Why Healthcare reform is continually important

Just a pair of tweets as to why I am so passionate about continual healthcare reform and system improvement:

The good news:

The bad news:

We can do better. This is a failure of our political and cultural system and we need to do better.

Arizona’s odd lack of segmentation

A friend of the blog passed me the Arizona approved rates for the 2017 Exchange year.  They look really odd to me.  Not the premiums (#’s are for 40 year single non-smoker with no subsidy), but the plan offering array seems very strange.

I really want to look at two rating areas to pull out the oddness.



The Silver Spam and Silver Gap strategies are fundamentally market segmentation plays exploiting the subsidy attachment formula.  Market Segmentation is one of the first Neat Little Tricks taught in business school.  Creating slightly different products at slightly different prices allows for higher allocation of transactional surplus to the produce instead of the consumer or society in general.  That is why there are 12, 16 and 20 ounce soda bottles of the same brand in the grocery store.

Rating Area 3 has two pieces of oddness leaping out at me.  The first is the massive price differential between the catastrophic and the Bronze plans.  Bronze has slightly more actuarial value than Catastrophic.  The two major differentiators is that Bronze is subsidy eligible while Catastrophic is restricted to under 30 without subsidy.  Additionally Catastrophic is a distinct risk adjustment pool.  Getting out of the really sick risk pool and only selling to young people leads to a much healthier and cheaper product.  That is interesting but not too interesting to me.

In Yuma, the intriguing thing is that Blue Cross and Blue Shield of Arizona is only offering a single Silver plan.  Subsidies will be base based on that single plan.

This is really weird and I am professionally puzzled.  We know that BCBS-AZ can take a plan type (HMO) and a network and build out two distinct policy offerings. They did that with their Bronze offerings in the same rating area.  The big lift in building a plan offering is assembling a network and building the utilization management and plumbing for a restrictive product type like an HMO or an EPO.  Adding slightly different cost-sharing components to the base of a network and plan type is dirt cheap.  It requires little incremental actuarial work, it requires little incremental system plumbing, it requires little incremental provider outreach.  The incremental cost of adding a new cost-sharing arrangement once you’ve done the hard work of building the base plan is low.  And you can justifiably offer a tweaked plan at a slightly different price point.  And that slightly different price point rejiggers the subsidy attachment point which makes the less expensive Silver plan more affordable post-subsidy.  A minor tweak improves the local risk pool incrementally.

Now Maricopa County (Rating Area 4) is not as odd.  Health Net of Arizona is doing a moderate Silver Gap.  Their less expensive Silver will be $32 less than the second least expensive Silver.  For an individual making $18,000 a year, the less expensive Silver is roughly half the post-subsidy price as the benchmark Silver.

The odd, to me, thing about the HNAZ strategy is again segmentation.  They’ve shown they can tweak their benefit configuration from a common base to get distinctive price points for their Silver product.  I am surprised that they are only offering a single Bronze and a single Gold plan on-Exchange.  Adding a few clones would be very low cost and it would allow them to more effectively segment the market.

I don’t know why these decisions were made.  They just seem odd to me.

Gimme money, that’s what I want

Kevin Drum made an interesting observation this morning – a lot of major central banks would like to see more inflation right now, but so far no one has pulled it off. A bunch of people replied that maybe one of the central banks should try printing a lot of money, so Drum pointed out that Japan already did that.

So the conclusion is…free money is really free? Can we print out the entire federal deficit? Alexander Hamilton would roll over in his grave, but think of the positive side. America would finally qualify for a decent mortgage rate. The Fed could mail fat envelopes of cash to everyone with a social security number. I bet that would poll pretty well.

I would guess* the answer has more to do with the psychological side of finance. Maybe printing money has no effect as long as everyone thinks that the bank is still being responsible. If international investors get nervous that the bank is really shooting the moon, maybe they will all get worried at the same time and all the bad stuff we associate with an inflation spike will kick in irreversibly all at once. Or maybe it’s not enough for the Fed to print money. Rich folks mostly just squirrel excess cash away in in some foreign account where it gathers fees and puffs up investment bubbles and generally doesn’t do anyone much good.

Perhaps you also need to get that scratchola into the hands of people who will reliably stimulate the economy with it. That is to say, poor people. If you give a poor person ten dollars they will spend most of it right away, in America, on stuff that supports jobs in America. Poor people all having enough money to buy eggs (and a refrigerator) will pretty much a priori make eggs (and refrigerators) more expensive. In my happy fantasy world where Republicans return the value of the air they consume, I can imagine coupling a major QE push with a comparable surge in infrastructure/jobs and safety net spending. Betcha ten bucks we would hit two percent inflation pretty quickly, and without the likely very bad consequences of the Fed just leaving the presses running until China and Europe hit the panic button.

(*) Professor Krugman is trying to knock a stuck bag of Welch’s fruit snacks free from a vending machine, so I’m just going to sit in his chair here for a minute and write this. Don’t tell him, ok?

Gimme Brains for Breakfast Baby


Holy shit, Senator Elizabeth Warren apparently murdered a bankster in the Senate today:

I’m honest to goodness physically aroused.

