Oscar lays off their underpants gnomes

 

February:

Oscar is able to get young and healthy people on an expensive network and high risk adjustment payments.  I can’t figure out their business model past the buzzwords.

March:

Oscar is incurring losses of roughly $145 Per Member Per Month (PMPM) in its biggest market.  It is charging roughly $190 PMPM in net premiums.  Some of the loss is due to risk adjustment (~$20 PMPM) as Oscar’s entire business strategy is to cater to tech savvy individuals who tend to be young and healthy…

I think there are two take-aways.  First, I still can’t figure out Oscar’s business model.

Secondly, setting up an insurance company or expanding an incumbent carrier into new lines of business and new areas is tough.

 May:

Oscar’s strategy has been to use their web/mobile technology platforms to be the hip/cool/disruptive insurer for the next generation.

The market segment that both of these plans seem to be aiming for are people who are fairly young, active, technologically savvy and very healthy….

Assuming a hypothetical individual could be covered by both insurers for the same treatment, Centene is paying significantly less per service than Harken because Centene’s basing its provider contracts on Medicaid rates instead of commercial or Medicare rates.

Centene and other Medicaid like Exchange providers are targeting roughly the same type of population but since they are much cheaper post subsidy, they are probably getting a far larger population to amortize their fixed costs over plus any service that they do need to pay for, they are paying for at a lower rate.

From here, I am having a hard time seeing how plans that have a “lifestyle” component can compete against Medicaid like Exchange providers.  Maybe it is different off-Exchange where everyone is paying full premium and “cheapness” is not a strong selling point.

June

I’ve been skeptical about Oscar as I can’t figure out their business model besides build a cool app and then profit???

Ohhh… no one has ever thought about medical management and early chronic care intervention.  My cube wall mate spends 90% of her time working on our algorithms to identify members who are likely to be expensive before they become expensive so that we can intervene. …

Oscar is trying to go narrow network or quasi-TPA support for health systems that want to run a home host insurance product that should allow them to control costs. But those strategies are common.  That is what I spent most of 2013 working on building hyper narrow networks for both Exchange and Commercial ESI.  That is what my 11:30 meeting tomorrow is about.

And August from Bloomberg:

Oscar, which pitches itself as a tech-savvy alternative to traditional health insurers, plans to end sales of Affordable Care Act plans in Dallas, a market it entered this year, and New Jersey. It’s part of a more conservative approach by the New York-based company as it plans to introduce insurance products for businesses next year….

The company said it’s quitting New Jersey mainly because its network of doctors, hospitals and other health providers isn’t a “narrow network” — a relatively closed, but lower cost, group of providers that many in the industry see as a way to keep expenses down….

In the interview, Schlosser said the company’s new plans focus more on Oscar’s strengths, particularly narrow networks. Along with lower costs, using more narrow networks gives the company a larger role in coordinating the care of its customers…

By the end of next year, Oscar wants to begin offering health plans for larger employers, Schlosser said.

I have not been able to figure out Oscar’s business model.  It was always a flashy app/front end with loads of good marketing and Venture Capital buzzword bingo, handwaving about disrupting the marketplace and then PROFIT!!!

The little bit about Oscar trying to go to the large group market segment is interesting as in some ways that is the easiest segment to operate.  Bills get paid on time, there is no risk adjustment payment flows to worry about and the population is comparatively health with comparatively low variance.  It is also a segment that is most inclined to want big networks and is the least price sensitive.  It is a hard market to get into but a fairly easy market to set up the plumbing for.

But as the reality that being an insurer is HARD sinks in, let us all have a moment of silence for all of the now laid off underpants gnomes who have nothing to do between deploying cool frontward facing tech and PROFIT.  They have a rough life so let us appreciate those gnomes.



APTC Hacks, BHP and 1332 Waivers

The ACA has two non-Exchange means of significantly expanding and configuring coverage.  The Basic Health Plan (BHP) allocated 95% of the combined funding of the Advanced Premium Tax Credit (APTC) and Cost-Sharing Reduction (CSR) subsidies of a state that would have been paid to cover people earning between 138% and 200% of the Federal Poverty Level (FPL).  Those funds are then used to create a low cost network (usually paying provider Medicaid plus something rates) to offer high actuarial value coverage.  New York and Minnesota and currently the only states offering BHPs.

The other method a state can use to rejigger their coverage arrangements is through a 1332 State Innovation Waiver.  These waivers allow states to re-arrange minimal acceptable coverage, eligible populations, subsidies and most other ACA requirements as long as the end result covers at least as many at least as well for no more federal cost than the traditional Exchange based methodology.

