The clock is ticking and insurers operating on the new public health insurance exchanges have just two months to gather data on 2014 enrollees to help guide decisions on business plans for 2015.
With Monday's grinding close of the 2014 open enrollment period, insurers offering individual health insurance policies on the exchanges are pivoting their attention to setting rates and benefit products for 2015.
The final day of enrollment was frustrating for consumers and payers alike as the Healthcare.gov website was offline for several hours because of an apparent software problem and high volumes of users.
But now that all applications have at least been started in the system, payers' attention turns to the next phase. In the Final 2015 Letter released by CMS on March 14, the qualified health plan application submission window is set between May 27 and June 27. Between now and the end of June, insurers will be pouring over enrollment and claims data, as well as assessing market factors present in exchanges state-by-state, to craft their insurance policy offerings for 2015.
"Insurers are already moving to learn as much about their new customers as possible," Ceci Connolly, managing director of Pricewaterhouse Coopers' Health Research Institute, said Friday. "They want to know about any existing health issues, but also try to determine what problems might be looming on the horizon. In this particular demographic, multiple chronic conditions are possible and the major challenge will be managing those efficiently."
Factors Already in Play
While it likely will take weeks for federal and state officials to release key beneficiary data from the exchanges such as age distributions, actuaries and others crunching the health insurance policy numbers for 2015 have already identified several factors they will have to take into account.
As Connolly noted, there is a widespread assumption that the 2014 beneficiary pool on the new exchanges will have a disproportionately high number of unhealthy people compared to subsequent enrollment years. This assumption is based on the reasonable expectation that pent up demand for medical services among the previously uninsured will prompt those individuals to be among the first to sign up for individual coverage on the exchanges.
"I would bet that many of the first million people who enrolled were people with pre-existing conditions who couldn't get coverage before," said Tammy Tomczyk, senior principal and consulting actuary at Oliver Wyman Consulting Actuaries inMilwaukee.
As insurers look toward setting premium rates and benefit packages for 2015 and beyond, the percentage of enrollees with pre-existing conditions is expected to decline, she said. "As we add [more beneficiaries to the exchanges], we're not going to be adding more of those people because they'll already be in," Tomczyk said.
A 'Bifurcated Market'
Another major factor already in play for 2015 rates and benefit packages is the Obama administration's decision to allow states to let individuals keep their health insurance policies outside of the exchanges as long as the end of 2016. Most states took the feds up on the offer, while more than a dozen, including Colorado, will be requiring individuals to purchase health insurance on the exchanges in 2015.
The states that have allowed individuals to keep health insurance policies off the exchanges through 2016 are running the risk of creating a "bifurcated market," Tomczyk said, noting young policy holders have little incentive to give up existing coverage that often has premium discounts based on age.
If insurers had known federal officials were going to allow "transitional policies" to stay in place through 2016, carriers would have set their 2014 premium rates higher, Tomczyk said. "The rates would have been higher than we saw," she said. "And we wouldn't have seen the likely jump in 2015 that we are going to see."
In Colorado, state exchange officials are predicting a major impact from the requirement for individuals to purchase health insurance through Connect for Health Colorado next year. The year "2015 will be a whole different world," exchange CFO Cammie Blais said last week.
Consumers Key Players
Fostering consumer education is seen as essential to establishing efficiency, stability and predictability on the exchanges.
"During the last few weeks, more people have been contacting Humana with questions about their coverage options under the Affordable Care Act. We've also seen an increase in traffic at our ACA educational events," said Alex Kepnes, director of corporate communications at Humana.
"Humana's approach throughout ACA enrollment has been to provide clear, basic education so people can make well-informed decisions about their health care coverage options. The more informed people are, the more empowered they are to make the right choices about their health needs."
For years, hospitals have complained about low Medicaid payment rates. Now hospital associations are leading the fight to expand Medicaid to millions of low-income adults in two dozen states that have yet to embrace expansion.
Steve Ahnen
President of the New Hampshire Hospital Association
Medicaid is no longer a dirty word in hospital boardrooms.
"Right now, someone is sitting in an emergency room because they didn't have coverage," said Steve Ahnen, president of the New Hampshire Hospital Association, last week after NH lawmakers cleared the path to Medicaid expansion in the Granite State by approving a Senate bill that resolved a yearlong political struggle over Medicaid expansion. "The ability to resolve that is to get people covered."
Ahnen says NH hospitals have been feeling the pinch from uncompensated care that totaled $425 million in 2013. "We believe [Medicaid expansion] will have a significant impact on relieving that burden," he said.
Medicaid Expansion, Payer Oversight Seen as Vital to Healthcare Reform
New Hampshire joins several states including Arkansas and Iowa that have chosen to expand Medicaid to income-eligible adults under the age of 65 through the new health insurance exchanges. As opposed to a straightforward expansion of a state's existing Medicaid program, the "premium-based model" allows states to use federal Medicaid expansion dollars to help low-income individuals fund the purchase of health insurance policies on the exchanges.
"We tried to find a way to provide access… and not continue to impose the cost on ratepayers for the uncompensated care," said NH state Sen. Nancy Stiles, (R-Hampton). She says one of the prime benefits to hospitals is that they will receive a higher rate of reimbursement from health policies on the exchange than they would have received through expansion of the state's existing Medicaid program.
Two dozen states have yet to expand Medicaid to income-eligible adults, and hospitals are feeling the pinch, according to Brendan Saloner, PhD, lead author of a perspective piece on Medicaid expansion published in the New England Journal of Medicine on March 27. He says one way the federal government is paying for healthcare reform efforts under the Patient Protection and Affordable Care Act is through cuts to the program Washington had previously used to help hospitals pay for uncompensated care, the Disproportionate Share Hospital reimbursement program.
