Early roll-outs for 2015 open enrollment

Just a couple of technical notes that are making me more confident about the roll-out of the Exchanges for the 2015 Open Enrollment period.

Maryland is going to a window-shopping model:

 The second year of Maryland’s health insurance marketplace for individuals and families begins on Nov. 9 when consumers will have access to a newly redesigned website that enables “anonymous browsing,” the ability to compare plans — without registering personal information — before enrolling. This feature is being launched earlier than originally planned to enhance the shopping experience for Marylanders

SHOP is being beta tested in Missouri and Illinois before national launch:

Missouri and Illinois will be two of five states to get an early look at the federal health insurance marketplace for small businesses, theCenters for Medicare and Medicaid Services announced Wednesday.

Businesses with fewer than 50 full-time workers in the five states will be able to access the Small Business Health Options Program, or SHOP, in late October, ahead of the start of open enrollment on Nov. 15.

Vermont’s Exchange website is down for maitenance right now:

VermontHealthConnect.gov is unavailable for a period of extended maintenance. If you have immediate needs, please contact our Customer Support Center at 855-899-9600 (toll-free) from 8am to 8pm Monday-Friday and 8am to 1pm on Saturday.

The soft launch of SHOP is a typical launch process for big releases.  A select set of users are allowed to use production processes and figure out what they can blow up.  Programmers and analysts then have time from the limited release to fix show-stopping bugs before most of the user base can access the system.  Vermont is using cyclical and predictable down time to get their back-end straightened up and formalized systems put into place instead of quasi-effective short term kludges that will destroy the code if not replaced while Maryland is adapting a best practice for load management. 

Will November 15th be perfect?  Hell no, but we know most of the state exchanges and healthcare.gov work well enough at the basic functionality (let’s not talk about 820s right now), so seeing these types of stories in the past month that we’ve transitioned from crisis to normal operating procedures.

That’s it?

That’s it?  That is all the Senate will do with Obamacare?  Give money to an industry that contributes pretty much to everyone and then continue to fuck the IRS chicken? 

The medical device tax was put in place to raise revenue to cover premium subsidies.  If there is a 1:1 revenue replacement and not a benefit cut or subsidy cut, I would be shocked if this did not pass the Senate with 85 votes.  If there was no replacement, I think it would pass the Senate with 72 or more votes. 

From a system point of view, it is a “So what” symbolic attack on Obamacare that does almost nothing besides deliver either no net stimulus if there are offsets to a zero-rate bound economy or inefficiently delivers a small stimulus to the economy if there are no offsets. 


Insurers leaving the Exchanges

Some drop-outs are more important than others.

We’ve seen some insurance companies drop out of the Exchanges this year. My take on a New York drop-out was that it was good news as the enrollment was miniscule and the products were not reasonably priced. The insurer was just too small to compete and there was minimial hope for significant membership gains to cover their back end costs:

384 people are too few people for an insurance company to offer a commercial or commercial like product for two significant reasons. Either reason is a good enough reason for a company to get out of this market segment….
From a policy point of view, unpopular and comparatively expensive plans exiting the marketplace is a good thing in states with deep markets and significant participation. It sucks that 384 people will need to find new policies next but they are highly likely to get better and cheaper policies instead.

This is not the case in Minnesota. A major insurer is dropping its participation from the Exchange on both the individual and SHOP side of the equation.

The insurer with the lowest rates and most customers on Minnesota’s health care exchange is pulling out…
According to a company statement, MNsure policies make up only a small percentage of PreferredOne’s entire enrollment but take up a significant amount of resources to support.
PreferredOne had 59 percent of the individual market for MNsure enrollees as of Aug. 6….

This is a significant disruption to the Minnesota market. It is not shocking though.

I am eyeballing the pricing for a 35 year old non-smoker in the Twin Cities on Health Sherpa and platinum plans without subsidy are cheaper from this provider than most baesline Silver plans. I think a few things are happening.

PreferredOne either was amazingly over optimistic on their acturial modeling or had decided to engage in an extremely aggressive loss leader pricing strategy to build membership. If this was a loss leader strategy, than it may have been too effective as the low cost platinum planss would have been very attractive to people with significant pre-exisiting medical conditions or known medical risk. People with high utilization and high complexity of cases are expensive on the medical side as they go to doctors/hospitals a lot AND they are administratively costly as they are calling in for help and care coordination on a frequent basis.