A President Trump’s Foreign Policy Preview: For Sale, To the Highest Bidder

This is just a quick pointer to the essential read of the day.  If Kurt Eichenwald’s brutal, beautiful story on the Trump Organization’s seemingly limitless overseas conflicts of interest with US policy doesn’t become the dominant campaign story for the day and much longer, then, again, we’ll know who and what our media are.

One of the best minor pleasures of this deeply important piece is the way Eichenwald brutally dismisses the false equivalence crap that so many in the press promise us doesn’t exist.  A sample:

The Trump Organization is not like the Bill, Hillary & Chelsea Clinton Foundation, the charitable enterprise that has been the subject of intense scrutiny about possible conflicts for the Democratic presidential nominee. There are allegations that Hillary Clinton bestowed benefits on contributors to the foundation in some sort of “pay to play” scandal when she was secretary of state, but that makes no sense because there was no “pay.” Money contributed to the foundation was publicly disclosed and went to charitable efforts, such as fighting neglected tropical diseases that infect as many as a billion people. The financials audited by PricewaterhouseCoopers, the global independent accounting company, and the foundation’s tax filings show that about 90 percent of the money it raised went to its charitable programs. (Trump surrogates have falsely claimed that it was only 10 percent and that the rest was used as a Clinton “slush fund.”) No member of the Clinton family received any cash from the foundation, nor did it finance any political campaigns. In fact, like the Clintons, almost the entire board of directors works for free.

On the other hand, the Trump family rakes in untold millions of dollars from the Trump Organization every year.


Much of that comes from deals with international financiers and developers, many of whom have been tied to controversial and even illegal activities. None of Trump’s overseas contractual business relationships examined by Newsweek were revealed in his campaign’s financial filings with the Federal Election Commission, nor was the amount paid to him by his foreign partners.

That should (but probably won’t) leave a mark in a certain building on 8th Ave between 40th and 41st st.

One more sample, just to get a sense of how utterly at odds with US national interest a Trump presidency would be:

With Middle Eastern business partners and American allies turning on him, Trump lashed out. Prince Alwaleed bin Talal—the billionaire who aided Trump during his corporate bankruptcies in the 1990s by purchasing his yacht, which provided him with desperately needed cash—sent out a tweet amid the outcry in Dubai, calling the Republican candidate a “disgrace.” (Alwaleed is a prodigious tweeter and Twitter’s second largest shareholder.) Trump responded with an attack on the prince—a member of the ruling Saudi royal family—with a childish tweet, saying, “Dopey Prince @Alwaleed_Talal wants to control our U.S. politicians with daddy’s money. Can’t do it when I get elected. #Trump2016.”

Once again, Trump’s personal and financial interests are in conflict with critical national security issues for the United States. During the Bush administration, Abu Dhabi, the UAE’s capital, and Washington reached a bilateral agreement to improve international standards for nuclear nonproliferation. Cooperation is particularly important for the United States because Iran—whose potential development of nuclear weapons has been a significant security issue, leading to an international agreement designed to place controls on its nuclear energy efforts—is one of the UAE’s largest trading partners, and Dubai has been a transit point for sensitive technology bound for Iran.

Given Trump’s name-calling when faced with a critical tweet from a member of the royal family in Saudi Arabia, an important ally, how would he react as president if his company’s business in the UAE collapsed? Would his decisions in the White House be based on what is best for America or on what would keep the cash from Dubai flowing to him and his family?

There’s tons more at the link — and yet Eichenwald says, correctly, that this article only scratches the surface. This is (truly) disqualifying stuff, folks. That it almost surely won’t drive Trump from the race is an indictment of him, his party, and a political process, shaped in part by a flawed media culture.  That just leaves us as a last line of defense.

You know, voters.

The common clay…

[Had to leave that hanging curve out for the Balloon Juice Jackals, right?]

Seriously. Eichenwald has done really important work here.  Go read what he’s found, then get it out to everyone you can.

Image: Marius Granet, A Peasant Girl Buying an Indulgence 1825

Risk Adjustment:Vox::Narrow Networks:538

There are two recent health policy articles by interested lay expertise sites that have me scratching my head. In Vox’s case, I am seeing a conclusion without context. For 538, I can not figure out the model that leads to a core assumption. These sites’ jobs are to inform the public and in these cases I think they can do a better job of their job.

Let’s start with Vox as Sarah Kliff looks at a Society of Actuaries analysis of risk scores on the individual market. She draws a very strong conclusion.

Between 2014 and 2015, SOA finds that Obamacare’s average risk scores went up by 5 percent. This means that the overall pool of people on the marketplace were sicker in 2015 than 2014. You can see the data here, in a table from the report.

The Society of Actuaries draws a much weaker conclusion

Risk measures published in the CCIIO release show that the average measure of risk increased from 2014 to 2015. Increased risk scores may be a combination of identification through better coding as well as a measure of the actual population health….

The program is still too immature to draw conclusive inferences about the future of the pool or marketplaces.

Vox saw a number that went up (bad) and wrote a story with no context.
Read more

Oscar lays off their underpants gnomes



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.


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.


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.


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.