Cuts to DSH "went into effect under the assumption the states would expand Medicaid," Saloner wrote, adding that hospitals serving low-income populations in states without Medicaid expansion are taking a heavy blow. "That causes a lot of financial strain."
In Missouri, which is politically gridlocked over Medicaid expansion, the state hospital association is leading the charge to expand the program.
"The question is not really whether Medicaid will put hospital revenue in the black, it is more a question of how deep in the red hospitals can go," said David Dillon, VP of media relations at the Missouri Hospital Association. "Without new Medicaid coverage and revenue… hospitals will not only experience the federal cuts but continue to shoulder high uncompensated care costs. In 2012, the most recent year of full data, Missouri's hospitals provided $1.17 billion in uncompensated care."
At the heart of the federal Medicaid expansion push is a guarantee from Washington to pick up the entire tab through 2016. In subsequent years through 2020, the federal reimbursement rate to the states will be tapered to 90 percent.
Pre-expansion Medicaid programs have federal reimbursement rates ranging from 50 percent to 74 percent.
The MHA has established a coalition with business leaders to help break Missouri's Medicaid expansion logjam. "The ACA is the law of the land. In Missouri, the hospital community has teamed up with the Missouri Chamber of Commerce and Industry to move the discussion forward," Dillon said.
"Businesses understand that without a Medicaid reform and expansion law, they will be exposed to significant cost shifting to support uncompensated care. For Missouri's business community, this has been a kitchen table issue, not a foray into the culture wars."
"Our analysis indicates that with more efficient management of enrollees in the current Medicaid program, the state could actually benefit financially from Medicaid reform," said Dillon. "And, this isn't just in the 100-percent years, but enough through the end of the decade that with proper stewardship Missouri could have nearly $700 million in trust for future state health spending requirements."
NH Deputy Insurance Commissioner Alex Feldvebel says Medicaid expansion should bring relief to hospitals in his state that have felt financial pressure from uncompensated care. "This newly eligible population, because of its low income, will consist primarily of uninsured persons. Providers will be better off when a low income patient has coverage rather than no coverage," he said.
But Robert "Bo" Ryall, president and CEO of the Arkansas Hospital Association, says Medicaid expansion is not a panacea for hospitals struggling to adjust to the pace of healthcare reform efforts and the associated financial changes. "Overall, hospital reimbursement has been severely impacted because of Medicare reductions in the Affordable Care Act and sequestration," he said last week. "Medicaid expansion does help hospitals, but in no way comes close to making up for the Medicare reductions."
After the enrollment deadline passes, private insurance carriers operating on the public exchanges must move quickly; they have only two months to file proposed premium rates and product designs for 2015.
Final 2014 enrollment numbers are about to start pouring out of the state and federally administered exchanges across the country like the roaring rivers washing away this harsh winter's heavy snowfall.
At insurance companies and exchange headquarters, officials will be sifting through the data looking for key factors that will help characterize the 6 million individuals who have reportedly enrolled in private insurance plans through the exchanges since October.
The stakes are high for payers, as they assess the cost of doing business with their new customers and try to glean insights from their 2014 beneficiaries that will help them set exchange premiums and product designs for 2015.
"The devil is in the details," Tammy Tomczyk, senior principal and consulting actuary at Oliver Wyman Consulting Actuaries inMilwaukee, said Friday. "Six million signed up, but how many of them paid? Or do they keep their coverage? Are we going to have four million, five million, or six million? I don't know where we're going to end up."
If enrollment on the exchanges is set at about six million beneficiaries, which is the enrollment figure predicted by the Congressional Budget Office in February, Tomczyk said the prospects for stability in the new exchanges could be good. "The bigger the pool, the higher the probability that you will have younger and healthier people coming in," she said, adding data from the exchanges over the next few weeks will make the picture clearer. "The big question, if it really is six million, is what do they really look like? How old are they, for example?"
At the Centers for Medicare & Medicaid Services, the federal agency working to launch and stabilize the exchanges, officials reacted gleefully Friday to government data showing individual enrollment in the exchanges had crossed the 6 million mark. "The Affordable Care Act is working," a CMS spokeswoman said. "More than six million Americans have signed up for private insurance through the Marketplace, and we're continuing to see a nationwide consumer surge in demand for Marketplace coverage. We only expect this demand to increase in the coming years."
Key Beneficiary Pool Factors
While noting there will be important circumstantial factors to consider from state to state, Tomczyk said "you can count on one hand" the factors that will determine 80 percent of the risks insurers face in the 2014 pool of exchange beneficiaries:
Age
The well-established correlation between higher age and higher healthcare costs means that in states where the exchange beneficiary population is skewed to older individuals, insurers will face higher risk of costly claims.
Metal Mix
There is a presumption that older individuals and people with chronic diseases will pick the most comprehensive Platinum plans to avoid annual out-of-pocket expenses of more than $4,000 in many bronze plans. "For a person in poor health, they're better off buying the Platinum," Tomczyk said. "In general, the people who enroll in Bronze will be healthier."
Medicaid Expansion
About half of the states have expanded Medicaid to income-eligible adults under the age of 65. Presuming low-income individuals are at higher risk of chronic disease and other costly conditions, providing medical coverage through existing state Medicaid programs will divert some of the least healthy individuals entering the health insurance market away from the exchanges. A twist will come in 2015 and beyond, when several states are set to expand Medicaid through the exchanges rather than through existing state Medicaid programs.
