-existing conditions or charge these patients more; 88 percent favored children kept on parents’ plans until age 26; 91 percent supported tax credits for small businesses that offered employees health insurance; 75 percent supported tax subsidies for individuals to buy insurance; 72 percent supported the Medicaid expansion; and 50 percent supported tax penalties for people who did not buy insurance.

These numbers are substantially less than the 26 percent of the general public who say they want Obamacare gone, as reported by the Kaiser Family Foundation. In the NEJM published survey, no physicians who self-identified Democrats reported being in favor of ACA repeal. But the survey also demonstrated a dissonance between physicians beliefs about patients’ healthcare entitlements and what a healthcare system can cover. For instance, as noted, 95 percent of physicians believed the prohibition on denying coverage for those with pre-existing conditions should continue, but only 50 percent supported the individual mandate despite the difficulties of covering as many individuals as possible without the penalty in place.

Overall, 426 physicians responded to the survey and the response rate was 45.1 percent. The researches noted that nonresponses limited their ability to generalize findings and that primary care physicians could have different views from other physicians.

 

 

Contributor’s Corner: Even the Cat Has Lost Health Insurance!

Continuing Concerns for Both 2- and 4- Legged Creatures

Ok. Now that I have your attention, STOP LAUGHING! It’s not funny–but, true. Poor Milo is now uninsured. Several months ago, we received a notice that the health insurance pet policy that had been in effect for years was looking for a new underwriter, and the affordable policy would terminate on 10/31/16. Finally, a new policy was made available, at rates, which you guessed it, would be considerably higher with larger deductibles and less coverage. Not surprising, but true. The message: two- and four-legged creatures beware.

The decision to let that policy lapse wasn’t easily made; but economically, it didn’t make sense to purchase a policy that had a very low cost/benefit payoff. Of course, Milo wasn’t faced with paying a penalty on his taxes (LOL; we can’t even claim him as a dependent) for remaining uninsured, as you or I might possibly be subjected to, if we made the same decision. It was much more like passing on dental insurance. Unless you have it as a fringe benefit, the narrow networks, and limited benefit schedules makes the value proposition easy enough to pass on. In effect, being self-insured, while not desirable, is a viable option. However, for medical insurance, it’s a very different story.

Elections matter, and with some form of “repeal and/or replace” looming in the next Congress, millions of individuals will likely find themselves in Milo’s situation, except with more uncertainty and risks, as availability, benefits and costs are unpredictable at this point in time. For those that think it’s going to be as simple as ABC! Think again. The new Congress and Administration are soon going to realize that the denouement (I liked that word in high school when learning how the plot unraveled in a novel) will be complex and fraught with obstacles.

O, what tangled web we weave when first we practice to deceive![1]

Right now, there is much speculation about the outcomes, and it is far too soon to really know. Call me skeptical, but after the pundits and polls missed the outcome of the election, I’m not too sure that conventional wisdom still applies. For all we know, Obamacare may become Trumpcare. After all, we learned that packaging and showmanship works. It reminds me of local government after an election, all of the town signage is changed so that the same park or arena now has the new town leader’s name emblazoned on the sign, lest we forget it’s still the same park. Nothing has really changed, just the name. The decision-makers should remember: Will the “quality go in before the name goes on?”[2]

Perhaps that’s wishful thinking, but just imagine like the game, “Cat’s Cradle,” when you try to take the string off your partner’s hand for the fourth or fifth time by correctly and deftly interlocking your fingers about the string to transfer it from your partner’s hand to yours while making sure the integrity of the cradle is preserved. From “cradle to grave,” there is plenty to be concerned about.

For the Young at Heart

The “invincibles” may find themselves unburdened by the penalties that may be lifted for not having health insurance. But the gamble still exists: what will you do if accident or illness befalls you in spite of your youth? Will insurance companies be able to make policies available at competitive or affordable prices without the youthful demographic helping to even out the risk pool? For those without company provided healthcare, will the likely elimination or reduction of government subsidies force newly insured individuals to abandon their insurance after finally obtaining it. Maybe there’s hope, based on some reporting, for those 26 and younger still being carried on their parent’s policy

For Those in the Middle

But wait a minute-what if the parent had an exchange policy with a 26 or under child on the policy, and now the exchange is defunct, or healthcare.gov no longer is supported, the entire family will be in need of insurance. The same will be true if exclusions or high risk premium pools are established for those with pre-existing conditions. And if lifetime benefit limits are reintroduced, given what we know today about the wonderful (but expensive) life-saving treatments and medications, it will give new meaning to the “sticker shock” millions will face as “open enrollment” periods will become a serious exercise to be called: “In search of….”

Crossing State Lines and Population Health

We generally associate the “state lines” argument with the anticipated competitive structure of premiums if insurance companies can sell their policies without geographic restrictions. It may also call into question in which state you live, and if there was adoption of the Medicaid expansion allowing many millions of individuals, previously above qualifying income levels, becoming eligible, and whether that too will change.

With all the emphasis on population health and treating patient outcomes, does the nation run the risk of losing ground it has just started to gain? I’ve never been a fan of the term “accountable care organizations.” When seeing the blue H, or MD after the name, there is the presumed quality and accountability associated with it. If what we now have today is better than what we had before, then the new Congress and the Administration will need to be “accountable” for whatever evolves as a result of its actions and/or inactions.

Don’t Mess with My Medicare

For those of us above a certain age, Medicare (whether “Regular” or “Advantage”) comes with a special “seal of approval” and certain safeguards. There may not be an appetite to change Medicare for those already on it, but it may not be necessarily true that it will be preserved “as we know it” for those approaching age 65 over a 5-10 year horizon. In today’s political landscape, it’s not clear that the “graying advocacy” of seniors will be strong enough to maintain this safeguard for all.

Metamorphosis

I wonder how many of us hope that when we wake-up we find this was all a dream.

One day, Gregor Samsa, a travelling salesman, wakes up to find himself transformed into a giant insect. Confused, he looks around his room which appeared normal. He decides to fall asleep again and forget what happened in the hope that everything will revert back to normal. He tries to roll over his right but discovers that he cannot due his new body he is stuck on his hard, convex back.[3]

Unfortunately, we are in a new reality. And it’s too early to forecast what will happen next. Change for the better will be good, and the current system can be improved. Change for “change’s” sake won’t do much except waste a lot of time and money, and cause needless anxiety. Milo’s just hoping that there’s water and food daily, and that his litter box is changed regularly, and that his visits to the vet are uneventful. For everybody else, pay your monthly premium, stay healthy and stay tuned.

Allan P. DeKaye, MBA, FHFMA, is President and CEO, DEKAYE Consulting, Inc., a revenue cycle healthcare firm. He is also a member of the Health Law Editorial Advisory Board for Wolters Kluwer Legal & Regulatory U.S. Mr. DeKaye is author/editor of The Patient Accounts Management Handbook. He is working on a second book, My Medical Bills Are Killing Me © What Americans Need to Know About Health Insurance.

[1] “Marmion,” by Walter Scott, 1808.

[2] Original slogan of Zenith Electronics

[3] Franz Kafka, Die Verwandlung (or The Transformation or Metamorphosis), 1915.

 

Copyright © 2016-2017 Allan P. DeKaye. All Rights Reserved. Reprinted with permission of the author.