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Zubrick and not understanding insurance

The Supreme Court requested the Zubrick attorneys to file a supplemental brief to explain how employees of religiously affiliated groups could receive no cost sharing contraceptive coverage without the religiously affiliated do jack shit.  The goal is to see if their precious fee-fees won’t be offended while offering their female employees contraceptive coverage.  The brief is here and it shows an amazing lack of understanding of insurance and Congressional intent in the ACA design.

There are many ways in which the employees of a petitioner with an insured plan could receive cost-free contraceptive coverage through the same insurance company that would not require further involvement by the petitioner, including the way described in the Court’s order. And each one of those ways is a less restrictive alternative that dooms the government’s ongoing effort to use the threat of massive penalties to compel petitioners to forsake their sincerely held religious beliefs. Moreover, so long as the coverage provided through these alternatives is truly independent of petitioners and their plans—i.e., provided through a separate policy, with a separate enrollment process, a separate insurance card, and a separate payment source, and offered to individuals through a separate communication—petitioners’ RFRA objections would be fully addressed….

If commercial insurance companies were to offer truly separate contraceptive only policies along the lines envisioned in this Court’s order, then the employees of petitioners who selfinsure or use self-insured church plans could enroll in those separate contraceptive-only insurance policies as well. Those policies would obviously be separate from the coverage provided by the self-insured employers or the church plans, and petitioners’ employees would be free to enroll in those policies if they choose. Accordingly, among the many less restrictive alternatives available to the government is to require or incentivize commercial insurance companies to make separate contraceptive coverage plans (of the kind contemplated by the Court’s order for petitioners with insured plans) available to the employees of petitioners that self-insure or use selfinsured church plans, without requiring petitioners to facilitate that process or threatening them with ruinous fines unless they do so.

I’ll let the lawyers take a whack at the legal argumentation as I’ll take a whack at the mechanics.

Contraception as a cost center is overwhelmingly focused on females who have some idea if they will want to use contraception at some point during the policy’s active period.  Men don’t have to pay for prescription contraception, and women over a certain age don’t either.  Individuals whose partner(s) have had permanant sterilization or medical infertility don’t need contraception either.  Contraception is a near perfect case example of an adverse selection problem when it is unbundled from a larger medical insurance policy.

Requiring women who work for religious organizations to buy separate contraception only policies transforms part of their compensation (second question are the women getting a pay raise to make them whole?) from participation in an insurance scheme to participation in a discount buyer’s club.  Almost everyone who would buy a separate policy with a twelve month coverage period for contraception only will use contraception.  There is no risk pool.  It is just a bulk buyers’ pool.

Congress in the ACA advanced a strong federal interest that there would be no gender discrimination in premiums offered to women.  This was expressed as a significant interest for well over a generation in the group market and it is an expressed interest in PPACA for the individual market.  Congress also has a strong interest in bending the cost curve.  One of the major theories of change to bend the cost curve is to increase the use of evidence based preventative care.  The means to increase birth control utilization is to reduce the cost of birth control.   If all of a sudden secondary policies have to be created the monetary and the hassle/friction costs go up significantly for the people who would benefit the most from increased access to this form of preventative care.

update 1 This is the oh so onerous and oppressive form that must be filled out under the current accommodation for their fee-fees:

An insurer failure aftermath

There is an interesting story out of Hawaii about an insurer failing.  The interesting thing is that the insurer was not on the Exchanges at all so the odds of this failure being PPACA related are minimal.

Last week, Family Health Hawaii (FHH) was ordered into immediate liquidation.

The Order allows Insurance Commissioner Gordon Ito to take possession of the organization’s assets, books, records, and to assume the roles of FHH’s directors and officers. This comes after 2015 filings showed that FHH did not meet statutory solvency requirements which include maintaining minimum net worth to ensure that they are able to meet their obligations. Despite work with the state’s examination team, FHH was not able to show that they would make up the loss and regain solid standing.

While the organization does not provide individual plans, FHH currently insures approximately 420 employer group plans. All policies must be terminated by May 6, 2016

What happens after an insurer fails?

An insurer should have enough reserves to cover any and all expenses on the day that premiums stop being collected.  That evidently is not the case for Family Health Hawaii.  A few things will happen.  Business as usual will occur until May 6th.  After that coverage stops.  Claims for services that were performed before May 6th but received after the drop dead date go into limbo.  They will be paid out of reserves.  Anything that is unpaid after reserves are exhausted are left hanging in the air. Some states have guarantee funds where all insurers in a state pay in to cover the remaining claims after reserve exhaustion from a failed insurer.  Other states will have the providers eat the difference or take a haircut.

Providers theoretically will get paid in full as long as the claim arrives by May 6th.  However most providers will seek to minimize their potential exposure by aggressively avoiding FHH patients for the next three weeks.  People who have deferable appointments will see their appointments cancelled.  People who have elective surgery scheduled will see their surgery pushed to June or July.  Most doctor offices and hospitals’ finance departments are scrambling to get every claim attached to a FHH member submitted as soon as possible so that they can get as close to the front of the line as possible.

People will see a Special Enrollment Period triggered on May 7th as they will have lost their previously qualified insurance coverage.  Some of the other Hawaiian insurers will write half year policies for the employer groups but there will be people who fall through the gaps.  SHOP might be a good landing spot for seven months until the next annual enrollment cycle starts up again.


Sparse networks, quality and tweaking the ACA

The ACA subsidy formula right now is tied solely to the actuarial value of a plan.  Subsidies are based on the second least expensive Silver plan for an individual in a market region before Cost Sharing Reduction subsidies are applied to boost actuarial value.  The government pays a fraction of the cost of what it takes to get a person a 70% policy.  This is a problem because it does not take quality of plans or networks into account.

There are an interesting pair of papers.  The first one is one that Claire McAndrews of Families USA flogs  on her quest to get better network directories and better networks.

We examined physician networks in 34 states offering plans through the federal marketplace during 2015 open enrollment using the rating area (geographic unit for marketplace premiums) containing each state’s most populous county. We analyzed 4 silver plans (the category of plans purchased by 69% of consumers)1: lowest, second lowest, median, and highest premium plans. One plan was excluded for a defective search engine, yielding 135 plans.

Using plans’ online directories between April 12 and 18, 2015, we searched for in-network specialist physicians in obstetrics/gynecology, dermatology, cardiology, psychiatry, oncology, and neurology (largest volume nonsurgical specialties) and endocrinology, rheumatology, and pulmonology (specialties treating common outpatient conditions).4 Accounting for patient travel, we applied a broad and narrow search radius relative to each rating area’s most populous city. Based on directories’ functionality, the broad radius was 160 km (100 miles) or, when unavailable (in 12%), the maximum search radius (typically 80 km [50 miles]). Our narrow search was half the broad radius….

Using the broad and narrow searches, 18 (13.3%; 95% CI, 8.5%-20.3%) and 19 (14.1%; 95% CI, 9.1%-21.1%), respectively, of 135 plans were specialist-deficient plans. Two plans included dermatologists and oncologists in the broad search radius but not the narrow radius. Three plans included endocrinologists in the broad search radius but not the narrow radius….1

Networks without adequate fairly common specialists are low cost products (on average) for two reasons.  The first is the most likely reason that a specialist is excluded from a network is the network is paying below the minimal acceptable rate for a specialist.  This would be an indicator that the network is paying fairly low rates.  Secondly, networks that do not have core specialists will not be attractive to people who know that they need to see a core specialist.  An individual with cancer will not buy a plan that does not have any oncologists in it.  It is a risk dump so deficient networks are engaged in an adverse selection cherry pick.

The other article I found interesting with was an analysis of how people made decisions on quality and price when shopping on Exchange:

We found that consumers were much more likely to select a high-value plan when cost information was summarized instead of detailed, when quality stars were displayed adjacent to cost information, when consumers understood that quality stars signified the quality of medical care, and when high-value plans were highlighted with a check mark or blue ribbon. These approaches, which were equally effective for participants with higher and lower numeracy, can inform the development of future displays of plan information in the exchanges…. 2

It is a good public goal for individuals to choose high quality and affordable plans that meet their needs.

The current design of exchange subsidies does not allow that to happen in most cases and the design of the 1332 waiver program rules minimizes the opportunities for improvement at the state level.  Let’s go below the fold to have a policy discussion:

Read more

Risk adjustment and talking to avoid diabetes

Risk adjustment is used to move money from insurer pools that are relatively healthy to insurer pools that are relatively unhealthy. Diabetes is one of the most common chronic conditions in the Exchange pool and it is very common in the Medicare Advantage risk pools as well. The risk adjustment factors are calculated based on several years of data to determine the relative incremental cost of a disease state and then fitted to a general medical cost trend line.

From this morning’s post on the YMCA diabetes minimiziation program that is now a standard Medicare benefit, I think there is an opportunity for Medicare Advantage insurers to aggressively game risk adjustment by doing good because the risk adjustment factors will be overpricing the cost of diabetes for a year or two.

The new intervention was about $205 per person, a fraction of the original cost.

They estimate that if the Y program were expanded to all Medicare beneficiaries, the government might save about $2,650 per participant over 15 months, much more than the program cost.

Why is this?