Pent Up Demand
In the first year of enrollment in the exchanges, there is an expectation that individuals with pre-existing conditions who could not get insurance before federally driven healthcare reform will be among the first to enroll. While nailing down the numbers will be difficult, Tomczyk said the previously uninsured will fall into two categories: those who were young, healthy and saw buying insurance as an opportunity; and those with costly pre-existing conditions. "This is the data, [that] as it starts emerging, becomes very helpful," she said.
Claims Experience
"With only three months of claims, you can get a pretty good idea of people's risk score for the year," Tomczyk said. "We're going to start looking at our clients' data."
On Friday, CMS said it finds the early data from the exchanges encouraging. The exchanges, a spokesperson said, are proving to be sustainable and appear to be paralleling the experience in Massachusetts, which established a balanced exchange risk pool after then-Gov. Mitt Romney launched a comprehensive healthcare reform effort in 2006.
Exchange Operator's View
From the vantage point of officials operating the exchanges, the 2014 enrollment data will reveal potential unbalances that could be destabilizing factors in the new markets.
"One of the key pieces of this is to have balance," Cammie Blais, CFO of Connect for Health Colorado, said Thursday. "We've been happy with the mix that has come in. But it's going to be critical to use that information to calibrate our next steps and determine how we continue to partner with stakeholders."
Getting a detailed profile of the 2014 Colorado exchange beneficiaries will "become a leading indicator of what we need to be focusing on next," Blais said. The steps Connect for Health Colorado officials need to consider include policy holder retention, policy renewals, and changing marketing campaigns to recruit enrollees from groups that have historically faced barriers to accessing healthcare, she added.
Operators of exchanges across the country are "getting a longer-term view" as the focus on launching the exchanges turns to stabilizing them. "There's going to be early adopters and those who hold out and wait to see if it's going to work… The people who are enrolling now either have a need or see it as an opportunity. … It's a longer vision that we need to have. Our reality will continue to change."
After decades of business interactions that have ranged from politely cooperative to openly hostile, healthcare payers and providers appear destined for peaceful coexistence.
Lynda Mischel
CEO of Noble Health Alliance
US healthcare reform efforts are fueling a drive to establish closer relationships between payers and providers, with a wide range of experimentation under way nationwide.
"I don't think it's going to be an easy change, but it's going to happen," Lynda Mischel, CEO of the newly formed Noble Health Alliance in suburban Philadelphia, told me recently. "Across the country, there are all kinds of examples of providers and payers offering joint products or providers opening health plans of their own."
Noble Health Alliance was established late last year when four health systems based in the Philadelphia area signed a cooperative agreement. Noble is researching potential payer partners to see whether the new cooperative organization can offer a "risk-bearing product" to provide insurance coverage to patients.
Finding a good payer partner is expected to be a key element in Noble's mission to offer a seamless continuum of care to patients throughout the new health system's provider network, says Mischel, who has a professional background in health insurance including managed care operations and employee assistance programs. "A payer/provider partnership is required to change the delivery of care," she said.
Mischel told me Noble has identified several qualities it desires in a payer partner, including technical capabilities and willingness to share data. "Our [existing] payer partners are looking at this as well," she said.
Data sharing is one of the prime benefits of closer payer/provider relationships, and several other healthcare industry executives who have broached the topic over the past two months.
"Our world has become so complex, we need to come together to look at data to make sure patients are getting the best care," Mischel explained, noting electronic medical records have shown great promise in reducing physician errors. "In the 21st century, data is going to drive our ability to provide quality care."
Mark Caron, senior VP and CIO at Pennsylvania-based Capital BlueCross, told me last week that providers are eager to gain access to claims information that provides the "whole picture" of a patient's medical history. "They're drowning in information, but they don't have that longitudinal record," he said of health systems, hospitals, and physicians.
Caron says data sharing between payers and providers has the potential to help educate patients about their health risks and to boost transparency in the healthcare delivery system. "The more we create an informed consumer, we'll all win as a society," he said. "Consumers have done a really good job in other industries to help them be the best they could be."
Mischel and Caron both told me there is no single dominant model that is likely to emerge from the ongoing evolution of the payer/provider relationship. "It will look different from market to market," the Noble CEO said. "We're really at the beginning of what the payer/provider relationship may look like."
Caron says there is intense interest across the country in finding new ways for payers and providers to work together in a manner that fits their unique market circumstances.
"Both sides are coming together to leverage the other's competency," he said. "There's an openness to pilot and work together to try new things… It's not going to be a cookie-cutter approach."
Barbara Ladon, managing director at Denver-based Newpoint Healthcare Advisors, told me last week that size is an important consideration for providers seeking closer relationships with payers. Large health systems have more options because their larger scale allows them to take on increased risk and play a health plan role. "The smaller hospitals—150 to 200 beds—are looking for collaborative relationships," she told me.
Drawing payers and providers closer together should help to create a value-based healthcare delivery system. "It's all based on improving the health of the population," Ladon said. "Providers are incented to take on the responsibility for managing the care of the population."
In terms of increasing value, there also is a powerful logical reason to pursue closer payer/provider relationships: partners work together better than adversaries.
After stumbling at the starting line, federal officials are pushing for a strong finish in the inaugural open enrollment period for the new public health insurance exchanges. And they're offering some individuals a deadline extension.
In contrast to the fall's nearly disastrous rollout of the federal government's public exchange website, HealthCare.gov, a hopeful spring appears to be dawning.
As Monday's open enrollment deadline to obtain individual policies on the exchanges approaches, the Obama administration has reported a signup surge.
With about 800,000 people enrolling in the first two weeks of March, more than 5 million individuals have obtained health insurance policies through the exchanges, federal officials say.
On Tuesday night, federal officials confirmed that consumers who have started but not completed the enrollment process by the March 31 deadline will have the option of requesting an extension. As recently as March 12, in testimony before the House Ways and Means Committee, Secretary of Health and Human Services Kathleen Sebelius rejected the prospect of a deadline delay.
