If you’re unhappy and you know it, complain

Mnemosyne has been on fire in comments regarding what to do when you think an insurance company is screwing you over:

Part 1:

Assuming he hasn’t been able to appeal successfully to his insurance company, I’ve been strongly encouraging people to file complaints with their local insurance regulators and with HHS. …It’s really, really important to let the state and federal regulators know whenever an insurance company does something hinky, because if consumers don’t report it, they won’t know….

Part 2

I say, complain anyway. Make them explain to the state and to the federal government that it was someone else’s fault while providing boatloads of documentation. My husband works in healthcare and whenever a state regulator shows up, it’s a really big deal.

Am I advocating that you be a nuisance and make the state investigate things that are probably legal on paper just to annoy the insurance company? Yep!

She is exactly right.  If you are unhappy with your insurance company complain.  If the front line staff can’t satisfy you, complain some more.  If the management staff can’t satisfy you, complain to the c-level while CC’ing your complaint to the state regulator, the local newspaper, local competitors and the effectively annoying investigative reporter.  Even if what the insurance company is doing is legal, at that point, the Andy Rooney rule comes into play — C level execs don’t want to be chased down the hallway by Andy Rooney and the 60 Minutes camera crew, so a solution will often be found.

A short story here — as part of the Mayhew Insurance Exchange offerings, we offer a very narrow network product. It is fundamentally designed to keep people away from an expensive chain of hospitals.  All of the marketing material has 72 point warnings saying that we won’t cover non-emergency services at That National Hospital Chain.  Someone bought that product and then three weeks later had an elective surgery at That National Hosptial Chain.  The individual in question had received a denial of authorization and a follow-up phone call to say that the surgery would be authorized at the other three hospitals the surgeon had privileges at, but not at Hospital X.  The bill was denied as out of network, and the person started to complain that we engaged in unfair and deceptive advertising.

The complaint escalated to the C-level and local reporters within a week, and there was a massive meeting to determine if we unfairly screwed the person over.  Legal was of the opinion that we were in the clear, and marketing/PR ran the calculation that is was cheaper for us to pay the claim then to take the hit from several thousand pissed off words in the local paper.  We paid the claim as if the member was in network.

Complaining works

Not all filed plans will be sold

Just a quick technical note.  The Qualified Health Plan filing period is now.  Insurance companies are preparing their plans for the 2015 open enrollment period and need to file their preliminary rates, their preliminary plan designs and their preliminary networks with state and federal regulators in the next couple of weeks.  This means we’ll see stories like the following (h/t ACA Signups.net )

Twelve insurers filed 114 individual health plans for sale inside the Exchange, Washington Healthplanfinder. If approved, the number of Exchange plans would increase from 46 to 114. Eight insurers currently have plans inside the Exchange.

Also, 10 insurers filed 119 individual health plans for sale outside of the Exchange, raising the potential number of non-Exchange plans from 51 to 119. If all are approved, the number of insurers will stay the same. The total number of plans available may change during the review process.

I guarantee that there will not be 114 plans for sale on the Exchange in Washington State this November.  I don’t know how many plans will be filed and then either not approved or not offered once approved, but this number is non-zero.

 Why would an insurance company file a plan, get it approved and then not sell it.

There are a couple of reasons.

The first is if there was a significant deviation in the network between the initial filing and final filing.  For instance if Mayhew Insurance wanted to file a narrow network plan that paid 109% of Medicare rates for a set of rural counties, and the network depended on one group of a dozen specialists to provide key high end accessible care and that group all dies in a team building parasailing accident, then the network can’t function and the product will get pulled.

Another is as a tool against providers.  For instance if there is a hospital group in an outlying county that wants to get Medicare +100% for all services and all products, building a network which can serve that county while excluding that hospital is a piece of leverage to haggle about the next three year contract.  If the insurance company gets a decent price (say Medicare +15 for Exchange, Medicare +48 for Commercial), the gerrymandered network plan might get withdrawn.

