Pricing matters

At the Health Affairs Blog, I looked at the on-Exchange enrollment changes in 2018 stratified by the type of exchange and the state strategy for dealing with the termination of Cost Sharing Reduction (CSR) subsidies.

This is the money exhibit:


Unsurprisingly, to me at least, pricing matters. Silver Loading, the CSR strategy that placed all of the CSR costs into the Silver plans, saw the comparatively best results.  I believe this is because Silver Loading strategies lowers the relative price of Bronze and Gold plans while holding Silver plan premiums constant for subsidized buyers.  Lower prices for two plan categories and constant pricing for the third should lead to some increased demand.

Silver Loading was not a panacea for enrollment.  Silver Loaded states saw a 3% enrollment decline as a whole but there were some states with significant enrollment gains.  I thought that the split in experience between states and state branded website states to be interesting as well.  I am using state branded websites as a mental proxy for local support for the ACA (Idaho is a notable exception).  I think that local support and better pricing will produce better results than less local support and more federal counter-messaging to enrollment despite better pricing.

But the short story is the expected story: prices matter.

Plan domination and the Gold Gap Strategy

I’ve been a major proponent of states Silver Loading CSR costs onto only their Silver plans so that premium tax credits would increase faster than the overall rate of claims cost increases. This makes the subsidized premium of Platinum, Gold and Bronze plans lower than they otherwise would have been.

There is a major concern though. People have to be able to figure out what they are looking at and make a good choice. I will define a “goood choice” as a non-dominated choice. A dominated choice is one where on all relevant metrics Plan A meets or beats Plan B. A dominates B. If there is a metric where B beats A even if A beats B on everything else, there is no dominated choice.

As a matter of policy, we should not want people to make dominated choices.

Andrew Sprung looks at the choices people made in Maryland where there is a significant Gold Gap in action. In 2017, 1.% of the people earning between 150% and 200% Federal Poverty Level (FPL) bought an 80% Actuarial Value (AV) Gold plan. These folks qualified for an 87% AV CSR Silver. In 2018, they still qualified for an 87% Actuarial value Silver but 9.8% of this population bought either a Gold plan.

2. Choices in 2018, when bronze plans were nearly free to everyone under 200% FPL and gold plans were either close in price to silver (for about 85% of enrollees) or slightly cheaper than silver (for about 15%) are also pretty on-point. The main problem, as noted in the prior post, is a dropoff in CSR takeup. Those under 200% FPL who bought gold chose “dominated” plans — that is, plans offering less AV per premium dollar than silver …. On the other hand, the extraordinarily high level of gold selection among those above 200% FPL reflects pure bounty for an under-subsidized cohort (excepting the subsidy-ineligible, for whom gold was merely less overpriced than silver). (my emphasis)

In Maryland, a subsidized eligible person who makes under 200% FPL is better off with a CSR Silver plan than a Gold plan if we assume the same network. Buying Gold for someone who is eligible for a 94% AV or an 87% AV Silver at a lower net premium is a mistake. Bronze may not be a mistake as the lower net premium (or $0 net premium) is a significant differentiation compared to Silver.

They have the ability to calculate the estimated net of subsidy premium and they can identify unique networks and unique benefit structures. State based exchanges have the ability to compare plans and identify dominated plans for each individual buyer. State based exchanges should be able to control the display of dominated plans at the individual buyer level. State based exchanges can either completely suppress the plans for a particular buyer or make the buyer click through one more screen to see all plans instead of the non-dominated plans.

States that want to improve the Exchange experience for their citizens have the tools to do so if they elect to do so.

Iowa’s new monopoly

Iowa’s governor signed into law a plan that will intentionally break the ACA market in Iowa

Wellmark, Iowa’s Blue affiliate, and the Farm Bureau will be allowed to sell to any Farm Bureau member “health benefit plans” that are explicitly not health insurance and therefore unregulated by the ACA. These plans can underwrite. These plans can exclude pre-exisiting conditions. These plans don’t need to offer a full set of benefits. These plans are basically a reversion to the 2009 status quo.

And if an individual can pass underwriting and does not qualify for significant ACA subsidies, these plans are a good deal as that group of people are mainly looking for hit by a meteor protection. Well subsidized individuals will be indifferent to these plans as the subsidies buys affordable comprehensive insurance on the Exchange. The people in trouble from this scheme will be individuals who either can never pass underwriting or will pass with so many upcharges or restrictions that passing is still pointless. Their options are to either move out of the state or to drop their incomes so that they qualify for ACA subsidies.

