Health Insurance/Health Care Committee Update
May 18, 2011
- Newly Released Facts & Figures
- Continued Efforts, Added Voices Shaping New York’s Health Insurance Exchange
Individual Subsidy & “Large Employer” Penalty; Auto Enrollment
Quoting from James Surowiecki’s “Bitter Pills” piece on national debt, budget cuts and health care, he notes one person’s “waste” is another person’s “income,” and that the main driver of health-care inflation is utilization, with supply often creating its own demand. With that as a backdrop, some more recent facts and figures released include:
- The annual Milliman Medical Index is out and the numbers are striking. In the last year alone, the typical family of four covered by a PPO saw an average increase in cost of 7.3%. The rate of increase is slowing, the report finds, but in 10 years costs have doubled. In 2002, they paid an average of $9,235 and today they'll pay $19,393. The report also found that "hospital spending is 48% of total health care spending, increases in facility spending (inpatient and outpatient combined) account for over 60% of this year's total increase in cost of health care."
- The American Hospital Association (AHA) released an estimate of costs for establishing an accountable care organization (ACO) per Section 3022 of the Affordable Care Act (ACA). In its 429-page guidance issued April 30, Centers for Medicare and Medicaid Services (CMS) estimated start-up costs and one-year operating costs at $1.755 million. The AHA analysis said costs would range between $11.6 million and $26.1 million.
- The American Medical Group Association (AMGA) notified CMS that 93 percent of its members would not participate in the ACO demonstration project. Separately, ten of the nation's biggest multispecialty groups notified CMS administrator Don Berwick they will not take part in the ACO program. Concerns noted by both groups:
Financial risk: downside risk for shared savings compounded by high investment costs required for ACO start-up and operation.
Severity adjustment for complex patients: limits on accounting for beneficiary acuity level dilutive to savings and potentially compromising proper patient management.
Excessive quality measurement requirements: too many quality measures in the first year (65 measures in five domains).
Patient attribution: retrospective attribution will limit efforts to reduce costs.
Patient opt-out: an impractical opt-out system for Medicare beneficiaries.
- After 2014, within a six-month period, more than 35 percent of all adults with family incomes below 200 percent Federal Poverty Line (FPL) will experience a shift in eligibility that will remove them from Medicaid and put them into an insurance exchange subsidy program, or the reverse. Within 12 months, 43 percent of adults newly enrolled in Medicaid will experience a disruption in coverage. (Source: Rosenbaum et al., Health Affairs)
- A new HHS Research Brief finds that most uninsured families will only pay for about 12 percent of potential hospital visits and those that are uninsured whose incomes are 400 percent above the FPL will only pay for 37 percent of their hospitalizations, leaving the expenses with "providers or shifted to other payers, including Federal, State and local governments, and private insurers."
- Hospital ownership of physician practices increased from 35 percent in 2009 to 42 percent of total physicians in 2010. (Source: MGMA)
Individual Subsidy & “Large Employer” Penalty; Auto Enrollment
Health Insurance Exchanges continue to be a focal point of national and state concern for employers of all sizes. Exchanges are not just a portal through which individuals and small businesses will be accessing coverage and the small business tax credit, but are intended to be the point at which individuals will be determined eligible for the federal premium subsidy offset for coverage.
Starting in 2014, the premium subsidy kicks in, as well as the employer penalty provisions for employers with a workforce in excess of 50 Full Time Equivalents (FTEs). Employers with a high degree of workforce churn – often thought to be retail and hospitality, and most recently joined by nursing homes – have been concerned about how frequently the IRS intends to calculate FTEs. The IRS issued recently a request for comment (not formal rulemaking) laying out various approaches on how this can be undertaken.
National employer groups have been meeting as well with the IRS, USDOL and the Treasury Department on both this aspect of the ACA and the auto-enrollment requirements for employers with more than 200 FTEs. The Business Council continues to work with several organizations and welcomes any feedback employers want to provide specifically around:
- How full-time employees are calculated in determining which employers are required to provide affordable health coverage;
- Challenges employers may face in being able to offer coverage to certain categories of employees even after implementation of the changes made by the Affordable Care Act to the group insurance market;
- Whether there are appropriate exceptions that should be provided for under the employer responsibility provisions; and
- Clarification of limits to the maximum 90-day waiting period in which employers are to provide health insurance.
