Health Reform

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The End of Health Reform Starts in Ohio?

November 9, 2011 in Health Reform | 2 comments

One of the key tenets of health reform is that insurers cannot charge different premiums to individuals based on their pre-existing conditions.  Under this type of system, the optimal strategy for many individuals is to not buy any health insurance until one gets sick.  Since insurers cannot charge these sicker people higher premiums based on these conditions, healthy individuals will end up heavily subsidizing the sick.  In fact, average premiums will increase for everyone.

To prevent this from happening, health reform instituting an individual mandate which requires every American to buy health insurance.  Without this requirement, health insurance prices could spiral out of control.

Ohio, however, has recently rejected the individual mandate.  The Cato institute that Ohioans came out against the individual mandate on a 2 to 1 basis.

Is this the beginning of the end of health reform?

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Industry Consolidation

October 31, 2011 in Health Insurance, Health Reform | 1 comment

Last year, I mentioned how ACO requirements will lead to more industry consolidation.  A recent article by the Economist is finding that my prediction is becoming a reality.

“Cigna, an insurer based in Connecticut, said it would pay $3.8 billion for HealthSpring, which offers services and insurance to the elderly. It is the latest deal to extend insurers’ tentacles into new areas of health care.”

State Health Exchanges will come into effect in 2014 and will extend health insurance to more people.  Individuals who cannot afford health insurance will receive subsidies.  The Economist cites a Boston Consulting Group study which estimates that firms’ revenues will more than double by 2019 to $1.2 trillion.  Profits margins, however, may fall due to a new taxes, minimum benefit standards, and more regulation of premiums appears.

What will plans do about it?

Many are diversifying.  They are moving into the Medicaid market where States outsource the health care provision of their enrollees to insurers or Medicare Advantage where the federal government is doing the same.  Insurers like Aetna are investing in health IT companies; UnitedHealth Group’s IT business (OptumInsight) makes up a large share of their revenues.

Industry consolidation can increase care coordination, but also reduces competition.  The effect on premiums and quality remains to be seen.

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Health Exchanges

October 17, 2011 in Health Insurance, Health Reform | No comments

The California Healthcare Foundation (CHCF) notes that States face a number of challenges when determining how to design their Health Exchanges mandated by health reform.  Today, I briefly highlight some of the requirements State Exchanges must fulfill.
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Health Reform in California: Expanding Care to Ex-Cons?

September 15, 2011 in Health Reform, Medicaid | No comments

One of the goals of health reform was to expand coverage to poor childless adults who previously did not qualify for Medicaid.  One unintended (or perhaps intended) consequence of this expansion is that a large number of individuals formerly convicted of crimes will be eligible for the this coverage.

Policymakers face a number of questions.  First, do these ex-offenders “deserve” coverage?  Many in the public may wonder why middle class individuals should be uninsured when the government is providing health care for ex-offenders.  On the other hand, those who served time have already paid their debt to society.  Should the be punished again by being disqualified for entitlement programs for which they are eligible?

Regardless of whether you think ex-offenders should be eligible for this Medicaid expansion, they without a doubt do have a number of medical problems which require treatment. NPR describes some of the challenges these individuals face.

According to Dr. George Pearson, “…a 45-year-old ex-convict will often have the ailments of someone 10 years older. Ex-convicts have higher rates of almost all chronic conditions, like high blood pressure, diabetes and asthma. It’s from living a hard life, to be sure, he says, but it’s also because they have common medical problems that go untreated.

‘So the hypertension becomes heart failure, the diabetes becomes diabetic neuropathy, amputation, blindness,’ Pearson says.”

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Estimates of Health Reform’s Effect on Employer-Sponsored Insurance (ESI)

August 23, 2011 in Health Insurance, Health Reform | 1 comment

Avalere Health provides a nice summary of some of the estimates of how health reform will affect the rate at which employers offer health insurance.  The provisions which may have an impact on health insurance offering include:

  • Free-rider penalties (+)
  • Exchanges (?)
  • Medicaid expansion (-)
  • Individual mandate (+)
  • Small business tax credit (+)
  • Insurance market reforms/grandfathering (-)
  • High-cost plan excise tax (-)

Using different methodologies and data files, a variety of reputable research firms have arrived at differing conclusions on the impact of health reform on ESI. Here are six estimates ordered from most negative to most positive impact:

  • Holz-Eakin: -22.3%
  • Booz Allen Hamilton: -4.5%
  • Congressional Budget Office (CBO): -1.9%
  • The Lewin Group: -1.8%
  • Urban Institute: Little net change
  • RAND: +8.7%

Sources:

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Predicting a Religious Revival in 2014

August 12, 2011 in Health Reform, Regulation | 2 comments

The Healthcare Economist predicts a religious revival in 2014.  Let me be more specific, in January 2014.  How do I know this?  Am I a religious man?  Has God spoken to me?

Let’s just say I have a certain insight.  In 2014, the individual mandate goes into effect.  All individuals must buy health insurance or else they will pay a tax penalty to the federal government.  Well…not all individuals.  Certain people with religious objections would not have to get health insurance. [American Indians, illegal immigrants, or people in prison would also not have to buy insurance].

The Amish and Old Order Mennonites, for instance, do not have to buy insurance through a ‘religious conscience’ exception.  Will health reform lead to an increase in the number of Amish Americans in 2014?