Additionally, Wellmark will be effectively granted a de facto monopoly on non-group insurance sales in Iowa. There is currently a single insurer, Medica, offering ACA plans. Wellmark has signalled that it wants to re-enter the ACA market in the state for 2019. Wellmark will be able to strategically offer ACA compliant products that can stick Medica with very high cost individuals without sufficiently high risk adjustment payments to make them whole. At the same time, Wellmark can pick up all of the limited remaining good risk into the underwritten not quite insurance plans while choosing how much and at what price point they want to take on of the remaining highly morbid guaranteed issued pool. Medica has no ability to defend itself or project its exposure. I will be shocked if Medica is still selling policies in Iowa next January.

Wellmark then will have the entire individual market and significant elements of the group market in Iowa. They will have an incredible data and pricing advantage against any potential competitor. And given that the Iowa political establishment pulled the rug out from underneath Medica after Medica did them a solid, I don’t think many competitors will be willing to enter the state.

Utah’s partial expansion request

Utah’s governor just signed a bill that authorizes a 1115 Medicaid demonstration waiver. The waiver combines work requirements with a request. This is interesting on several levesl.

KUER reports:

The new law would ask the federal government to allow Utah to widen it’s low-income health insurance program. Right now, a single adult with Medicaid coverage can only make about $600 per year — essentially homeless. Under the new law, the same individual could be covered if they make anything up to the poverty level, approximately $12,000 per year.

It also adds a work requirement for those who qualify. If an individual is unemployed and wants Medicaid coverage, they’ll have to do things like get job training, volunteer or take classes.

This is interesting on several levels. First it is a red state with a Republican trifecta trying to expand Medicaid. They are asking for a work requirement but as far as I can tell the requirement would only apply to the expansion population. This is still a lot of people who make very little money so the vagaries of scheduling and intermittent work will be a massive implementation challenge but the work requirement is less restrictive than several that have been requested.

Far more interesting to me is that Utah is asking for a partial expansion. We’ve talked about partial expansions before.

The distributional consequences are important. For people who earn between 100-138% FPL in states that have not expanded Medicaid, nothing will change for them. They are no worse off. People who live on less than 100% FPL in these states will be dramatically better off as they will have Medicaid for their coverage….

More interestingly to me is that CMS recently turned down Arkansas’s request to change the enhanced match rate Medicaid expansion to 100% Federal Poverty Level (FPL) instead of the current 138% FPL. However there is a very critical difference: Arkansas had already fully expanded Medicaid. They went for the most expensive and convoluted system of expansion possible by sending most of the healthy population into the Exchange pool. That system costs 24% more than a straight up expansion of Medicaid but it got local buy-in. However Arkansas is now paying a fraction of the cost of expansion and they’ve been moving more of their private option population back into the less expensive legacy Medicaid system. The Arkansas proposal to shift the 100-138% FPL cohort to the Exchanges and off of Medicaid was an attempt to dodge previously obligated committments.

Utah has never expanded Medicaid. The 100-138% cohort is already on the Exchange and they are already eligible for federal subsidies. Expanding Medicaid to only 100% has no increase in costs for the Federal government on the Exchange side of the ledger. If there is only a partial expansion, the Feds are paying for the 100-138% cohort and if there is no expansion the Feds are still paying. This is a very different fact pattern than Arkansas so there is a chance that CMS could approve the waiver.

And if that is the case, then several more hold-out states would probably seek the same waiver.


Quality in networks

Covered California is the California exchange entity. It is very different than any other exchange in the country as it is a very active buyer and manager of the choices it allows to be sold on the individual market. This has allowed it to be the leading Silver Gapper and Silver Loader in the country as it does not allow for a single Medicaid like insurer to take both the least expensive Silver and the benchmark Silver position.

It is also allowing for an aggressive attempt to reform networks by improving quality. KQED reports:

In the next three-year contract that Covered California strikes with insurance companies, there will be a quality-focused stipulation: any hospital that doesn’t meet certain targets for safety and quality can be excluded from the health plans sold through the marketplace….
Covered California is joined by Medi-Cal, the state health program for low-income residents, CalPERS, the retirement program for state employees, and the Pacific Business Group on Health, which represents self-insured employers. Together, these groups pay for the health care of 16 million Californians, or 40 percent of the state, which gives them substantial leverage with hospitals.