Unless there is an enrollment flood in the final two weeks of this month, the exchanges will fall well short of the 7 million enrollee goal set by Sebelius last July. But officials at the federal agency administering the exchanges are sounding a confident note about the sustainability of the new markets.
"As this historic open enrollment period for the Health Insurance Marketplace enters its final days, we've seen the momentum gathering across the country," a spokeswoman at the federal Centers for Medicare and Medicaid Services told HealthLeaders on Monday. "Since October 1, more than 5 million people have signed up for coverage through the Health Insurance Marketplace, and we're continuing to work hard to ensure that every American who wants to enroll in affordable coverage by the March 31 deadline is able to do so."
And CMS officials are expressing confidence in the new exchanges as they look to the future. On March 14, CMS released its Final 2015 Letter for the public exchanges, which set several rule changes for the exchanges next year. Also on March 14, CMS released a 278-page document which proposes more rules changes for 2015 such as protecting exchange navigators from state interference.
"Based on the experience of this open enrollment period, we are also already looking ahead to 2015 and have taken steps to provide early guidance and certainty stakeholders need to provide affordable health coverage next year and beyond," the CMS spokeswoman said.
After reviewing the lengthy document detailing proposed rules changes, a legal analyst at Wolters and Kluwer's Health Reform KnowlEDGE Center in Illinois said its title, Patient Protection and Affordable Care Act; Exchange and Insurance Market Standards for 2015 and Beyond, uses language "not typical of HHS," noting the similarity to the Buzz Lightyear catchphrase, "To infinity … and beyond!"
"If there is a message, it is 'we're here to stay,'" said analyst Michelle Oxman.
Executives at ikaSystems, a Massachusetts-based company that has been helping insurers operate on the public exchanges, say policy carriers are banking on the exchanges to become a permanent fixture of the broader health insurance market.
"We aren't betting against the likelihood that CMS and the administration are able make the exchanges 'sticky,' and, perhaps more importantly, our health plan customers believe that the move to individual markets and exchanges is here to stay," Brian Kim, senior VP for account management at ikaSystems, said Monday.
He said there is little doubt that the exchanges have taken hold, but uncertainty lingers about how the exchanges will evolve over time. "The question is really about what form they will take based on the forces that support, contest and seek to shape the exchanges."
"On that note, we necessarily take a pragmatic view, individual adoption could be modest or massive, small businesses could flock to them or move into private exchanges, the regulatory and administrative requirement changes could be minor or major. All we can do," said Kim, "is help our customers manage the ambiguity by fostering nimbleness and flexibility through solution design and modularity."
Medicaid expansion, regulation of insurers, and oversight of private insurance plans are key factors in the national healthcare reform effort, a Commonwealth Fund report suggests.
"In states choosing not to expand Medicaid, more than 15 million underinsured and uninsured people have incomes below poverty—earning less than $23,550 a year for a family of four," the Commonwealth Fund report released this morning says. "Unless their states expand Medicaid, there will be no new coverage options—either Medicaid or premium assistance—available to them."
On a teleconference call to present the findings Monday, the lead author of the report said the resister states are taking a high-risk gamble. "There's a lot at stake when we exclude those under 65 from having insurance," said Commonwealth Fund Senior VP Cathy Schoen. "It's a very valued good. It's something people want and they want better health."
The research sets state-by-state baseline data for the number of uninsured and underinsured across the country before the introduction of healthcare reforms under the Patient Protection and Affordable Care Act.
Low-income individuals were considered underinsured if they had health insurance but spent 5 percent or more of their income on medical costs. People in higher income brackets were considered underinsured if they spent 10 percent or more of their income on medical costs.
The key findings of the report include:
Thirty-two million people under age 65 were underinsured in the United States in 2012.
The rate of the underinsured in states ranged from a low of 8 percent in New Hampshire to a high of 17 percent in Idaho and Utah.
Low- and middle-income people were at highest risk of being underinsured, accounting for 30 million of those who had health coverage but lacked adequate protection against high health costs. Low-income people face the highest risk by far, with 26 million listed as underinsured.
About 47 million people were uninsured in 2012, a decline of nearly 2 million from 2010. The improvement is almost entirely due to the provision of the PPACA that allows children 25 and under to remain on their parents' health plans.
About 2 million people have joined the ranks of the underinsured since 2012, mainly because of the proliferation of high-deductibles and other cost-sharing burdens for consumers.
Oversight of Private Insurance
The Commonwealth Fund's Schoen says payers and providers have essential roles to play if Medicaid expansion is going to be successful. "When we're offering insurance," she said of the emerging post-PPACA markets, "it's the private insurers we're relying on."
The report calls for "effective oversight of private insurance plans" and Schoen says effective regulation of insurers is a key factor in the national healthcare reform effort because they are creating the provider networks that form the foundation for insurance policies.
"They are agents, and they are organizing care systems for us," she said. "We're relying on private insurers to provide us with options, and we want to make sure they do a good job… This is really a chance for them to prove themselves."
"Comprehensive, decent coverage" for all Americans is in the interest of hospitals and physicians, Schoen said.
The practical benefits for providers include an overall improvement in patient health that will drive down healthcare costs as well as less bill collection activity, she said.
'Enormously Complicated Product'
Dr. David Blumenthal, president of the Commonwealth Fund, speaking on the call, said that reforms introduced under the PPACA offer both opportunities and challenges for consumers, who are expected to play a pivotal role in the evolving health insurance marketplace.
"For the first time, we have a transparent market," Blumenthal said. "People have the ability to see what's offered and to make a choice."
