The first post-deadline Exchange enrollment report is out. The topline numbers are good ( 11.3 million people enrolled by 12/27 on all exchanges), and the case mix looks to be decent with a good number of young people in the newly enrolled group. There is an interesting nugget that implies a lot of churn and therefore a significant incentive set against insurers pushing people to get preventative care:
Within the HealthCare.gov states:
-
HealthCare.gov users are actively shopping and saving money. Within the 38 HealthCare.gov states, 3.6 million reenrollees actively selected a plan. Of those active reenrollees, 60 percent switched to a different plan than they had in 2015.
More than a third of the people on Healthcare.gov who renewed their policies switched plans. From a shopping and market competition perspective, this is amazing. People are using managed competition to send price signals. They are most likely jumping from bad and high cost plans to at least lower cost plans which hopefully better suit their needs.
However, this is a market full of churn.
In the old pre-PPACA days, 60% of the people on the individual market at a given point were off the individual market a year later. Most of the jumping was from the individual market to something better on the group or government segments.
Today, 40% or more of the people who signed up on January 1, 2015 will have a different plan on January 1, 2016. Some of that is attrition as people jump from the individual market to something better (group coverage, Medicare, Medicaid, CHIP etc) and most of it is people moving from one Exchange plan to another.
There is a problem with this movement. Preventative care may still not pay for the insurer in any given year.
PPACA mandates that preventative care (vaccines, screenings, annual PCP and ObGyn visits etc) are no cost sharing services. This removes a patient side barrier to access. The policy goal is two fold. The first is to keep people healthier by either averting problems or catching them earlier through proper screenings. This should bend the cost curve as early care tends to be cheaper than acute care. The second is to move insurances from being risk avoiders to active population health managers.
If the market is still very unstable with the average length of enrollment that is still fairly short, the incentive structure for insurers is to not push preventative care that has long run pay-offs .
Insurers are still going to push for people to get a flu shot, as the return on investment in this case is immediate and significant. But they won’t be pushing people to get some vaccines (like HPV) where there is a big gap between the administration (and payment) date and averted disease incidence. They will pay for the vaccine if someone gets the vaccine on their own, but they won’t benefit from future lower medical expenses from that particular individual getting the vaccine tomorrow as that person is highly likely to be covered by someone else when they otherwise would have gotten HPV. The same logic applies to broad categories of preventative care.
There are two ways to resolve this problem. Both would require Congressional action for a national fix or a 1332 waiver for a state level fix. The first action is to use a successful program from Medicare (the Medicare Stars) and twist it into an Exchange program. Part of Medicare Stars looks at previous claims history and determines which Medicare Advantage providers do a good job of managing chronic conditions and preventative care. Plans that do a good job at getting their members appropriately screened, vaccinated and who also manage chronic conditions effectively get more stars. More stars means more money from CMS to the insurer. Good insurers work very hard to get 4 or 5 stars as both a sign of quality and because there is a lot of money attached to being 4 stars instead of 3 stars.
The Exchange plans could have a modified Stars program where 4 and 5 star plans can first brag about their quality on the Exchange, and more importantly, get bonus payments that are independent of risk adjustment. $100 per member per year for being a 4 star plan instead of a 3 star plan would prompt a lot of effort on insurers to make sure their members (who may be likely to churn anyways) are properly screened and receiving all appropriate preventative services.
The other way of approaching this problem is on the consumer end. Low cost insurers on the Exchange can be free riders on public health improvement efforts as the subsidies are currently built. There is no good incentive for an insurer to build in a good preventative program with long term pay-offs but short term costs because, right now, most Exchange shopping is being done on price in relationship to the 2nd Silver subsidy point. If there was a back end calculation that modified subsidies so that the base subsidy stays the same, but high quality plans would get a $10 or $15 per month bump in subsidy, the cost gap between plans that chase people to get preventative care with long term pay-offs and freeloading plans would close.
japa21
There is motivation for all insurers to push preventative care. The person insured under Mayhew Insurance today may well be with Japa Insurance tomorrow. But the person insured through Japa Insurance today may well be with Mayhew Insurance tomorrow. And with this rate of churn, it is quite possible that a few years down the road, those folks will be back with their current insurance carrier.
Richard Mayhew
@japa21: Yeah, but it is a probabilistic motivation, not a certainty motivation. If I am a C-level guy with stock options at Mayhew Insurance ( I am not nor do we have stock), I want to minimize my current spend to goose my stock while laughing at JAPA as we cherry pick your cheap customers this year. Who cares about 3 years from now much less 10 or 15.
It is a collective action problem.
MomSense
I switched policies–but in the same insurance company.
WereBear
Thanks so much for laying out how systems CAN work. Proper incentives will actually let them make more money.
Comrade Luke
My policy was switched by my provider, by virtue of them eliminating my old plan and replacing it was a similar, slightly more expensive plan. Do scenarios like this count in the 60% churn number?
dr. luba
Every policy I’ve chose has been discontinued the next year, or the price has gone up dramatically. Thus I’ve had a different policy every year. I would prefer to stick with one, but don’t have the option.
I had the same plan (COBRA conversion to individual policy) which worked well for me for more than 15 years. The minute the ACA kicked in they cancelled it. Bastards…..
The Lodger
Just reminding y’all it’s not always a failure of the system when someone doesn’t re-register with the exchange. My wife just got a job working directly with a health insurance company, no exchange involvement needed.
Mnemosyne
@japa21:
Unfortunately, that’s not how it’s been working. Most insurers choose the lower cost now and gamble that when the expensive health issue shows up further down the line, the customer will be someone else’s problem. They’ve been doing it for decades, and it sounds like they will continue doing that way until they’re either punished or given an incentive not to.
Kitty
I had to move from a Silver plan with a $100 deductible to a Bronze plan with a $6,000 deductible because my monthly premium had nearly doubled. I wanted to stay with the same company.
Raven on the Hill
My insurance company simply left the Exchange. End of story.
I think further analysis in needed.
Richard Mayhew
@Kitty: Kitty, it sounds like you went from 94% cost sharing Silver to Bronze —- you have a couple more days to take a very hard look at the Exchange to see if you can find another Silver (assuming your income stays the same) that is cheaper with way less deductible as the Bronze is effectively useless to you unless you get hit by a bus.
pseudonymous in nc
No, in many cases they’re being told that their plan is being phased out for offering far too good a deal and they will have to settle for one with a higher deductible and premium instead.
In North Carolina, UHC pulled its Platinum plan for 2016 leaving BCBS as the only Platinum provider at a huge premium; all of the Exchange plans at the Bronze level are now HSAs; the monthly premium that would have got you a Gold with low deductible now gets you a Silver with high deductible. People are definitely being funnelled towards higher cost-sharing burdens.
delosgatos
It looks pretty close to a typical Prisoner’s Dilemma. In such cases the government can break the dilemma in various ways.
Kitty
@Richard Mayhew: Thanks for your reply Richard. I really wanted to stay with Medical Mutual, they only have 2 silver plans available, and the other one is more expensive. I couldn’t afford it when my part of the premium went from $164 to $270. The Bronze is $125. I’m healthy and had all long overdue diagnostics and screenings in 2014 – 15. I’ll get through this year and see if I can go silver again in 2017.