Hope and benchmarks floats

Adrianna McIntyre at Vox raises a good mechanical point about the next Exchange open enrollment period.  People will be changing plans in order to minimize their out of pocket premiums.  She explains the mechanism:

The federal subsidies used to offset the cost of insurance are based on income, but they’re also pegged to the second-cheapest silver plan on each state exchange, which is called the “benchmark plan.” When people choose something cheaper than the benchmark plan (the cheapest silver plan, or one of the bronze plans), they will spend less money out of their own pocket on the insurance premium. If a person chooses a plan that’s more expensive than the benchmark plan, he’s responsible for the extra cost…

But annual changes to insurance premiums aren’t uniform across plans. That means the “benchmark plan” can change from year to year — with financial consequences for those with subsidies. These consequences will be most acutely felt by low-income enrollees.

My first response looking at the world as it is instead of as I and many others here wish it to be, is so what.  People in private insurance have to routinely consider switching plans every year to minimize their premium and expected out of pocket expenses.  I know that I have held the same exact plan configuration (benefits, deductibles, co-pays, network) at the same exact per paycheck cost for one dyad in my working life.  It happens in the private market, it happens in the public-private partnership of CHIP market, it happens for Medicare and Medicare Advantage, it happens basically everywhere except Medicaid fee for service.

However there are a few important policy and technical points to draw out.

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Nevada’s open enrollment experiment

Limited open enrollment is a common risk pool management technique.  It is designed to avoid people from not paying for insurance until after they either get hit with a bus or are told that they have a cancer diagnosis.  Large commercial groups use limited open enrollment, small commercial groups use limited open enrollment, Medicare Part D and Medicare Advantage uses limited open enrollment.  The Exchanges use limited open enrollment.  Limited open enrollment combined with a mandate is designed to force the currently healthy into the insurance pool.  This is fairly simple health design. It is not the only technique to force the healthy and usually the young in the pool.  Another is massive subsidization so that premiums are dirt cheap.  This is a technique commonly used in large groups where the employers are picking up 90% to 95% of the cost.  Another method is a late enrollment penalty.  Medicare uses fairly signifcant late enrollment penalties to make sure it hoovers up almost all the 65 year olds in the country in a very short time period. 

There are a lot of ways to skin the risk pool management cat.  Nevada is experimenting with continual open enrollment but a ninety day wait period outside of the normal open enrollment period. 

Insurers that sell individual plans have to offer insurance to all comers during an annual open enrollment period, which this year ended for most people on March 31. However, the health law allows insurers to sell individual plans on the exchange outside the regular open enrollment if they wish to do so, as long as they don’t discriminate against people who are sick.

Health policy analysts say they don’t expect insurers to take advantage of the extra selling opportunity often. “The assumption is that no insurance company would do that because they’d just open themselves up to too much adverse selection,” says Sabrina Corlette, project director at the Georgetown University Center on Health Insurance Reforms.

Still, at least one state is embracing the option. Under a Nevada law that took effect in January, any insurer that sells individual health plans outside the state’s health insurance exchange has to offer those plans year round. To discourage people from waiting until they get sick to buy a plan, insurers can require a waiting period of up to 90 days for coverage to take effect.

This is interesting in a good way.  I don’t think there will be a lot of sales in future years as people whose life situations have signficant changes will think to go on the Exchange and get Exchange subsidized insurance with a billing cycle’s wait time, but for the next year or two, I think this is a fascinating experiment. XpostFactoid has an interesting interview with Nicolas Bagley on the state waiver program.  The state waiver program in PPACA allows states to offer alternative methods to achieve the same or better results at the same or lower costs of non-waivered PPPACA/Obamacare. 

What about the individual mandate, which comes within the scope of Section 1332?  Could it be replaced in a package that offers equivalent coverage to an equivalent population as the ACA?

“In principle, yes,’ Bagley said. “The waiver is designed to allow states to explore alternative means of structuring their healthcare system. If you have an alternative to the individual mandate that you find more palatable, if you think it can accomplish the same goal of near-universal coverage at the requisite baseline level, then the statute absolutely affords states that possibility.”

“One way to think of it is that the individual mandate operates to discourage the choice of going without health insurance. There are all sorts of ways you might go about discouraging the choice to go without. Restricting open enrollment is a good one: you might be reluctant to go without coverage for three years, even if you’d have gone bare for one,  You can come up with all sorts of other sticks –or, alternatively, other carrots, such as finding money to make it even more appealing to purchase health insurance.”

 Is a ninety day wait period sufficient to avoid significant adverse selection in the presumably small risk pool?  I don’t  know.  If it is, it could be a push to changing the nature of the enrollment period to a rolling open enrollment with a limited free for all time and then a wait time with a weaker mandate.  That could solve a political problem without policy damage.


The obvious, it burns

From the Wall Street Journal, a statement of the blindingly obvious:

Among those health-law marketplace enrollees who have seen a doctor or other health-care provider in the first quarter of this year, around 27% have significant health issues such as diabetes, psychiatric conditions, asthma, heart problems or cancer, the data show. That is sharply higher than the rate of 16% for last year’s individual-consumer market over the same time frame, according to the data, which was supplied by Inovalon Inc., a health-technology firm that receives medical claims directly from nearly 200 insurers that are its clients.

It is also more than double the rate among people who held on to their existing individual policies; among those enrollees, the rate was 12%. Those consumers, who kept so-called grandfathered individual plans, are showing by far the lowest rates of use for health-care services such as emergency-room visits, hospital stays and prescriptions.

There are a couple of take-aways. Read more

Noise is good

Welcome to the convergence zone. Rates are still being formulated for the 2015 open enrollment/new product period, but initial estimates are being released by state regulators. There are two things to note. The first is that companies seem to be operating reasonably independently in their 2014 rate estimates so the 2015 corrections are all over the place. Some companies were too optimistic in 2014 so they are raising rates to cover costs; other companies were too pessimistic so they are cutting rates to attract membership. Reasonably random error and noise is a good thing, esepcially if we assume that 2014 really could be treated as the Exchange beta testing year.

The second thing of interest is rates will start converging. Companies are operating off of less incomplete information than they did in 2014, so assumptions are being validated or replaced by actual data. Insurance companies are in the business of massive data mining and projection, so more data is usually better. Similar products with similar networks will be priced reasonably close to each other. Information and search costs for individuals should decrease significantly as the products are operating under less adverse information biases.

Charles Gaba:

District of Columbia: 3 of 4 insurance companies either lower rates or keep them stable for 2015

Washington State:

LifeWise has proposed an 8.9 percent rate increase.

Other insurance companies with large chunks of the individual market — Coordinated Care Corp. and Group Health Cooperative — are both proposing rate increases of just over 11 percent.

All four companies had similar monthly rates in 2014 and would likely come even closer together in 2015 if their proposals were approved by the state:

■   Group Health’s average silver plan for 2014 was $280.47 and would be $312.50 in 2015 if its price increase is approved.

■   Premera would go from $300.94 to $328.03 for a similar plan.

■   LifeWise would go from $301.07 to $329.36.

Good News Everybody

Via Charles Gaba:

Gallup’s new polling shows 5% of the country has gone from uninsured to insured over the past six months:

So, let’s see here. The Gallup poll only includes adults over 18, so…

By an amazing coincidence, back on May 5th Gallup issued similar survey results which showed a reduction in the overall national uninsured rate of at least 11 million, so this survey, using slightly different wording and a different approach, simply reinforces that one…although the earlier one included Medicaid as well, so there’s obviously some overlap/churn going on here.

This thing is working and it is working well within design parameters.  There are a couple more positive shocks to the system that we should anticipate as Pennsylvania, Virginia and Indiana are highly likely to expand Medicaid through the waiver process sometime this year with a 1/1/15 effective date.  The second round of open enrollment looks like it will have more plans, more competition and mostly functioning websites.  People are getting the “gay marriage in Massachusetts” learning by observing experience right now.  The teabaggers won’t learn, but quite a few people who are leery of Obamacare are seeing that not much is changing in a bad way.  Premiums are going up a little, deductibles and co-pays are going up a little, but hey, that has been the case for my entire life. 

This thing is going to work ( and soon enough I can breathe long enough to wonk out again).


He’s going the distance, he’s going for speed

The skinniest Exchange narrow networks from 2014 won’t be as skinny for the 2015 open enrollment period.  There are three major drivers.