But the choice is not an easy one, especially for consumers who have never had health insurance before, he said. "Insurance is an enormously complicated product," Blumenthal said. He noted that many who decided against obtaining health insurance this year on the PPACA exchanges "weren't sure whether the plans were right for them."
Devising health insurance access mechanisms such as the PPACA exchanges is only the first battle in a lengthy US healthcare reform campaign, he said. "Once we create a structure that enables people to get insurance, we're going to have to embark on a long-term process" to educate consumers, Blumenthal added.
So far, 24 states have opted not to expand Medicaid, according to the Commonwealth Fund. New Hampshire is expected adopt a modified form of Medicaid expansion this week, with federal Medicaid dollars set to be used to subsidize the purchase of health insurance on the PPACA exchange.
The Granite State's proposed Medicaid expansion, a bipartisan approach crafted in the state Senate, simplifies the enrollment process for beneficiaries, State Senator Nancy Stiles (R-Hampton), said in an interview Monday. Offering health insurance to Medicaid expansion enrollees on the exchange avoids people having "to switch from place to place" to get coverage, she said.
But Schoen believes the biggest boost to providers could come from creating a healthcare system that does not segregate patients based on their ability to pay. "It would be a new day in America if doctors didn't have to look at someone's wallet before providing care," she said.
As the inaugural open enrollment period for the new individual health coverage exchanges comes to a close, CMS officials are proposing several changes and additions to the Patient Protection and Affordable Care Act to ensure that HIX hold and grow.
In a 278-page document released this month, federal officials propose to fine-tune, optimize and strengthen the new public health insurance exchanges, including the creation of new laws to protect federal consumer advisers from state interference in performing their duties.
Titled "Patient Protection and Affordable Care Act; Exchange and Insurance Market Standards for 2015 and Beyond, the document also provides details about innovations set to be introduced to the exchanges in 2015 and 2016 such as an Enrollee Satisfaction Survey to gauge beneficiary opinion about their insurance policies and a Marketplace Survey to help "assess consumer experience" with the exchanges. The proposed rule and law changes were prepared by the Centers for Medicare & Medicaid Services.
A CMS spokeswoman contacted Thursday said that many of the proposed changes were based on experience from the new public exchanges' initial open enrollment period, which began in October and comes to a close on March 31.
In a clear sign that CMS is beginning to focus on the finer points of exchange operations as opposed to the launch and enrollment efforts that have dominated the agency's attention for more than a year, the "Standards for 2015 and Beyond" document provides guidance for several operational details that had not been previously addressed.
These proposed rule changes cover a wide array of issues, from how health plans should bill beneficiaries for time periods of less than a month as in the case of a birth, to spelling out the difference between the terms "cancellation" and "termination."
Michelle Oxman, a legal expert at Wolters Kluwer's Health Reform Knowledge Center, said the "Standards for 2015 and Beyond" document contains both housekeeping items and specific instructions for exchange features that have increased in importance now that the exchanges have been established.
"Several changes address items that weren't covered in previous rule making. The proration of premiums for less than one month of coverage and the distinction between cancellation and termination could be considered tweaks or clean-up," she said.
"Quality reporting on plans wasn't critical until now, but was required. The marketplace survey and enrollment satisfaction survey are added to collect consumer opinion now that the law has actually been implemented."
Changes to PPACA Proposed
In an apparent reaction to states that have sought to place restrictions on the activities of federal consumer advisers who are helping individuals enroll on the public exchanges, CMS officials are proposing several changes and additions to the Patient Protection and Affordable Care Act, the landmark healthcare reform law that created the exchanges.
Several states have passed laws to set registration requirements and standards for those who provide formal health insurance advice to consumers. Last year, Missouri adopted one of the most far-reaching state laws, the Health Insurance Marketplace Innovation Act. A federal District Court judge issued an injunction against the Missouri law in January, ruling the PPACA preempts state laws that interfere with exchange navigators.
"It's fair to say that [CMS] is responding to attempts by some state legislatures to interfere with the work of navigators and their role in implementing the ACA," Oxman said. "The states that have been the most active in legislating requirements for navigators are Missouri, Tennessee, and Texas. All three state governments have been hostile to the implementation of the ACA from the beginning. A federal court enjoined Missouri from enforcing its 'Health Insurance Marketplace Innovation Act'… which not only required licensing but prohibited navigators from giving information about the terms and benefits of health plans, which is exactly what the ACA and regulation direct them to do. CMS is stating very clearly what kinds of regulation will be considered interference with purpose of the law so that the courts can decide what regulations are preempted."
Navigator 'Interference'
CMS's proposed protections for federal "navigators, non-navigator assistance personnel, or certified application counselors" are relatively clear.
"These proposed amendments are directed at non-Federal requirements that conflict with Federal statutory or regulatory standards and that either, on their face, prevent assisters from performing their Federally required duties, or that would conflict with Federal standards," the CMS document says.
CMS is seeking to overturn any state law that prevents federal consumer advisers "from carrying out Federally mandated duties or from otherwise meeting Federal standards that apply to them, or if a non-Federal requirement would make it impossible for an Exchange to implement those consumer assistance programs consistent with the Federal statutes and regulations governing those programs."
A CMS spokeswoman confirmed that the intent of the proposed rule and law changes for navigators is to clarify the kinds of state laws that can be put in place for licensing, certification or other standards. She said the PPACA preempts state laws that conflict with the federal healthcare reform law or prevent federal consumer advisers from performing their duties.
The "Standards for 2015 and Beyond" document spells out allowable state regulation of navigators: "A State may require these types of Exchange-approved assisters to undergo fingerprinting or background checks before they can operate in a State, so long as a State's implementation of these additional requirements does not prevent the Exchange from implementing these consumer assistance programs in the State consistent with Federal standards or make it impossible for the assisters to perform their Federally required duties."
