Off-Exchange only Copper 1332

One of the major challenges of the Exchanges going forward will be the morbidity of the risk pools.  I am modestly concerned about the size and health of the well subsidized component of the risk pools.  I am very concerned about the size and average health of the low or no subsidy components of the risk pool.

Katie Keith at Health Affairs summarized two recent actuarial studies on the impact of expanding underwriting and the removal of the federal individual mandate:

Two new analyses—issued by the actuarial firms Wakely and Oliver Wyman—examine the impact that the proposed rule, if finalized, would have on the Affordable Care Act’s (ACA’s) individual market. Both find the impact to be much higher than federal estimates, which is consistent with a previous analysis from the Urban Institute….

Wakely’s report modeled three different scenarios…Combined with the repeal of the individual mandate penalty, premiums would increase by up to 12.8 percent and enrollment in the ACA market would decrease by up to 26.3 percent.

Wakely’s findings are consistent with an analysis from Oliver Wyman on behalf of the D.C. Health Benefit Exchange Authority. Oliver Wyman found that the proposed rule alone would increase claim costs in D.C.’s individual market by up to 3.1 percent; enrollment in the city’s individual market would decline by 900 people. Combined with repeal of the individual mandate penalty, claim costs would increase further, up to 21.4 percent, and enrollment would decline by about 6,100.

Both analysis show  that healthy, low cost individuals will leave the ACA market. Some will be uninsured and others will get low premium, underwritten plans.  For well subsidized buyers, this won’t matter too much as the federal government eats all of the premium price hikes.  For non-subsidized buyers they get whacked with massive premium increases.

States are taking action to temper some of these increases.  Republican controlled Wisconsin submitted a reinsurance 1332 waiver that will hold lead to a 10% decrease in premiums compared to no other action.  New Jersey’s legislature just passed a state level individual mandate and authorized a reinsurance 1332 waiver application.

These are reasonable and appropriate steps to keep some of the non-subsidized premiums from increasing even faster.  They also require significant state funding.

I am curious if states that want to do something but either can not or will not find state funding can go an alternative route to provide some minimal assistance to indviduals who do not qualify for subsidies but who will not pass underwriting.  Can states apply for a 1332 waiver that allows for the creation of Off-Exchange only Copper(50%) and/or Tin (40% AV) plans that are tied into the common risk adjustment pool.

There are two angles here that could provide at least incremental relief.  First, slightly lower cost plans with high out of pocket expenses will bring in slightly more people who are reasonably healthy which will bring down the total average morbidity slightly.  This is a bankshot.

Secondly, the ACA’s low actuarial value plans (Bronze) are a really good deal for two classes of unsubsidized people: those who anticipate very little healthcare  needs for a year and those who anticipate an incredible amount of healthcare needs.  For the first cohort, they are buying solely on premium.  A Copper plan will be more attractive to them than a Bronze plan as the incremental out of pocket maximum is barely relevant while the decrease in premium is very real.  People who know that they need lots of expensive care have a more complex calculation.  They are optimizing on the minimal total cost (premiums plus out of pocket maximum) of plans with a minimally sufficient network.

Last October we looked at the counties and some variant of Bronze is the least expensive choice for most middle aged individuals who are highly likely to max out their benefits.

For someone who knows that they are facing a $50,000 claim year, the lower premiums of a Copper plan may lower total costs even as out of pocket maximums increase. IF they do, the person is better off going Copper instead of Bronze. If not, they are no worse off.

So can states file a 1332 that allows for the offering of a Copper plan off-Exchange only?

CSR Updates

Two pieces of Cost Sharing Reduction subsidy news this morning.  First, we’ll start with the simple news.  Louise Norris reports that Colorado is switching from being a Broad Load state to a Silver Switch state.


This means that CSR costs in Colorado will be put onto only Silver On-Exchange plans. Currently CSR costs were spread to all plans of all metals. Bronze and Gold plans will get comparatively cheaper to Silver (the interaction of pulling out CSR while also dealing with a much sicker risk pool due to new federal policy means I can’t estimate actual price levels.) Off-Exchange buyers will now be held harmless for CSR in the state.