Right now, most of the 1332’s (with the exception of a potential Colorado single payer 1332) that are being proposed are fairly technical back-end fixes.  For instance, Massachusetts wants to re-align merged risk pool provisions for the small group market.  That is valuable.  It is not a system transformation effort.

Both of these alternative pathways have strong budget constraints.  The BHP program must cost the federal government no more than 95% of the traditional effort.  The 1332 process must be budget neutral.

States that want to engage in large scale systemic experimentation with either the BHP or 1332 waiver processes need to be aware of what strategies carriers are offering in their market.  If a state’s markets are dominated by Silver Spam strategies, the budget flexibility to engage in large scale reform will be severely constrained.  Silver Gap strategies will give states significantly more budgetary resources to use for BHP and 1332 demonstration projects.

Let’s go below the fold to explore why.

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APTC Hacks, Non subsidized plans and choice revelation

Advanced Premium Tax Credits (APTC) are only relevant for people who buy policies on the Exchanges.  However the subsidized universe is only about half of the entire individual market.  The non-subsidized and off-Exchange universes will help us determine how carriers embark on their Silver pricing strategies.

If an individual would have qualified for an APTC but buys an off-Exchange policy for whatever reason, they do not get any subsidy to help offset the premium.  They pay full price.  There are some non-subsidized buyers on the Exchanges.  A common case will be people with variable incomes who are not sure if they are subsidy eligible.  They may overestimate their income so they don’t have to pay the APTC back but if they have a bad year, they can collect the Premium Tax Credit the following year when they file for their tax refund.  People who know that they can not qualify for the Exchange have no reason to shop on Exchange.  Indeed, they have a mild incentive to look off-Exchange.

Policies that are sold on Exchange must be offered off-Exchange.  However carriers can offer policy and plan designs off-Exchange that they do not offer on Exchange.  Mayhew Insurance did that in 2014 with an experimental product as we needed data to see if our hunch was right (we weren’t).  Carriers can decide to only participate off-Exchange if they wish to do so.  The advantage of selling off-Exchange is that the population is a bit higher income and that tends to correlate with two things; better health and more stability in paying bills.  Even though policies are offered off Exchange, the on and off-Exchange policies in a single metal band in a state are in a common risk pool for risk adjustment purposes.

Off Exchange has a typical policy buying decision maker earning over 400% Federal Poverty Level (FPL).  On Exchange, subsidized buyers have a median policy decision maker earning around 200% FPL.  These are very different market segments.  And those differences can feed some insight into why a carrier that has the ability to capture the #1 and #2 Silver positions would engage in either a Silver Spamming or Silver Gapping strategy.

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A CAP in Illinois

What is the situation and why am I thinking it is an adverse selection event if anyone offers to write credits for the Land of Lincoln members.

Land of Lincoln was a Co-Op. It was placed under state oversight in July. It’s reserves had gotten too low due to a higher than expected risk adjustment bill and no compensating risk corridor asset. Coverage for people on the individual market will terminate on 9/30/16. That means people will be running without coverage from October 1 to December 31.

New York had a similar experience in 2015 when Health Republic was liquidated in the fall of 2015.

Normally regulators would prefer to allow an insurer under oversight to run until the next open enrollment period. That would allow their members to have continuous coverage with the least amount of disruption and added stress. However Land of Lincoln and Health Republic could not make it to the end of the current policy year. Instead, they ended mid-contract. This triggers a Special Enrollment Period as the members lost coverage due to no fault of their own.

In New York, there was an arrangement that people who were on Health Republic who signed up for a month of coverage would have their deductibles and out of pocket expenses credited to their new policies.

That is now not the case in Illinois. Blue Cross and Blue Shield is refusing to enter into a voluntary arrangement to credit deductible and out of pocket spending for any new policies it rights for any qualifying event. That is their right to do so. However, their refusal to do so pretty much forces every other Illinois insurer to also refuse to extend deductible credits.

Adverse selection is the cause of this race to mutually assured ugliness.

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Aetna, cynicism and Pennsylvania

Jonathan Cohn reports on report on Aetna’s strategy on linking Exchange participation and the rapid approval of their merger.

the move also was directly related to a Department of Justice decision to block the insurer’s potentially lucrative merger with Humana, according to a letter from Aetna’s CEO obtained by The Huffington Post.

Aetna Letter

TLDR: Nice exchanges there, be a pity if anything happened.

One of the states Aetna pulled out of is Pennsylvania. This is odd as a friend of the blog pointed out to me offline. Below Aetna’s rate application memo for the individual market in Pennsylvania. You should look closely at the highlighted segment.

Aetna

Aetna was profitable in 2015 in the individual market in Pennsylvania. It is projecting to be profitable in 2017. The filing memo was drafted in late May and submitted to the Pennsylvania regulators in early June. Conditions have not changed enough to make Pennsylvania a money loser in under two months.