A Missouri Department of Insurance spokesman said state officials could not comment on the navigator issue because of ongoing federal litigation linked to the Health Insurance Marketplace Innovation Act. Texas officials did not respond to requests for comment.
Kate Abernathy, a spokeswoman for the Tennessee Department of Commerce and Insurance, said her state's legislature unanimously adopted a law on registration of navigators. "That's what we will continue to do until we're told otherwise," she said. "We're just trying to do what our legislature tells us to do."
Help for Health Plans
The "Standards for 2015 and Beyond" document includes allowances for health plans that are linked to the exchange rollout and expenses tied to the conversion to the new ICD-10 code set for medical diagnoses and inpatient procedures.
With the 2014 and 2015 exchange beneficiary pools likely to be more costly to care for than anticipated, CMS is proposing to adjust several mechanisms that offset health plan risk, Wolters Kluwer's Oxman said.
"[CMS] is going the extra mile for insurers who are afraid of having too many sick people on their plans through the exchange, by: one, reallocating the required reinsurance contributions so that Treasury is paid last; two, increasing the permitted administrative expenses by 2 percent; and three, raising the 'profit floor' from 3 percent to 5 percent for purposes of risk corridor adjustments," Oxman said.
"The reasons cited are increased risks to issuers of qualified health plans because of the decision to let people keep noncompliant plans and the fact that these issuers will continue to monitor the risks posed by people currently in the high risk pools and the uncertain costs of reinsurance."
The CMS says federal officials recognize health plans face several risk factors in the 2015 plan year including: additional administrative costs, risk pool effects and uncertainty in the 2015 benefit year related to state renewal of non-ACA compliant plans; the time it will take to fully assess the risk profile of 2014 enrollees given the six-month initial open enrollment period; protracted phase-outs of high-risk pools; and the scheduled decline in reinsurance program payments.
To help compensate exchange health plans for costs related to ICD-10 conversion, CMS officials are proposing to extend an existing compensation rule indefinitely, Oxman said.
"The proposed change would extend the existing rule to include 2014 and any later year of implementation if CMS delays ICD-10 again," she said. "The rule allows … issuers to count the costs of the conversion incurred in the year the changes become effective, up to 0.3 percent of earned premiums, as quality improvement activities. This amount would count toward the 'medical loss' in the medical loss ratio as if it had been spent on patient care."
New 2015 rules for the health insurance exchanges establish a clear and relatively straightforward path to renewing health plans and beneficiary policies. But several payer concerns still remain.
In their "Final 2015 Letter" released Friday for the new public exchanges, federal officials announce a relatively easy framework for health plan and beneficiary policy renewals for 2015, adopt changes related to provider networks, and set a 2015 health plan application timeline that pegs open enrollment to begin Nov. 15.
Health plan executives and state exchange officials alike have anxiously awaited a decision on how the federal Centers for Medicare and Medicaid Services would set 2015 renewal rules. The prospect of requiring all beneficiaries to obtain 2015 coverage through open enrollment had prompted fears of beneficiaries dropping out of the exchanges or switching health plans in large numbers, disrupting the nascent markets for individual and small business health insurance.
In the Final 2015 Letter, CMS states, "Current enrollees in recertified plans will remain enrolled into the new benefit year, as long as those enrollees do not terminate their coverage."
The new rules released Friday also allow insurers operating on the exchanges to keep 2014 carrier and health plan identification numbers for plans recertified for 2015. The insurers' trade association, America's Health Insurance Plans, had predicted a logistical nightmare if new identification numbers were required in 2015. "Changing these IDs would be extremely disruptive both for consumers (in not having the option to remain enrolled in their current QHP) as well as for plans in supporting the electronic file transfer between the Exchange and the plan," AHIP officials said in formal comments submitted to CMS on Feb. 25.
Provider networks
The Final 2015 Letter establishes a new standard to measure provider network adequacy and creates a more stringent standard for the inclusion of essential community providers such as hospitals that serve low-income patients.
"CMS will now be assessing provider networks with a 'reasonable access' standard in order to figure out which networks failed to provide access 'without unreasonable delay,'" says Gregory Hammond, a legal analyst at the Health Reform KnowlEdge Center in Riverview, IL.
For the 2014 plan year, CMS assessed provider network adequacy based on three criteria: carrier accreditation status, a state review that was at least as stringent as reviews required under federal law, and network access plans collected from carriers.
In their formal comments filed Feb. 25, AHIP officials urged CMS not to change the provider network adequacy criteria: "First, the proposed changes are a significant and unnecessary departure from how network adequacy is reviewed today. Second, we are very concerned that such significant changes and rulemaking are being considered so close to the beginning of the application submission process. Third, we believe CMS' approach will be practically difficult—if not impossible—to implement, particularly for the 2015 benefit year." The AHIP officials say developing a provider network "can take upward of a year or more to complete."
In another blow to AHIP's members, the Final 2015 Letter sets a higher standard for the percentage of essential community providers that insurers must include in their provider networks. For 2014, provider networks operating on the exchanges had to include 20% of essential community providers present in the network's geographic area. In 2015, provider networks will be required to include 30% of essential community providers.
In its Feb. 25 comments submitted to federal regulators, AHIP raised several objections to the 30% standard, including the short time frame to adjust to the new standard, the apparent emphasis on network size over other considerations such quality and local market dynamics, and the "troubling" ability of CMS to review payment rates and offers to prove good faith, which could reveal "sensitive competitive information."
More change on 2015 horizon
In a change that adds bite to regulation of the public exchanges, CMS will not be continuing the "good faith enforcement safe harbor" given to health plans in 2014, exposing insurers to possible civil fines.