The preliminary filings also gives an insurance company a good idea of what is competitors are doing.  It might not make sense to sell a product that is matched against a nearly identical competitor’s product when the competitor is already deeply embedded in a dominant marketing position in a region.  The plumbers only have so much time to plumb.  If the product is going into an uncontested segment, the effort could be justifiable, but if the segment is already under fierce competition, the plumbers’ time is better spent elsewhere. 

Similarly, and this is a net policy negative, a product could have been offered that is adverse selection friendly.  For instance, if there is a network with several very good pulmonologists  in a region with known high concentration of Exchange eligible kids with cystic fibrosis while all other networks have the minimal required number of pulmonologists, the plan may get pulled as it is extremely likely that the really attactive network will attract way too many $300,000 per year cystic fibrosis members without sufficient revenue numbers to support that type of medical expense. 

 Finally, the actuaries will get several more months of data to refine their models and see if anything strange is happening.  Products and plans might get pulled if the pricing model changes due to new data.

Reference pricing as another no

The biggest problem with American health care financing going forward is cost.  For the same common procedure, American providers charge much more (purchasing power parity adjusted) than other OECD providers.

 we pay higher prices for the same care? Among prescription drug costs, we pay far more than any other country, at least 20% more than Canada and over 60% more than New Zealand. For the same MRI’s and CT scans, we also pay more: $1,080 is the commercial average cost for an MRI in the U.S. as compared to $599 in Germany; at CT of the head costs $510 on average in the U.S. versus $272 in Germany. For a hip replacement, we again pay the most: $1,634 among public payers and $3,996 among private payers, versus $1,046 and $1,943 respectively in Australia. And physicians’ incomes are the highest: $187,000 on average among primary care doctors in the U.S. versus $93,000 in Australia; and $442,000 among orthopedic surgeons in the U.S. versus $154,000 in France.

Reference pricing is a cost controlling payment strategy.  It works when an insurance company looks at its contracts with providers and see that 75% of the providers who meet quality standards charge no more than X for a given procedure or bundle of procedures. The insurance company then says that X is the most that it will pay for the procedure.  If a patient goes to a doctor that charges no more than X, the insurance company pays full benefit.  However if a patient goes to a provider who charges more than X, the insurance company pays full benefit up to X, but after that, the patient/member is on the hook the remainder.

Reference pricing works well for elective, non-urgent procedures that are well defined and common.  For instance, reference pricing has been tried by CalPers for hip and knee replacements.  Other common procedures where reference pricing could be useful would be vasectomies, ACL replacements, lapband, gastic bypasses and anything else which has a significant amount of flexibility in the scheduling.  The goal is to drive people to use less expensive providers in order to get high cost providers to drop their prices. 

This is similar to tiering and steering that we discussed last month as it is a strong nudge to get people to go to lower cost providers as there is minimal evidence that shows high cost providers are noticably higher quality providers. 

I think tiered networks will be more common on the Exchanges this fall as well as more common for employee sponsored plans as they produce cost savings while at least maintaining the illusion of unlimited choice.

Reference pricing, from a member point of view, acts similarly to a tier network but at the procedure level instead of the provider level.  It is a bit more complicated that a true tier and steer network model.

The reason why the past 470 words are important is the Obama Administration last week issued a clarification on reference pricing for Exchange policies.  Reference pricing will be allowed, and it the amount that members/policy holders have to pay over the reference price will be attributed to the out of network out of pocket costs.  This is important because in-network out of pocket is limited to deductible, copayments and co-insurance to no more than $6,350 for a single person in a policy year. 

Your health insurance plan slaps a hard limit on what it will pay for certain procedures, for example, hospital charges associated with knee and hip replacement operations. That’s called the reference price.

Say the limit is $30,000. The plan offers you a choice of hospitals. If you pick one that charges $40,000, you would owe $10,000 to the hospital plus your regular cost-sharing for the $30,000 that your plan covers.

And that extra $10,000 doesn’t count toward your plan’s annual limit on out-of-pocket costs.

That’s crucial because under the health care law, most plans have to pick up the entire cost of care after a patient hits the annual out-of-pocket limit, currently $6,350 for single coverage and $12,700 for a family plan. Before the May 2 administration ruling, it was unclear whether reference pricing violated this key financial protection for consumers…

I think this is a good thing on the proviso that any reference pricing scheme is extremely clearly disclosed, and pricing is amazingly transparent.  We need systems of No on medical care, and reference pricing is one of the stronger systems of No that has a demonstrated history in both the United States and overseas of reducing costs without compromising quality.

Indiana’s expansion plan is better than nothing

Wonkblog has a good explainer for what is being proposed by Indiana to expland its Medicaid program:

 Pence last year insisted that he would only expand coverage if he could do it through the Healthy Indiana Plan, a health savings account-type of program for about 45,000 adult Hoosiers who didn’t qualify for the traditional Medicaid program…

Pence will lift HIP enrollment caps, opening up the program to working-age adults earning less than 138 percent of the federal poverty level ($16,105 for an individual or $32,913 for a family of four). Between 334,000 and 598,000 people will be covered under the plan, according to Pence’s office. Enrollment will open in 2015, with federal approval…

  • HIP Members under the poverty level have the option to make monthly contributions. If they don’t, they’ll be transferred to a more basic level of coverage without vision and dental benefits. The lower coverage level requires co-payments for services, instead of monthly premiums. There are no co-pays, though, for preventive care and family planning services.
  • HIP members above the poverty level who don’t pay a monthly contribution within 60 days are locked out of the program for six months. They can’t opt into the basic coverage level.

The basic plan design is a high deductible health plan where people are responsible for the first $1,100 of costs initially with it potentially expanding to $2,500.  It is better than nothing, but it is a pretty shitty deal. 

Read more

The mechanics of Medicaid expansion

Yesterday’s post about Healthy Pennsylvania brought up an interesting set of questions.  Would a straight up expansion of Medicaid instead of implementing Healthy Pennsylvania take less time to build the back-end infrastructure?  The logic is that the current Medicaid system is already working, so adding another 500,000 people would be “merely” an increase in scale.

It is a bit more complicated than that.

The biggest complication is provider network contracting.  Mayhew Insurance is a Medicaid managed care organization for the state(s) that we operate in.  Our provider contracts have an opt-out clause for individual networks when there is a material change to business model, population, reimbursement or other critical circumstances.  I am not a lawyer, but I have seen what our legal department considers a “material change” and a population increase of half a million people easily qualifies as a material change.  The provider network would need a ninety day opt-out period where providers could opt-out without penalty.

After the provider opt-out period ends, new providers are needed to both replace the lost providers and to give a decent possibility of good access to care.  This is another three to nine month process.  It is not a critical show-stopping step, it is an ongoing process.  More importantly, contracts will be revised with exisiting providers to insure that there is adequate capacity and adequate reimbursement to cover the newly insured people.  This means provider offices will need to hire more CRNPs, more physician assistants, more nurses (not many more docs would be hired is my guess).

In conjunction with network expansion, is a significant behind the scenes ramp-up.  Customer service reps need to be hried and trained.  Some companies have a three day training period, others have a three month training period (and you can quickly tell which company trains to what standard).  Medical management needs to be expanded and probably retrained as the expansion population is different in key aspects than the Legacy Medicaid population (expansion is more male, different age distribution, fewer comorbidities, fewer long term care problems). 

New benefit grids need to be designed, tested, modeled and disseminated.  My state covers a few populations that make more than 100% Federal Poverty Limit.  These sub-populations already have co-pays and minimal deductibles for services, so if my state was expanding, I would assume that at least the expansion individuals who make more than 100% FPL would also have some cost-sharing.  We could template off of exisiting plan designs which is faster than building from scratch, but it is still a significant process. 

A straight up Medicaid expansion to do it right needs at least six months of prep work.  I would prefer at least nine months to minimize stress, but six months is needed to get things done well the first time.  Three months could get an expansion to Initial Operating Capacity with a signficant four to six month Phase 2 clean up.  Simple expansion would probably save only a month or two over building out a brand new line of business.