The first is a federal regulatory driver.  The 2014 regulation required the minimally acceptable network to contract with 20% of the Essential Community Providers in a service area.  An ECP is a center that serves underserved populations.  Federal primary care clinics, family planning, AIDS care clinics are the most common ECPs.  The 2015 regulation is 30% of the ECPS in a service area must be in network.  For most networks, this is a fairly minor tweak, but the skinniest networks will need to add facilities and docs to meet requirements. 

The second is that providers are starting to see that the Exchanges are here to stay and that it is better to get Medicare +8% from an Exchange product than who the hell knows what from the spare cash flow of an uninsured individual.  Mayhew Insurance has seen a steady stream of inquiries of providers who want into the Exchange networks.  They are coming in either to help one or two current patients who switched their insurance, or they are seeing that the Exchanges will improve their bottom lines.  The narrowest and usually the lowest paying networks will probably see the highest percentage increase in provider participation in 2015 as the base level of participation for the super-skinnies would be very low regionally.

The final reason why networks are getting larger is amazingly technical and geeky.  The speed assumption in one of the major geo-access/GIS software packages changed.  

Now what is this and why is it important?

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Competition on the Exchanges

Oh Noes — some company’s actuaries fucked up with their projections and we see a very clear example of the Winner’s Curse in Maryland:

CareFirst of Maryland Inc. and Group Hospitalization and Medical Services Inc., both CareFirst companies, submitted filings to the Maryland insurance department requesting a 30.2 percent premium increase for individual plans in 2015. CareFirst Blue Choice Inc. requested a 22.8 percent increase for next year, citing an older average membership age and a sicker patient pool.

Maryland’s exchange has only five insurers which participated in 2014 and will add another insurer in 2015. All Savers Insurance, a subsidiary of UnitedHealthcare, requested a 4.8 percent. A nonprofit Kaiser Foundation plan offered a 12.1 percent rate reduction and Evergreen Health Cooperative, 10.3 percent reduction. [emphasis mine]

I am not a Maryland insurance expert, but what I predict will happen is that Care First (which tended to have very low rates) will lose a lot of membership to Kaiser and Evergreen and All Savers.  Shifting insurance is a pain in the ass and it is something that us privileged folks in the private sector have never ever had to do. 

Oh wait, it happens all the time as the HR department gets a better quote from the other competitor down the street and they move insurers, networks and plan configurations to save seven dollars per member per month.  My family’s insurance comes through my benefits and thus the insurer has been a constant, but my wife’s company has gone through four different carriers in five years (now they are back to carrier #2). 

Competition is a bitch.

And this is what we should expect as that is the basic design intent of the Exchanges — reduce information and search costs of consumers by requiring insurers to offer reasonably transparent and clearly defined products where people can buy on price, and network and not on the ability to get through underwriting.

New Hampshire is a good case study of how the Exchanges are supposed to work in 2015:

The  New Hampshire Insurance Department said Monday that five insurers plan to sell policies in the suddenly crowded New Hampshire marketplace. It’s a stark contrast from the first open-enrollment period of the law known as “Obamacare,” when only one insurer — Anthem — offered plans….

Overall, five insurers are expected to offer plans through the HealthCare.gov marketplace in the state:  Anthem,  Harvard Pilgrim, Minuteman Health, Assurant Health, and Maine Community Health Options. 

The competition is important. A 2014 study conducted by the National Bureau of Economic Research found that if all insurers active in states had participated in the states’ marketplaces, the second-lowest priced silver premium (which is linked to federal subsidies) would be 11.1% lower. It also would have reduced federal subsidies by about $1.7 billion the study found….

The first open-enrollment season in New Hampshire was successful despite the lack of competition. The state enrolled more than 40,000 people — and about 211% of its original goal, the highest in the country.  

New Hampshire has demonatrated a viable market and insurance companies are now flooding the state to get a chunk of the pie.  Some will offer very narrow networks, others will offer access to Boston’s world class medical systems, and others will have different flavors of customer service.  Anthem has first mover advantage of getting people used to thinking of Anthem as  their insurance company, but that is only worth a couple of dollars per member per month, so they’ll need to offer good deals (either on price or networks) to keep their membership base in the state.