According to the Final 2015 Letter: "CMS acknowledged the transitional nature of the 2014 benefit year, and agreed not to impose civil money penalties or decertify QHPs for non-compliance with certain Marketplace requirements if the QHP issuer has made good faith efforts to comply with applicable requirements. CMS expects that by 2015, issuers will have gained more experience operating in the [public exchange] environment and/or will be more familiar with the Marketplace requirements."
In the preamble to AHIP's Feb. 25 comments to CMS, Dan Durham, AHIP executive vice president for policy and regulatory affairs, presses regulators to keep the safe harbor policy in place for 2015. "Given the continued focus in 2015 on new regulations, technology, processes, and procedures, we urge CMS to continue to recognize good faith efforts regarding compliance in 2015," he says.
And the Final 2015 Letter is not the final word on rule changes for the public exchanges next year. "Some policies with operational implications in the Draft 2015 Letter to Issuers are not being finalized in this Final 2015 Letter to Issuers, with the intent to continue work to accomplish them," the CMS document states.
A CMS official said Wednesday that one area that remains targeted for possible rule changes is the collection of provider network data. The Final 2015 Letter states: "For future years, CMS is further considering appropriate formats for collection of provider network data, which would both enable CMS to review provider network adequacy and allow for the creation of a search engine function for consumers to find particular providers and provider types on HealthCare.gov."
Mark these dates
While noting "all dates are subject to change," the Final 2015 Letter sets a timeline for key dates for health plan applications to participate in the public exchanges. The milestones include the following:
The qualified health plan application submission window is set between May 27 and June 27
Final submission of health plan data is set for Sept. 4.
Health plans should receive notice of final certification by Oct. 14
Payer and provider executives alike are grappling with a nearly crippling level of uncertainty on how regulations and rules will change their business.
"Risk comes from not knowing what you're doing." —Warren Buffett
How do you run a business in a highly regulated market where the rules are seemingly in a constant state of flux? Health plans across the country are facing this quandary on deadlines that are often measured in days and weeks, not the months and years it takes for most businesses to react effectively to a changing market.
While health plan executives are reluctant to go on the record, I have been inundated with a flood of hushed complaints over the past two months from insurance industry insiders who say they are grappling with a nearly crippling level of uncertainty.
You do not have to look hard to find examples of what they are talking about.
On the new public exchanges for individual health insurance policies, carriers have faced a bewildering maze of business challenges from quarters that are largely beyond their control. Just in the past two months, federal regulators have changed or considered changing key ground rules for the new public exchanges, including the decision to allow individuals to keep insurance policies that do not comply with the Patient Protection and Affordable Care Act until fall 2016. For its part, the Centers for Medicare and Medicaid Services released a 148-page document that included details about proposed Medicare payment rate changes in the fiscal year starting in October.
People inside and outside the health plan community are still trying to figure out what CMS is likely to do when the agency sets the final Medicare fee-for-service and Medicare Advantage payment rates early next month. I was among the horde of health plan executives, analysts, and journalists under orders to decipher the CMS guidance on Medicare payments.
The agency released its guidance document just before 5 p.m. on Friday, Feb. 21. When I called a government affairs executive at one of the large health plans on Monday, Feb. 24, she said her staff "had been working all weekend" to understand the regulators' intent, but they still had more work to do before they could offer a comment.
Whether you have been working in the private sector for decades or are finishing Economics 101 in college, this level of complexity and uncertainty should send shivers down your spine. My spine variously tingled and contorted over the several days it took to get a handle on CMS' Medicare payment document.
To get a handle on the crushing complexity flowing from reform efforts in the healthcare industry, let the wisdom of the free market be your guide.
Last month, publisher Wolters Kluwer Law & Business opened the Health Reform KnowlEdge Center to provide a comprehensive consulting service to payers and providers struggling to keep up with the pace of change. "We have been hearing a lot of cries for help over the past two years," says center director Nicole Stone. "It became clear to our clients that this new [healthcare reform law] wasn't going away. … They needed to prepare themselves for what was coming in the future."
Stone says healthcare providers and payers have been overwhelmed with more than 700 new laws and regulations since President Obama signed the PPACA in March 2010. "There's so much out there that particularly providers need to comply with," she says, such as the imminent adoption of the ICD-10 code sets for medical diagnoses and inpatient procedures. "I don't know how anyone stays on top of all that information and can still do their own job."
Several Wolters Kluwer clients have hired lawyers and analysts "just to keep track of the health reform changes," Stone says
The KnowlEdge Center employs 30 full-time staff members to keep tabs on changes in laws and regulations, Stone says. "You also have to be aware of what the President is doing on the side," she says in a pointed reference to the White House-driven decision to allow individuals to keep non-PPACA-compliant policies through fall 2016.
Good business leaders are always looking down the road to gauge the opportunities and challenges ahead. When Stone looks to the future, she sees strong demand for her product, healthcare reform information, for many years to come.
"It's incredibly complex and it's only going to get more complex over time," she says. The troubled rollout of the PPACA public exchanges is set to be followed by a new set of challenges. "There's going to be more litigation, a new administration, and more changes put into place that are going to be incredibly difficult."
Join our webcast on "Hospitals Developing Health Plans: Key Steps to Becoming a Provider-Payer," featuring executives from North Shore-LIJ Health System CareConnect Insurance Co. and Sanford Health System, on March 28, 2014, 1:00–2:30 p.m. ET. Register today.
Alongside the more publicized individual public health insurance exchanges, a relatively new public marketplace for small business health insurance offers another choice to employers.
