When in doubt, cut costs

Reuters is reporting on a disturbing situation in Lousiana. Individuals with a positive HIV status have been receiving federal help to purchase healthcare for the past two decades via the Ryan White Act. This act helps pay for prescription drugs and basic primary care for people who need AIDS and HIV treatment but otherwise can not afford it. Some portions of this Act provide premium support to buy private insurance.

All Exchange insurance plans in Louisiana are creatively misinterpreting CMS regulation and guidance in order to not accept Ryan White payments and therefore kick people with AIDS and HIV off of their plans for either non-payment of premiums or as risk/fraud/abuse risks.

The Center for Medicare and Medicaid Services (CMS) is the primary administrative and rule-making hub for federal guidelines on Medicare, Medicaid, Childrens Health Insurance Program (CHIP), and now the Exchanges. Congress and CMS has always intended for the Ryan White CARE Act’s goals to be achived through PPACA. For instance, CMS mentioned that Ryan White centers would be part of essential community services for all Exchange plans last April. Last September, CMS issued regulations that demonatrated an intent to continue Ryan White funding and premium assistance programs for individuals whose insurance situation moved to the Exchange.

In November 2013, CMS issued guidance on third party reimbursement of premiums. The goal of this guidance was to avoid double dealing and intentional wrecking of risk pools in a scenario where a hospital would pay the premium of a currently uninsured patient with chronic or repeated episodes of intervention needed conditions in order to get payments. This would destroy any randomness as the hospitals would only do this for their sickest/costliest patients.

The problem in Lousiana is all of the health plans recently read that guidance to apply to all third party payment support, including other federal programs. From this (mis)-reading, they are trying to disenroll anyone who has submitted Ryan White payments as a potential for fraud and abuse while coincidentally dramatically lowering expected medical loss costs.

CMS is punching back and basically calling the Lousiana insurers (and a North Dakota insurer) idiots in bureacratese:

The November 4, 2013 FAQ does not apply to payments for premiums and cost sharing made on behalf of QHP enrollees by Indian tribes, tribal organizations, urban Indian organizations, and state and federal government programs or grantees (such as the Ryan White HIV/AIDS Program). QHP issuers and Marketplaces are encouraged to accept such payments.
As CMS stated in its 2015 Draft Letter to Issuers on Federally-facilitated and State Partnership Exchanges,2 pursuant to section 1312 of the Affordable Care Act, section 402 of the Indian Health Care Improvement Act, and 45 CFR 155.240(b), a Marketplace may permit Indian tribes, tribal organizations, and urban Indian organizations to pay QHP premiums on behalf of members who are qualified individuals, subject to terms and conditions determined by the Marketplace. Indeed, Federal law specifically provides for this approach.
In addition, guidance from the Health Resources Services Administration (HRSA) on the Ryan White HIV/AIDS Program3 specifically describes how grantees can use grant funds to pay premiums and cost sharing for eligible individuals enrolled in QHPs.

So why is this happening?

If I squint hard enough, I can see the fuzziness in the language, especially if I am only looking at the November FAQ from CMS. That fuzziness can lead to the leading insurer in Louisiana to make the choice of reducing claims costs by kicking out several hundred people with high medical needs and the other two Exchange insurers have to follow suit as their risk pools would get destroyed if they picked up every AIDS patient in Louisiana. This happened in two states where the regulators aren’t particulary keen on making PPACA work, so there is no local pushback from state regulators. It takes a bit of time for issues to escalate to CMS attention, so if the assumption is do anything that is plausible to minimize claims impact, I can see this happening.

Narrow networks, specialty hospitals and stable suboptimal equilibria

Most exchange plans are narrow network plans. This means hospitals and doctors are excluded from the plan due to either pricing or corporate strategy. Expensive providers are culled if there are nearby options that are cheaper. This is leading to really good premiums as comparable Exchange plans are coming in under group health insurance premiums. The trade-off is restricting choice to only providers that are willing to reduce their prices.

Washington State starkly illustrates this trade-off as the Seattle Children’s Hospital was excluded from all  most of the narrow network plans on the Washington State Exchange initially.