Colorado was one of the five states that Broad Loaded for 2018. It is rational for the remaining broad load states to move to Silver Load.

Now here is the big deal:

The insurers sued almost as soon as CSR payments were terminated.  They have a very strong case that the federal government promised payment for CSR and then reneged.  Nick thought that the courts would easily rule in favor of the insurers for the 4th quarter of 2017 where there was no ability to mitigate but going forward, Silver Loading would act as a mitigating factor to minimize total federal exposure.

If we assumed mitigation was relevant, than the CSR lawsuits were worth about $2 billion for 2017 and a lot less in 2018 as the vast majority of policies sold were under some type of mitigation effort.  Going past 2018, and assuming the CBO assumption that almost every state would Silver Load by 2019, mitigation would pretty much cancel out the termination of CSR.  If mitigation was relevant, the total net present value under dispute is easily under $5 billion dollars.  It is not nothing but it is an accounting error in federal budgetary terms.

The initial ruling makes mitigation irrelevant.  The net present value under dispute for the next decade could easily reach $100 billion dollars.  Now that is some real money.  Insurers could conceivably and legally double dip with premiums funding CSR and then the courts ordering CSR payments through the automatically appropriated Judgement Fund.

I am not a lawyer so I don’t know the likelihood of that ruling being reversed on appeal up to and including the Supreme Court.  I just know that there are going to be a lot billable hours.



Prognosis is hard

Predicting death on an individual basis is hard.  It is uncertain and it is a dynamically looping system.  MedPac publishes an annual report on Medicare and there is a table in the Hospice chapter that shows how it is tough to predict death.

To qualify for the Medicare hospice benefit, a Medicare beneficiary needs their personal doctor and the hospice medical director to state that the believe that the individual has less than 180 days to live.  This is a prospective prognosis estimate that determines eligibility.  And most of the time the docs are right.  But not always, and their misses are fairly frequent depending on diagnosis, care setting and a few other factors.


Most categories of the 90th percentile are misses.  Neurological conditions have very long tails because the disease has a very noisy and jumpy staging.  Cancer on the other hand is a well staged disease with reasonably good predictions.

There are confounding factors.  Some regions of the country are suspected to use hospice as a cobbled together long term care benefit. But the quick take-away from this table is that prognosis is tough to do even when there is a hard decision that acts as a gate to a different flow of resources are on the table.

Bourbon, short stays and normative hospice utilization versus patient centeredness

Barbara Bush died yesterday after a very short period of comfort care after she elected to stop any further attempts at curative care. She may or may not have received formal hospice care.

If I was 92 and knew that I was going downhill, I think I would elect Scotch over bourbon.  I would also elect to spend what uncertain time I had left at home with family and friends instead of in the hospital where the quantity of remaining life may be greater at no better and probabilistic lower quality of life.

If she had elected hospice care, she would have had a very short span of hospice utilization.  Hospice qualification for someone covered by Medicare has a fairly strong normative pathway.  An individual will be identified as having a high probability of death within the next 180 days in the opinion of the treating physician and the medical director of the admitting hospice. Once an individual elects hospice, they give up curative care for the primary diagnosis that led to hospice.  Ideally, then the individual uses hospice for several weeks to a few months.  Short spans of less than a week and long spans of more than six months are seen as meaningfully problems.

MedPac’s 2018 report on hospice utilization repeats a common sentiment that echoes years of previous statements:

The Commission has previously expressed concern about very short hospice stays. More than one-quarter of hospice decedents enroll in hospice only in the last week of life, a length of stay that is commonly thought to be of less benefit to patients and their families than enrolling somewhat earlier. Very short hospice stays (e.g., 25th percentile) occur across a wide range of diagnoses

We are also moving towards a medical system that is supposed to be “patient-centric” with a dozen distinctive definitions of what that actually means.  The patient and their family are the drivers of decisions while the clinicians facilitate and illuminate pathways that can be chosen.  So if a patient chooses to try one last round of treatment and then chooses to forego further curative care at the very end of life, how do we reconcile a strong normative belief on “proper” hospice utilization with patient centeredness?

Bourbon is recommended.

Good job Utah

The Utah petition is for a straight up expansion and not the partial expansion that Utah’s government has requested.

Several other states including Missouri, Idaho and Nebraska have active signature gathering campaigns to get Medicaid expansion on the ballot for this fall.

If you are in these states, seek out the signature collectors and sign away.

Choices at the end of life

The former first lady is choosing hospice care at the end of her life. She has multiple chronic conditions and after her last hospitalization, she evidently said enough. She made the affirmative choice to forego future curative care and is now receiving hospice care which is comfort and symptom alleviation care.

Hospice care is increasingly common for individuals on Medicare. End of life is the single universal public health experience as no one will ever be immortal. So people need to be prepared.

That means thinking through what you want in a given scenario. Do you want everything that can be done? Do you accept that “success” might mean never being able to walk again? Do you want care up to a certain point and then comfort? Are these decisions different for different scenarios?

This means talking through your mortality with the people that are important to you as well as those who are in the position to make decisions for you if you are unable to communicate your wishes. This means your spouse, kids, attorney, power of attorney holders, clergy, primary care and frequently seen specialty doctors and anyone else that you think will be relevant.

And once you have made your decisions, document them. Generate or update a living will, have a MOLST or POLST . Make sure your authorized decision makers have the updated copies of your wishes.

And as life continues to happen, think about what you want and as your opinions change, update your wishes.

If Silver-loading is not allowed — what next?

Margot Sanger-Katz has an excellent rundown of all the ways that the Trump Administration is working to make the guarantee issued, community rated individual insurance markets of the ACA work less well or fail completely. She raises one point that I want to expand on:

The administration has left one more potential disruptive option on the table. Last year, when President Trump canceled a disputed set of payments to insurers, state insurance regulators allowed the health plans to shuffle around prices to absorb the loss. In a call with reporters Monday, Ms. Verma said her agency was considering barring that practice. Without the price adjustment, consumers in the Obamacare-compliant market will have a harder time finding an affordable plan.

This is in reference to Silver Loading.

CMS can make a rational argument that loading CSR costs onto only Silver should not happen for public policy grounds. Silver Loading costs the federal budget serious money through much higher benchmark premiums and also higher enrollment because Bronze and Gold plans become comparatively much cheaper for subsidized buyers.

Silver loaded states tended to do better than other states on enrollment for the 2018 open enrollment.

There would be two major questions. First, what would the alternative be? And secondly how does that alternative play on the Off-Exchange only market?

The alternative would most likely be a Broad Load scenario. Last year, six states applied a uniform percentage surcharge to all plans. This meant that against a counterfactual of regular and ongoing payment of CSR, Bronze plans were less expensive than they would have been for subsidized individuals and Gold plans would be more expensive. If states that are currently using Silver Load strategies are forced to go to a Broad Load strategy, Gold plans become very expensive for subsidized buyers and Bronze plans are less likely to be zero premium plans after subsidies are applied. We should expect an additional 2% to 3% drop in enrollment from on-Exchange buyers in states due to this change.

The next question is how would this work off-Exchange? States that Silver Loaded in 2018 made sure that off-Exchange buyers who purchased Bronze or Gold plans were not touched by the CSR pricing shenanigans. Some states used Silver Switch strategies where near-clones of on-Exchange Silver plans were offered Off-Exchange without CSR being built into the pricing. This held the entire off-Exchange market harmless.

I think CMS has a harder public policy interest argument against banning off-Exchange only plans from not incorporating CSR costs into the plans as there is not billions of federal subsidies at stake. Off-Exchange plans by definition are unsubsidized. So if this assumption is right, then the off-Exchange market bifurcates completely into plans that are offered on and off-Exchange with a Broad CSR load built into all premiums and then off-Exchange only plans that have a significant pricing advantage.