Plan Design In An Exchange
While all states await the release from Health & Human Services on the essential benefit menu of services which must be offered through the exchange, The Business Council and others continue to impress upon policymakers that plan design and flexibility will be absolutely key in a health insurance exchange intended to serve the small business market.
Related to the importance of plan design options, is a recently released USDOL white paper on high deductible plans which provides useful data; USDOL also issued a recent report to HHS on selected medical benefits which can be found here. An interesting takeaway from the UHF forum (detailed below) is that DOH, as they ready their data service hub for Medicaid enrollment, is working with the Pacific Business Group on Health to categorize 150 different variables into a manageable “5-10” variables.
The Commonwealth Fund released earlier this month its guide to state regulators on risk adjustments under the ACA which summarizes the thoughts of leading risk adjustment experts, explores the challenges regulators will face, considers the consequences of the law’s risk adjustment provisions, and analyzes the merits of different risk adjustment strategies.
New York’s Exchange
Policymakers continue eliciting feedback and accessing research talent to help frame the big policy questions to address as New York’s highly regulated insurance market prepares for adding an exchange option into the mix.
The United Hospital Fund held a roundtable forum last week focused on coordinating Medicaid with the health insurance exchange. Four different presentations were given providing additional insight into the state’s implementation of the $27 million Early Innovator grant; insurance policy issues on incorporation of those licensed solely to offer public health plans into an insurance exchange; implementation of the ACA including state concerns on federal rulemaking related to thorny issues such as defining “modified adjusted gross income”; and building from some of the existing assets in New York to ensure an exchange is well coordinated with Medicaid enrollment and eligibility in NYS. A key concern among the presenters was the ability of the exchange to handle the significant number of program participants in “Medicaid renewal” status and how they will be directed to the appropriate coverage option.
This forum’s purpose was solely focused on the coordination of Medicaid aspects of an exchange, but several elements of the conversation are particularly important to employer stakeholders. In response to a question, “what about the SHOP – aka small business exchange? How will the DOH portal be designed for functionality with businesses and their plans?” The answer given was “we envision SHOP as a separate portal, but we have a lot of work to do on that.” In response to a question posed on whether public health plans are positioned to offer products through the exchange, the answer was, “while not perfectly positioned to do so, these are issues DOH is considering as they think about the exchange structure and the market decisions which will influence whether the market is there for them.” In response to a question about the overlap between commercial plans and Medicaid managed care plans, it was noted that the networks are mostly bifurcated in other than the upstate market but the degree to which the state aligns policies to allow public health plans to be in multiple markets will be key.
The Navigator role continues to evolve, with the state using its learning from the Consumer Assistance Program ACA grant to frame its thinking. The grant operates under a “hub and spoke” model, led by the Community Service Society with 22 other organizations around the state including Legal Aid and the Empire Justice Center, providing public education and enrollment assistance in public and private health insurance products. New York City’s HRA issued its “Framework for a Navigator Program in New York City” last week, making its case to build from its current health insurance successes and seeking to establish a discrete navigator program in NYC that leverages existing resources.
The Governor’s health insurance exchange team continues its statewide forums to elicit input. Health Care For All, an advocacy group seeking universal coverage, issued a call to action to legislators earlier this week urging them to take action on both governance and structure of the exchange. Groups testifying at the Albany forum included Citizens Action; AARP; Burnham Financial Services; and the Health Plan Association (see HPA’s testimony here), among others; the forum ended two hours earlier than planned, with the panel asking no detailed questions of presenters.
While there are no formal proposals from either the Legislature or Administration to react to, how to proceed with implementation of an insurance exchange which preserves options for the 1.6 million New Yorkers getting coverage in the small group market is the “big question.” The Business Council, along with others, is arguing for a measured, cautious approach taking only those public policy steps necessary to retain eligibility to access federal grant funds. Numerous big public policy questions are influenced by the governance of an exchange, but need not be decided simultaneous with enacting a governance model. For instance, given the lack of data to evaluate impact on certain insurance market segments, The Business Council does not believe any legislation enacting a governance model for the insurance exchange should include insurance reforms such as merging the individual and small group markets, or authorizing the exchange to serve employers with up to 100 employees.
Your Input needed
Your thoughts, concerns and questions are most welcome. Implementation of an Insurance Exchange will impact all businesses; and without the benefit of your feedback, we will not be able to ensure your concerns are adequately represented.