Healthy PA or nothing until 2016

Atrios raises an interesting question concerning Healthy PA.  Healthy PA is the proposal by Gov. Corbett (R-PA) to expand Medicaid by using a combination of the Arkansas private option and the Michigan style health incentive/HSA program plus some gratuitous poor shaming.


I’m not sure if it’s better to just pay it and get people enrolled, or gamble on the reasonable possibility that after November a new governor will have a better plan.

I’m not a Pennsylvania political junkie, but from my understanding of Pennsylvania politics, it is extremely likely that Corbett loses this fall to any of the fairly generic/standard issue Democrats running but the Republicans are extremely likely to continue to hold one if not both chambers of the state legislature.

The biggest downside to this political gamble that the Democrats could get something better is timing.  Right now, the Corbett administration has put out a request for interest/application to Pennsylvania insurance companies.  If the goal is to have Healthy Pennsylvania running on January 1st, the health insurance companies have six months to do the prep work.  Speaking as a plumber, six months to build a brand new product with a whole lot of strange and odd business rules is an extremely aggressive timeline.  It is achievable if the Pennsylvania companies are able to keep most of their plumbers on a single task.

Now, as I understand it, the Pennsylvania governor’s term starts in mid-January.  Getting anything better than Healthy PA past at least one Republican controlled chamber will take several weeks/months.  At that point, the plumbing for expansion is several more months.  Realistically, if anything better than Healthy PA can get passed, it probably could not be implemented until at least September 2015, more likely the start date would be January, 2016.

There is a non-zero probability that a failed Healthy PA (shot down by Dems holding most of their votes away) leading to a failed straight up Medicaid expansion.

The trade-off is Healthy PA effective January 1, 2015 OR the probability of something better on either September 1, 2015 or January 1, 2016 plus the probability  of nothing.  If Healthy PA is implemented, it can be tweaked, modified and improved.  My moral sense says it is better to get a significant improvement in wellbeing for the most disadvantaged in society than to hold out for the possibility of something better but later with the chance of nothing. I’m mini-maxing here.

MPS on subsidies

I think Kevin Drum is getting something wrong on healthcare subsidies and the economy in a liquidity trap:

 don’t have access to the full Goldman Sachs report, but I’m dubious about this for two reasons. First, Obamacare is roughly revenue neutral, which means federal subsidies are all paid for via tax revenue. Obamacare really shouldn’t have any first-order net stimulative effect on personal income or GDP. Second, although subsidies will reduce health insurance bills for people who were previously covered—thus freeing up income for other purposes—the individual mandate will force previously uncovered people to buy insurance they didn’t have before. This will reduce the income they have for other purposes.

Let’s think through the basic financing of Obamacare cash flows.  At its simplest, Obamacare transfers money from high income individuals to lower income individuals through the form of either subsidies for health insurance or Medicaid expansion payments.  The taxes that pay for Obamacare are primarily a surtax on high incomes via income taxes and an expansion of what is considered taxable income for OASDI-HI taxes.  Those taxes mainly hit people who are making more than $200,000 in MAGI.  There are a few other taxes (tanning, medical devices, reinsurance etc) that hit people at all income scales, but most of the new taxes are paid for by higher income individuals.

Subsidies are limited to family units making less than 400% Federal Poverty Line.  More subsidy dollars go to families who are poorer. Medicaid expansion dollars are limited to families making less than 138% FPL. 

Going back a few years, the CBO estimated the multiplier effects of various ARRA (stimulus) programs.

CBO multipliers
The key insight is that an economy that is operating significantly below potential, and where there is a significant class of people who are fundamentally tapped out of both ability to spend and ability to borrow, giving those people more money at the expense of taxing people who have unused capacity to spend and borrow should produce a significant burst of economic activity.  That is the basic financial transfer mechamism of PPACA — money goes to poorer people with a high marginal propensity to spend and it comes from people with a high marginal propensity to save. 

Does this analysis hold in all conditions. Hell no.  It holds when we’re stuck at the zero-bound and getting out of a massive debt overhang.  If we’re seeing an economy expanding like it is 1943, this analysis fails miserably, but we’re not seeing an amazing and unsustainable boom right now.