Federal and state Small Business Health Options Program marketplaces opened since the fall are developing slowly, but the SHOP exchanges show great promise to transform small employer health insurance, according to carriers, state officials, and a Commonwealth Fund study.
Seventeen states and the District of Columbia have opened SHOP exchanges since October, with the federal government operating the small business marketplaces in the remaining states. The performance of the SHOP exchanges varies from state to state, and none of the federally operated exchanges have automated billing or administration, says Sarah Dash, one of the authors of the Commonwealth Fund study and a research fellow at the Georgetown University Health Policy Institute in Washington.
"Basically, there's still a small business market outside the SHOP," she said in interview Friday. "There are still a lot of things in play in terms of enrollment."
Dash says several factors are depressing SHOP exchange enrollment levels, including the federal government's decision to allow renewals of small business health insurance policies through fall 2016, even if they do not comply with the PPACA. "Early renewal takes a whole chunk out of the market that could have entered the SHOP," she said. "They are taking a big customer base out of the SHOPs."
The SHOP exchanges have rolling enrollment, which has eroded employer urgency to join the new market, Dash said. "They have a rolling ability to enroll, so there's not been this rush to a deadline like March 31 [on the individual public exchanges]…We're really just at the beginning."
'Two-Fold Value Proposition'
Jim Sugden, small business marketplace manager at Connect for Health Colorado, says he is optimistic about the long-term prospects of the SHOP exchange in the Centennial State. "We are finding our way along. We are off to a slow start, but it's a new concept," Sugden said in an interview.
The Colorado exchange official said the SHOP exchanges offer a level of choice to employers and their employees which has been elusive in the past. "Our value proposition is two-fold," Sugden said, noting a small percentage of employers are eligible for a small business tax credit. "A larger number of employers will find the larger choice more attractive… I know this can work because choice is a winner if you present it properly. You have to frame the choice in terms of being meaningful for the employees."
Connect for Health Colorado, described as a quasi-public entity by its CFO, Cammie Blais, offers 96 plan designs from six carriers on its SHOP exchange. As of March 1, there were 176 groups enrolled, with about 1,600 individuals either receiving or slated to receive benefits, Sugden said.
The Colorado SHOP exchange should be able to seize a significant share of the state's small business health insurance market, he believes. "I'd really like to see us have 25 to 30 percent of the market," Sugden said, adding the Colorado SHOP exchange could be "financially sustainable" as early as January 2016. "If you look at a business plan for most businesses, you get three, four, or five years to be sustainable."
Dash says the SHOP exchanges have the potential to help the country achieve a value-based healthcare system. "The idea is you aggregate the purchasing power of your individuals and your small businesses," she said. "Big businesses can drive value-based initiatives. They can kind of drive the marketplace more [than smaller players]… The idea behind the marketplaces is as an aggregator and setter of standards. That's the promise as far as the value-based delivery system is concerned."
Rhode Island on a Roll
While the Commonwealth Fund study does not gauge SHOP exchange performance, it does indicate "which ones are working and which ones aren't working," Dash said, noting the states are leading the charge.
"The states that did move forward with establishing their own SHOPs really tried to make this a value-add for small businesses," she said. "Federally run SHOPs just don't have the level of choice. Employers in those states don't have the options that are available in other states."
Several states offer health insurance policies on their SHOP exchanges that exceeded federal standards, according to Dash. She says seven states, including Rhode Island, offer the fullest possible range of plans.
"Our SHOP exchange is one of the only SHOP exchanges in the nation that has been up and running since October 1," HealthSource RI officials said in a statement released Monday. "We've been pleased with the interest we've seen from Rhode Island's small employers, particularly around our unique Full Employee Choice model, which lets the employer select a base or reference plan at a designated contribution level and then gives employees the flexibility to choose from any of the 16 plans offered on our SHOP exchange. Employers appreciate having predictability in cost while still having the flexibility to let their employees choose what's best for them."
As part of their enrollment efforts, HealthSource RI officials said they are working to build partnerships with brokers. "We offer training for brokers and we work hard to let employers know that if they have a relationship with a broker they like and trust, they can continue to work with that broker to enroll through HealthSource RI."
Neighborhood Health Plan of Rhode Island is bullish on the small business insurance policies it is offering through HealthSource RI. "Some of the good SHOP exchange news in Rhode Island is that the site functions well, there have been no significant IT issues, and the experience for businesses and brokers of purchasing coverage in a new way has been positive. We anticipate these early and continuing HealthSource RI successes will build momentum and help grow our state's SHOP exchange over the coming months and year," said Tom Boucher, a spokesman for the health plan.
'Hard to be Definitive'
Brian Kim, senior vice president for account management at Southboro, Massachusetts-based ikaSystems, which is helping health plans operate on the new public exchanges, said it is too early to determine whether the SHOP exchanges are a small business health insurance game changer.
"For health plans, there remains enormous variability in potential outcomes and adoption rates," Kim said. "Flexibility remains the name of the game to be able to participate without over-committing, yet also without hamstringing efficiency and differentiation… The promise of SHOP is very attractive for small businesses, and it very well may be a significant shift for small and large businesses. At the same time, it is hard to be definitive."
According to Kim, three factors will determine the market impact of the SHOP exchanges:
Uncertain market rates for plans available on the exchanges: Rates could mimic premium increases seen in the individual market due to benefit structure requirements; or volume and risk pooling could reduce overall premiums.
The attractiveness of medical underwriting for certain industries with lower risk profiles and uncertainty about the negatively self-chosen market that remains.
The evolution of private exchanges that may allow more medically underwritten rates at a group level.
"At the same time, much of the sensitivity to pricing and market rates is up to the employers and their perception of hiring and retention competitiveness," he said. "The impact of those considerations remains to be seen."