Secondly, the back-end infrastructure to support Exchange is extensive, especially as the risk spreading mechanisms such as risk adjustment require significant technical support. Building that type of infrastructure from scratch is painful and expensive. PreferredOneseems to have been only a commercial group insurer with a small staff before it decided to dip its toes into the water for individual Exchange.  It had no pre-exisiting model it could rip off to modify for Exchange.

It had aggressive pricing, a population that is higher need than normal, and not a lot of administrative/technical depth. On a quick glance at these basic facts, dropping Exchange makes sense. It sucks for the people who have to re-enroll in new plans at higher price points but 2014 was always a beta test year, and we know that companies would be entering and leaving different markets which is why the markets were never expected to stabilize until the 2016 open enrollment period. Preferred One is not the only significant exit, as Hawaii lost a large provider for the SHOP exchanges for the same basic reason.

Pioneering bonuses and integration

One of the big system reforms embedded within PPACA is a move towards payments for quality instead of quantity.  The Medicare payment structure is changing at the pilot project level.  The formation of Accountable Care Organizations (ACOs) are designed to shift some of the risk of high cost care away from the government and other payers and towards the providers.  The ACOs are structured so that providers are responsible for population health management and if their patients cost less, they keep a good chunk of the incremental savings over expected expenditures.  If they cost significantly more than just random noise or case mix would suggest, the providers are on the hook for the overruns. 

Medicare’s ACOs are starting out small, but they seem to be working. 

The Washington Post is reporting that the Pioneer ACO program (Pioneer is the more ambitious program) is seeing good results:

The second, smaller group of 23 ACOs are in the Pioneer ACO Model. They have more experience, and the financial incentives are larger. Out of this group, 11 earned bonuses, Medicare announced. Three other ACOs in this Pioneer ACO Model lost money, and three more took advantage of a Medicare option that allows them to delay evaluation until after they have three years of experience.

Roughly half of the ACOs are saving significant money, a quarter are either losing money or seeking safe harbor, and a quarter are bouncing along within the margin of error. 

This is a major win, especially since research has shown that the business process changes that produce big cost savings for ACO like organizations take some time.  The Pioneer ACOs have been in operation for two years.  Business process changes usually take eighteen to twenty four months to propogate through the organization.  My bet is that next year’s results from this cohort of Pioneer ACOs will be even better. 

As the ACO model spreads throughout healthcare, structural changes will need to be made.  Read more

“I’m now insurable, fuck you Obamacare?”

That is the message the National Center for Public Policy Research is trying to tell in a “research” “brief” that is dripping in bad faith or crap analysis.  I’ll get to that part later, but now let’s look at the part where a woman is blaming Obamacare for making her insurable in her tale of Obamacare woe:

Pam Hopmann, age 63, lives in Chesterfield, Missouri….For years, Pam was covered under her husband’s employer-based plan. When he retired, she stayed on his plan for an additional 18 months via a federal law known as “COBRA.” That ran out in January of 2013…..When she looked for coverage on the individual market, she was unable to get a policy because of a congenital heart condition. [my emphasis]

She was able to get coverage through the temporary Pre-Existing Condition Insurance Plan (PCIP) created under ObamaCare for people who are high risk. She paid about $400 a month in premiums and had a $1,000 deductible, which she found reasonable….

But in September of 2013, she received a notice that her PCIP plan would be cancelled at the end of the year.

“My husband and I started trying to sign up for insurance on the exchange….

She ended up choosing a gold plan, a “$10 Copay PPO” policy from Coventry Health Care. She qualifies for a monthly subsidy, but even with that she is still paying a higher premium of $544 a month. She also has a higher deductible of $1,750.

So unpacking this Ms. Hopmann had a pre-exisiting condition.  She was uninsurable on the underwritten individual insurance market as no insurance company was willing to take her on medical risk.  For nine months, she was in a high risk  bridge program funded by PPACA, and then went onto the Exchange where she was able to get significantly subsidized insurance without having to pass through medical underwriting.  Her Exchange plan is slightly worse than her high risk plan.  And for that she is pissed off.

At the individual level, this makes sense.  She had something good and she lost it.  It does not matter that this was the program design.  It does not matter the House GOP was unwilling to increase funding for high risk pools even at the opportunity of gutting a significant chunk of the Exchanges.  It does not matter that in the counterfactual universe of no PPACA, she is uninsurable as no insurer who is not state mandated to take all comers/act as insurer of last resort is going to write a policy for a 63 year old with a cardiac condition.  It does not matter.  She had something good and now has something less good. 