The Monterey Herald has a good explainer:

Left out are hospitals such as Seattle Children’s, excluded from five of seven plans on Washington’s state insurance exchange.

The hospital, which has sued the state to be included in more plans, is struggling to get paid for care given to about 125 children since Jan. 1…

Seattle Children’s Hospital, for instance, sued the Washington Office of the Insurance Commissioner…

 the state responded that “nothing in the law dictates inclusion of a specific provider, regardless of their preeminence or sympathetic patient base. So long as issuers meet the legal standards for adequacy and covered services, the OIC does not manage their business arrangements for them….”

The hospital, meanwhile, counters that the uniqueness of its services and the training required by its doctors to carry out patient care deserve more compensation.

“We take care of a very unique group of children, and the amount of resources we need to have is very expensive,” Melzer said. “We do 100 percent of transplant care and 70 percent of cancer and cardiac care in the state….

“The cost of Children’s non-unique inpatient services is 100 percent higher than such services at other hospitals in our statewide network,” he [Earling, Insurance Company spokesman ]said.

A pediatric appendectomy, which cost $23,300 at Seattle Children’s, is priced at $14,100 at Premera’s other in-network hospitals, Earling said, adding: “The issue, at the end of the day, is access at a more affordable price. That’s why their non-unique services are not covered.”

Rebekah Blankers [mother of child with unique diagnosis that can be treated at Seattle Childrens’]  isn’t waiting to find out what Premera considers unique or non-unique. She has switched Gabriella to a …plan that will cover all care done at Seattle Children’s. ..the rest of the family…will stay on the less-expensive LifeWise plan.

There are a lot of issues going on here which we’ll take a look at below the fold:

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Good news everybody

ACAsignups.net has some news on enrollment for January 2014:

CNBC, moments ago:

A total of 3,299,492 had enrolled in Obamacare plans as of Feb. 1, according to HHS.

Damn. I was off by 0.017%. :)

More importantly the age mix is starting to normalize as younger adults are entering the risk pool.

In January, 27 percent of those who selected plans in the Federally-facilitated Marketplace are between the ages of 18 and 34, a three percentage point increase over the figure reported for the previous three month period.  Young adult enrollment grew by 65 percent in January, from 489,460 at the end of December to 807,515 as of Feb. 1, while all other age groups combined grew by 55 percent.

81 percent of young adults ages 18 to 34 selected plans at the Silver metal level or higher (Silver, Gold and Platinum plans).

The Massachusetts experience was that younger and healthier people waited.  The age distribution got younger each month the deadline got closer.  And shockingly, a program that is a a kissing cousin of the Massachusetts program design is experiencing similar growth patterns.


Where’s my doc

KQED in California has been following several of its audience members’ experiences with Obamacare. Today’s story is about finding providers taking insurance and the joys of online provider directories:

I’ve been following Sue Kearney of Oakland. After confirming her doctors would take the insurance, she enrolled in an Anthem Blue Cross subsidized PPO plan with Covered California last fall. Then she scheduled appointments…

But at her first appointment, she was told that the doctor did not accept any Covered California insurance. Ditto for the other doctors. Kearney set up a screen share with me, logged into her account and confirmed for me that doctors showed up as accepting her insurance, but the office said they didn’t when she called them.

That sounds about right.

When I was a young health insurance bureaucrat who did not know any better, I helped to maintain the provider directory.  Provider data quality is a constant struggle to get a response from the office manager and the receptionist.  If we contracted with a large group, the central office would have a decent idea as to what their CFO or CEO signed but only seven of the thirty four receptionists or office managers were aware of the newest configuration of networks.

There are numerous points for failure in the provider directory informaation chain.  The most common is the office manager to health plan link. 

Office managers will assume that they have always taken all Mayhew products, so they still take all Mayhew products including the very narrow network, so they tell members that they’re participating in Mayhew Narrow, but they aren’t.  Members are shocked when they get billed out of network.  Office managers may reflect the attitude of their doctor(s) who are Randian fanboys and assume that they don’t take any Exchange, but their CEO signed them up.  Office managers may not be aware that a particular product is geographically restricted, so the office that they work at on Monday, Wednesday and Friday takes the product, but the office that they work at on Tuesday and Thursday can’t take the product.  They may also have amazing tacit knowledge which minimizes problems until they retire or move to a different job and the new kid has no clue. 