My wee bit of cynicism bears fruit. Aetna is trying to logroll an anti-competetive merger with on-Exchange political consequences. If it works for Aetna/Humana it burns a bridge to get the merger, and if it fails, it puts Aetna on the shitlist of any Democratic administration. That is a very interesting strategy when it is highly likely that there will be another Democratic administration.

UPDATE 1: Here is the relevant chunk of the 2016 Aetna filing memo for Pennsylvania.

Aetna 2016 filing memo

So in all years Aetna’s individual market operations in Pennsylvania were either profitable or projected to be profitable. Something stinks worse than a wrestling team’s locker room after two-a-days.



Weirdness Open Thread: Peter ‘Bathory’ Thiel Vants to Transfuse Your Plasma

And here we all assumed Ayn Rand fanatic Thiel was just encouraging strapping young men to drop out of college and visit his palatial seasteading for the usual reasons. According to Inc:

More than anything, Peter Thiel, the billionaire technology investor and Donald Trump supporter, wants to find a way to escape death. He’s channeled millions of dollars into startups working on anti-aging medicine, spends considerable time and money researching therapies for his personal use, and believes society ought to open its mind to life-extension methods that sound weird or unsavory.

Speaking of weird and unsavory, if there’s one thing that really excites Thiel, it’s the prospect of having younger people’s blood transfused into his own veins.

That practice is known as parabiosis, and, according to Thiel, it’s a potential biological Fountain of Youth–the closest thing science has discovered to an anti-aging panacea. Research into parabiosis began in the 1950s with crude experiments that involved cutting rats open and stitching their circulatory systems together. After decades languishing on the fringes, it’s recently started getting attention from mainstream researchers, with multiple clinical trials underway in humans in the U.S. and even more advanced studies in China and Korea

In Monterey, California, about 120 miles from San Francisco, a company called Ambrosia recently commenced one of the trials. Titled “Young Donor Plasma Transfusion and Age-Related Biomarkers,” it has a simple protocol: Healthy participants aged 35 and older get a transfusion of blood plasma from donors under 25, and researchers monitor their blood over the next two years for molecular indicators of health and aging. The study is patient-funded; participants, who range in age from late 30s through 80s, must pay $8,000 to take part, and live in or travel to Monterey for treatments and follow-up assessments…

Because the RNC convention was such a multi-ring circus, I never found time to link to the NYTimes essay on Thiel’s speech endorsing Trump there. “Peter Thiel’s Heroic Political Fantasies,” frankly, presented Thiel as someone who thinks of himself along the lines of the genetic vampires in Peter Watts’ novel Blindsight — a member of a predator species only distantly related to Homo Sap.

But that’s an unduly heroic fantasy. Thiel’s just another Dives trying to avoid the final judgement — during the first Gilded Age, he’d have been visiting Switzerland to have monkey glands (or the testicles of executed criminals) sewn into his scrotum.



Entrenching Medicaid Expansion

Just a pair of notes on the political entrenching of  Medicaid Expansion into the political and policy processes of the United States.

First in Arkansas:

 

Arkansas officials should consider transferring more high-cost enrollees from the private option to the traditional, fee-for-service Medicaid program, a sponsor of the law that created the program said Monday.

At a meeting of the Health Reform Legislative Task Force, Senate President Pro Tempore Jonathan Dismang, R-Searcy, said he’s concerned that health care costs of some enrollees are increasing the cost of coverage for others in the state’s individual insurance market.

The basic mechanics of this plan would be to shift more of the expensive, high utilizing and not too healthy members from the Arkansas Private Option subsidized on-Exchange risk pool that pays providers commercial rates to the legacy Medicaid program where providers are paid (in Arkansas) about half the commercial rate. The goal is to reduce Arkansas’ state contribution to Medicaid expansion by effectively making the Expansion eligible individuals in the Legacy Medicaid pool an effective and well funded low income high risk pool while dumping all of the good risk into the private option pool to minimize nominal premium increases on Exchange.

The simpler thing to do in general would have been a general expansion with new ID cards and little else, but that will not pass in Arkansas so we get this policy tweak that actually solves a problem and probably makes everyone but the providers no worse off if not a bit better off.
 

Next, in Indiana:


 

Governor Pence pushed for the Healthy Indiana Plan v2. (HIP 2.0) to expand Medicaid. It is a convoluted bastard of conservative pet rocks and hoop jumping but it actually does cover most of the people who need to be covered by Medicaid Expansion.

It is also not an immediately disqualifying event for Governor Pence to be elevated to a national ticket.

This is how policies get entrenched even as a party bitches about them.