Now if the wingnut welfare landing pad NCPPR was interested in arguing that Exchange subsidies should be significantly richer so Platinum level benefits are the default, this story could be made in good faith.  That is not the argument they are making.  The NCPPR is arguing that this woman is getting screwed by Obamacare despite the fact that in a non-PPACA world, she is uninsurable until she limps across the line for Medicare in two years.

  And worst of all, this is not even the biggest piece of bullshit that they are throwing into the public discourse.

Read more

Risk adjustment and the Red Queen race

The three R’s of Obamacare are Reinsurance, Risk Corridors and Risk Adjustment. These three steps are attempts to stabilize the individual on-Exchange marketplace by changing the incentive structure of insurance companies. Reinsurance and Risk Corrdidors are short term plans while Risk Adjustment is a long term program. We’ll talk a lot about Risk Adjustment today, but let’s go over the other two first.

Reinsurance is a back-end payment made by the federal government to insurers that have “shock” or “catastrophic” claims. For 2014, reinsurance was in play for claims between $45,000 and $250,000. The federal government would pick up 80% of the costs of these claims for a maximum federal exposure of $164,000. The average pay-out will be significantly less. Reinsurance is financed by a $63 per member year fee for people with major medical insurance. The goal of reinsurance is to remove some of the tail risk of big claims. 2015 will have a $44 reinsurance fee. 2016 has not been announced yet.

The goal of risk corridors is to create a three year window of forgiving rate estimation for insurers if one is not a cynical bastard. If one is a cynical bastard, the risk corridors create a three year window of loss leader membership building. In either case, it provides a transitional time frame for insurers to figure out what the Exchange population looks like while segmenting the market. Pricing for a given actuarially value, network scope and buggering thy neighbors in races to the bottom on sick people avoidance schemes, should converge into tight clusters. During that time, the Federal government takes on some of the downside of losses based on too optimistic actuarial assumptions while also taking on the upside of too pessimistic actuarial assumptions. If a company’s medical expenses are more than 3% but less than 8% (a 5% range) greater than expected, the Feds kicked in a 50% payment of the gap (up to 2.5%). Losses above 8% saw the Feds pick up 80% of the excessive loss. The converse is true on gains. The Feds would get a slice of the gains.

Federal reinsurance and PPACA risk corridors are temporary programs.  Risk adjustment is a long term program.

The basic goal of risk adjustment is to discourage insurance companies from cherry picking only healthy members. Risk adjustment uses claims history at the individual level to assess the projected medical risk (general health) of an insured population. Each insurer receives their own aggregate per member risk score, and then money is moved from low risk/healthy groups to high risk/sick groups to compensate the sicker groups for their increased risk of medical expenses in the upcoming year. Risk adjustment has been a feature of American healthcare for decades, and it is especially notable in Medicare Advantage as well as Medicaid managed care.

So how does this happen? Read more

Healthcare 2020

Last week, I made a comment at the end of a post about my son and his first asthma attack:

A high first dollar health plan (which is where the entire US system is going)

Very valued and insightful commenter JL asked a very good set of questions about my thoughts on the intermediate future of US healthcare:

” A high first dollar health plan (which is where the entire US system is going)
I did not realize that RM’s diagnosis of the overall direction of the US healthcare system was so grim.
Why, oh why, does the US insist on continuing this 30+ year failed experiment? It has been 30 years since Mark Pauly basically drew an X on a piece of paper and asserted that all markets were the same and like minded economists acted like, and even asserted explicitly that the market for health care was the same as the market for ice cream, and if you interfere with perfectly informed consumer decisions, its just a subsidy that will result in people consuming too much care, just as they would eat too much ice cream if the price were kept artificially low.

The thoughts below are 30% technical judgments which I believe I have some particular knowledge and insight on, and 70% political judgment where I know that I am just someone on a blog and my judgment/insight/foresight is no better than societal norm.

My basic thought pattern on this is informed by this quote on American policy making:

You can depend on Americans to do the right thing when they have exhausted every other possibility.

We still have a lot of dumb decisions with very deeply entrenched stakeholders left to buy-out before we can have a fully somewhat rational healthcare system.

Read more