And then they just forget to tell the insurance company about important things:

  • The office burned down.
  • The office is uninhabitable due to the meth lab next door exploding.
  • The provider died two years ago.
  • The doctor in question moved three time zones away.
  • The doctor in question is in Congress now and no longer practices.
  • The office has been bought out by an integrated payer-provider system that does not contract with other insurers.
  • The doctor surrendered his license because of a very public front page scandal.

Those are some of the things that providers have forgotten to tell my company.

Kristol to Americans: You lazy moochers have it too good

I am a firm believer in the Heritage Uncertainty Principle of True Conservative Healthcare Reform Plans:

Conservative health-care-policy ideas reside in an uncertain state of quasi-existence. You can describe the policies in the abstract, sometimes even in detail, but any attempt to reproduce them in physical form will cause such proposals to disappear instantly. It’s not so much an issue of “hypocrisy,” as Klein frames it, as a deeper metaphysical question of whether conservative health-care policies actually exist.

The question should be posed to better-trained philosophical minds than my own. I would posit that conservative health-care policies do not exist in any real form. Call it the “Heritage Uncertainty Principle.”

P-Care was a recent iteration of such a principle as the primary financing mechanism was immediately clawed back as soon as liberal wonks started asking obvious questions (why yes, it would be a massive tax hike on middle class Americans AND massively disruptive to the market).

The most recent iteration of conservative “health insurance reform” proposals is from Always Wrong Kristol et al.  The diagnosis of the problem is simple — Americans, or at least non-rich Americans, have it too easy and risk is too insulated.  We must suffer more.  And TAX CREDITS:
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Turbotax and PPACA help

I just finished doing my tax return for the year.  There were two important things I noticed.  For the first time in my marriage, my wife and I don’t max out the student loan interest deduction.  That is a major win for us.

Secondly and more importantly, Turbotax was pushing the Exchanges reasonably hard.  There was a question on health insurance status for family members and then a decision tree if anyone was not covered.  This is important for two reasons.  First, it should continue to spread the word about how expansive the subsidies are for people on the Exchange as well as the expansion of Medicaid for people in expansion states.  A lot of people of small means don’t believe that they’ll get financial help in buying decent insurance.  Secondly, for the people who are aware that they need to do something about insurance, the tax refund is a usually the biggest lump sum distribution that people see in a year.  It is easier to buy a policy when the tax refund can pay for the first nine months of premiums.  I know my cousin who I’ve mentioned elsewhere on Balloon Juice was waiting for the refund to buy an Exchange policy.

The curves of procrastination don’t perfectly align.  The long term procrastinators for PPACA have until the end of March to enroll.  The procrastinators for filing have until April 15th to do something, so the reminders won’t line up perfectly, but this is useful.

Why there will be rate shock stories this fall

Earlier this week, we reviewed how small group underwriting currently works.  Most small groups are underwritten on either an experience review of claims history or statistically rated based on a review of risk factors.  One of the larger cost risk factors is being female. 

PPACA is changing the means of how groups are underwritten for non-grandfathered policies that went into effect on or after January 1, 2014. The new policies are underwritten based on a modified community rating system that allows for consideration of the age of people in the underwritten group, their locations (which can still tie a lot of statistical probabilities of cost and health status) and smoking status.  The community that they are rated against is the entire pool of small groups that an insurance company insures.

Yesterday, we looked at why actuaries and underwriters like big groups.  Healthcare cost distribution is extremely lumpy. 

Small groups and individuals are almost impossible to accurately price.  Big groups allow statistical approximations to approach population realities while the error bars on a small group are massive.  Massive error bars make underwriters and actuaries cry…Random noise becomes more important in small group sizes.

Right now under experience and/or statistical underwriting, there are significant premium differentials between groups with members who are the same age, location and smoking status.  This system has its own set of entrenched winners and losers.   

Why should we expect to see hundreds of stories of rate shock this fall? Read more