To qualify for the program, an individual’s A1C levels had to be high enough to justify a diagnosis of pre-diabetes. Quite a few individuals will get a diagnosis of uncomplicated type 2 diabetes. The old risk adjustment factors covered the cost of traditional treatments so that over a large enough population, diabetes is a break-even proposition for Medicare Advantage insurers. Those risk adjustment factors don’t change that quickly. So if the Medicare Advantage insurers can set up diabetes coaching programs similar to the YMCA program that produce somewhat similar results in the very near future, they’ll still be getting risk adjustment payments for higher cost traditional treatment even as the lifestyle training and coaching through the Y leads to better results and much lower costs. This is a short term opportunity to get outsized profits from diabetes as each year going forward replaces a traditional diabetes experience year with a year of traditional plus lifestyle coaching experience year which should lead to a lower risk adjustment factor.

In a couple of years, insurers that still only pay for traditional and less effective diabetes management will be getting risk adjustment payments for their diabetic population that are far less (because it is based on coaching costs as a primary treatment regime) than their actual medicalized costs of treatment.


The amazing technological game changer is here

And it is talking combined with trusted social engagement.

Medicare recently authorized a creative new diabetes prevention benefit that leads to better health results and significantly lower costs.  The core technological driver is talking and coaching at the YMCA.  The Incidental Economist/New York Times has details:

That feeling shifted last week when Sylvia Mathews Burwell, the secretary of health and human services, announced that Medicare was planning to pay for lifestyle interventions focusing on diet and physical activity to prevent Type 2 diabetes. It’s an example of small-scale research efforts into health services that have worked and that have expanded to reach more people….

The Diabetes Prevention Program grew out of extensive research on weight managementand behavioral learning. More than 3,200 patients age 25 to 75 with pre-diabetes were randomized to one of three groups. The first group was given an intensive lifestyle intervention. By focusing on a low-fat, low-calorie diet with the addition of exercise through brisk walking or a similar intensity activity, it encouraged people to lose at least 7 percent of their body weight and maintain that over the course of the trial.

The backbone of the intervention involved 16 one-hour face-to-face meetings that helped each individual participant set and achieve goals to improve health habits. The second group was treated with metformin, a medication that can lower blood glucose, and the third was the control group, provided with a placebo medication.

The trial was ended early because the results were so compelling. Those in the medication arm had a 31 percent reduction in the risk of developing diabetes. More important, those in the lifestyle intervention saw a 58 percent reduction in their risk. Moreover, if you were 60 or older at the beginning of the study, your reduction was 71 percent. A later meta-analysis confirmed that these results for lifestyle interventions were replicable across numerous different studies….

the behavioral expert, Mr. Marrero worked with the Y to reshape all 16 core intervention lessons and several maintenance lessons into a group-based format led by instructors who were Y employees. The new intervention was about $205 per person, a fraction of the original cost.

They estimate that if the Y program were expanded to all Medicare beneficiaries, the government might save about $2,650 per participant over 15 months, much more than the program cost.

This is a big deal. And the core component of the program is frequent coaching sessions by a trusted coach who gives actionable feedback and course correction guidance.

Talking and trusted coaching is the killer app of population health management, not a new set of pills or ever more doctoral level providers, although doctors are critical as they are the most trusted information conduit. Payment reform is part of the package but it is just an enabling feature. Payment reform without trusted coaching to achieve behavioral change is massively insufficient.

My employer is working on a coaching initiative that is showing very significant results in terms of health improvement and cost avoidance. We had tried for years to have a call center staffed with nurses and nutritionists and pharmacists to harass people into making behavioral changes. The problem was the probability of someone staying on the phone for more than fifteen seconds after the caller identified themselves as coming from the insurance company.  We were getting a lower retention rate than cold-callers selling steak knives.  However as soon as primary care physicians were told to write an actual prescription to call the insurance company for help, response rates quadrupled and preliminary results are showing some awesome (and statistically significant) changes.

Under the old fee for service model, good health coaching made no economic sense for the primary care provider.  A good health coach provided by an outside entity meant office visits avoided, it meant tests avoided, it meant hospitalizations avoided.  Those are all great things for the patient, those are all great things for the payer.  They are bad things for the primary care physician’s revenue.  However the movement towards accountable care organizations and risk adjusted capitation means these are opportunities for better member health and better profits for the doctor.  They don’t have to see their frequently visiting patients as often or at as high level of care, they are ordering fewer tests and seeing fewer hospitalizations.  Since they are getting a flat fee for their entire practice and their more expensive patients are getting cheaper to manage because they are getting healthier, they make more money and more importantly according to a few focus groups I’ve observed, they’re happier practicing medicine instead of writing scrips.

From a system perspective, a significant fraction of healthcare costs, especially for the Medicare population, have roots in modifiable behaviors. Changing those behaviors through trusted talking and coaching is usually more effective and efficient than prescribing brand name prescriptions or in-patient admissions. We’ll see more talking and less cutting in the future.