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U.S. Began Providing Socialized Health Care in 1798

July 13, 2011 in Health Reform, Public Health | No comments

While walking around in San Francisco’s Presidio, I noticed a refurbished building which happened to be a former Public Health Service Hospital.  After investigating its origins, I dug up the following information regarding one of the United States’ first efforts to provide an individual health insurance mandate:

“In July of 1798, Congress passed – and President John Adams signed - “An Act for the Relief of Sick and Disabled Seamen.” The law authorized the creation of a government operated marine hospital service and mandated that privately employed sailors be required to purchase health care insurance…First, it created the Marine Hospital Service, a series of hospitals built and operated by the federal government to treat injured and ailing privately employed sailors. This government provided healthcare service was to be paid for by a mandatory tax on the maritime sailors (a little more than 1% of a sailor’s wages), the same to be withheld from a sailor’s pay and turned over to the government by the ship’s owner. The payment of this tax for health care was not optional. If a sailor wanted to work, he had to pay up.”

 

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Access to health insurance ≠ Access to health care.

June 27, 2011 in Health Insurance, Health Reform, Public Policy | 3 comments

Is the Massachusetts health reform a success?  Yes and no.

In terms of increasing access to health care, it has been an unqualified success.  According to the Economist, only1.9% of Massachusetts residents were uninsured in 2010.

Massachusetts’ health reform has not been able to offer universal access to health care or to constrain costs. “ One in five working-age adults say they have trouble finding a doctor who will see them…Spending on MassHealth, the programme for the poor, rose 40% between 2006 and 2010….average monthly premiums rose by 12% between 2006 and 2008. True, a higher share of firms now offer coverage, but they are also shifting costs for that coverage to employees”

Massachusetts is trying to legislatively block health premium increases.  Reducing health insurance cost, however, will likely drive down provider reimbursement and either increase cost sharing or decrease access to health care.

The key takeaway from this post is the following: “Access to health insurance does not guarantee access to health care.”

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Employer-Sponsored Insurance after Health Reform

April 21, 2011 in Health Reform | No comments

Much of health reform’s efforts has been focused on expanding coverage to those without employer-sponsored insurance (ESI).  For instance, the ACA mandated expanded Medicaid eligibility and the creation of a health insurance exchange for those not eligible for a group plan or those who work for small employers.

One area of study which has been neglected, however, is the effect of health reform on ESI.  For non-elderly Americans, ESI is still the primary mechanism through which individuals finance the provision of health care services.  A recent Urban Institute report uses a simulation model to estimate how health reform would effect coverage through ESI.  I discuss this article after the jump.

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Question to States: How to Design a Health Insurance Exchange?

April 18, 2011 in Health Insurance, Health Reform | No comments

Section 1311 of the ACA requires a state to establish an Health Insurance Exchanges for the individual and small group market.  How will states actually implement these Exchanges?  A brief from the National Academy of Social Insurance reviews some of the program parameters which States will have to establish.

What type of entity will the exchange be?

  1. Option 1: Establish the Exchange within an existing executive branch agency, either as part of the Governor’s cabinet or subordinate to a cabinet-level agency.
  2. Option 2: Create an Exchange as an independent executive branch agency with its own governing board, as was done in Massachusetts and more recently in California.
  3. Option 3: Establish an Exchange as a nonprofit entity, separate from state government.

Not any insurance plan can be sold in the Exchange.  “The ACA requires that health plans sold in the Exchange meet certain criteria, including marketing, network adequacy, accreditation, and quality improvement requirements.   However, the ACA does not preclude a state from adopting additional standards for qualified health plans.”

Individuals with sufficiently low income will receive a subsidy to purchase health plans through the exchange.  Although subsidies are received as income tax credits, low-income individuals can receive these credits in advance if their prior year income is low income.  People who are ineligible due to high levels of income from previous years will only receive the subsidies as part of their tax return.  On the other hand, people who were poor in previous years and eligible for subsidies could in fact be ineligible if their income rises (this is the subject of a working paper by John Graves).  In these cases, the Exchange must develop a procedure to recoup the money from ex post ineligible individuals.

Is there a problem with adverse selection?

The answer is yes in the following three cases:

  • Guaranteed Issue would eliminate medical underwriting,
  • Marketing practices may target healthier individuals,
  • Products offered outside the exchange could be less comprehensive and also lower cost, and thus attract healthier workers.

To fight this problem, the ACA includes provisions such as temporary federal reinsurance and risk corridor programs, market-wide risk pooling, and market-wide state risk adjustment

What consumer protections does the ACA mandate? First, there will likely be brokers and agents who provide services to help consumers pick plans.  In addition, Exchanges must establish a Navigator program, awarding grants to eligible entities to carry out education, enrollment and information dissemination activities. To further protect consumers, products offered in the Exchange must be licensed by state insurance regulators.  There are three options for Exchanges to set up a system for State Insurance regulation of Exchange health plans.

  • Place all licensure and solvency requirements on the State Regulators,
  • Split the licensure load between State Insurance regulators and the Exchange.
  • Have insurance regulators ensure that plans meet licensure and solvency requirements (as they do now), but the Exchange would determine whether a plan meets all other ACA and Exchange requirements

Medicaid and the Exchange

How different will Medicaid and Exchange regulation be when Medicaid programs contract with HMOs?  The ACA aims to harmonize the two regulation schemes.  In fact, ACA includes provisions recommending common health plan certification standards on matters such as provider networks, coverage terms, and quality performance standards in order to promote health plan participation in both the Medicaid and Exchange markets.  “Finally, because recoupment of advance premium tax credits is anticipated in cases in which families undergo a change in income that affects the size of the credit to which they are entitled, the NASI options include provisions for the Exchange to assist consumers in reporting income changes that might affect the amount of subsidy, as well as in qualifying for any “safe harbor” against federal recoupment that might ultimately be recognized in federal rules.”

Source:

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