But only Covered California is telling hospitals that if don’t play by the rules, they’ll be benched.

There is enough market power on the payer side to make a lot of the providers listen. The goals are only somewhat ambitious, but there is serious money attached to them so most hospitals will at least file paperwork that shows the desired levels of performance.

This is an interesting attempt to use market power of a group of coordinated buyers to get better value out of the provider world.

Evaluating Buy-in proposals

Last week, Emma Sandoe and I wrote in the Health Affairs blog an outline on how to think about evaluating Medicaid buy-in proposals.  We thought that as the primary season is opening up and the chaos in the individual market, that more states will start thinking about Medicaid buy-in options for the individual market.  From here, the most critical thing in evaluating a Medicaid buy-in proposal is identifying what the sponsors are seeking to achieve with such a proposal.  We think there are several goals that could be achieved via a Medicaid buy-in.  Some of these goals may be in opposition to each other.

  • Increase the value and breadth of coverage in the Individual Market
  • Offer more options to people living in low competition regions
  • Stabilize and improve the viability of the individual market by eating some strategic risk
  • Lower premiums for individuals in the individual market
  • Increase consumer protections in the individual market
  • Leverage the current combined Medicaid and individual market power to push system delivery reforms.

The key challenge to evaluate any buy-in proposal is figuring out what it is trying to do.  Once that is identified, the evaluation is fairly straightforward but if you are an advocate, please press your representatives to clearly articulate the problem that they are trying to solve with this policy.  That is just good advice in general.

Say my name, say my name

Almost a quarter of the population is covered by Medicaid.  But not everyone who is on Medicaid knows it.  Ashley Tallevi examines the implications of privatization features that leads to the misidentification of Medicaid as private insurance in the Journal of  Health Politics, Policy and Law**:

When I measured privatization simply using managed care enrollment, which is the most widely used measure of Medicaid privatization in studies of Medicaid underreporting, I found no relationship between privatization and Medicaid self-reporting. However, when I specified administrative features of Medicaid managed care organizations (MCOs) that obscure government’s role, I found that these administrative features are related to the underreporting of Medicaid enrollment. Medicaid recipients become less likely to report their enrollment when MCOs mix Medicaid recipients and commercial enrollees in the same plan and when Medicaid MCOs include the private company’s name in the MCO plan name. I also found that, when this misreporting occurs, Medicaid enrollees are frequently reporting enrollment in private insurance plans.

Charles Gaba was curious about this question in 2015 and his data is stunning:

it’s jaw-dropping to discover that not only does Medicaid itself operate under more than 100 different names (some states have several separate or overlapping Medicaid programs), but that when you include CHIP and “other” state-funded healthcare programs the total number swells to over 200.

Going back to my main point: Of the 106 different Medicaid programsonly 15 of them (from just 12 states) have the word “Medicaid” in their actual publicly-branded name. For instance, in Connecticut, “Medicaid for Low-Income Adults” is referred to as “HUSKY Part D”. In Wisconsin, their main Medicaid program is called “BadgerCare”, but they do have another variant called “Wisconsin Medicaid Purchase Plan” or MAPP for short.

My last position at UPMC Health Plan was on the Medicaid team where I optimized risk adjustment revenue strategies for UPMC for You, the Medicaid managed care component of the company. This rings true to me. Every piece of advertising, branding and communication that I can remember focused on UPMC for You. Medicaid or Medical Assistance was seldom mentioned anywhere other than the Monday morning data geek team meeting.

One of the things that happily surprised me last year was the power of the Medicaid push back on the Republican health cut bills.  Not everyone on Medicaid knew that they were on Medicaid although I would imagine that the parents of medically fragile children and the beneficiaries with significant, persistent high cost needs were very well aware of how Medicaid allows them to structure their life even if they were on Badger Care or Apple Care or UPMC for You or whatever else.

Medicaid is a critical resource for lots of families, but the naming conventions hides the value of that resource to some beneficiaries and the broader public.


** Ashley Tallevi; Out of Sight, Out of Mind? Measuring the Relationship between Privatization and Medicaid Self-Reporting. J Health Polit Policy Law 1 April 2018; 43 (2): 137–183. doi: