Reverting to a pre-ACA insurance market model may be more challenging to commercial payers than dealing with the competition of the exchanges.
Health plan executives are busily developing strategies for surviving the next incarnation of the Affordable Care Act or its successor, and they all are factoring in their new competitor–the exchanges created under the healthcare law. Eliminating that competition actually might not be in their best interests, however.
The exchanges may survive in some fashion or be eliminated, and either result will be a major determinant in how health plans move forward, says Hector De La Torre, executive director of the Transamerica Center for Health Studies, a non-profit division of Transamerica Institute.
"Whether they were in the marketplace or not, they had to take the exchanges into account. If they are just in the traditional insurance market, direct-to-consumer, they still have to take into account what the pricing and benefit structure was in the exchange because they're competing against it," De La Torre says.
"The exchanges have become a significant player in the health insurance market, and you don't just shrink or eliminate that payer and not have it affect the rest of the market."
Removing ACA requirements and eliminating the exchanges would essentially take the insurance market back to 2010, the pre-ACA era, De La Torres says. If essential health benefits are removed, for instance, insurers will be free to sell skinny plans with limited coverage or catastrophic plans, De La Torre says.
"The problem is this isn't 2010. We're seven years later and we've had this other experience. Consumers have had this other experience and that will affect their expectations," he says.
"If we go back to a state-by-state model with one state demanding this kind of coverage and another demanding something else, it's just going to become that much more complicated for the health insurers. The ACA simplified things in many ways."
For better or worse, the ACA took a lot of control and decision making away from the health plans, De La Torre notes. It specified essential health benefits, cost structures, and medical loss ratios under which all plans had to operate.
More Complicated, More Expensive, and More Risky
"You just had to price those products the best you could, in order to be competitive," he says. "Now if we're going back to the pre-2010 model, they're going to have to be everything to everyone. That's more complicated, more expensive, and more risky."
Insurers are developing a range of strategies for every foreseeable scenario, De La Torre says, but volume is the most difficult variable to nail down.
"It's hard to anticipate volume until you know the specifics of what changes are happening," he says.
"I serve on the board of the largest public health plan in America, and we can't anticipate the numbers because there are too many moving parts to anticipate how many people we are going to lose. But we can anticipate some of the impact in terms of how we provide the services, an 'if A, then B' approach, so that's where the focus is now."
A strategy of requiring healthcare providers to publish their rates and offer the same discounts to all health plans could result in more competition and options for consumers, says one expert.
The best way to lower consumer costs for healthcare would be for hospitals to publish their rates and for the government to regulate the level of discounts providers can offer to payers, says Greg Borca, co-founder of SKYGEN USA, a collection of companies that help insurance plans with benefits management.
This idea is not new, but seldom pops up in discussions about repealing or revising the Affordable Care Act, but Borca says it would have a significant impact.
His option would work this way: The government would regulate the level of discounts, and if a provider were to go beyond that level with one payer, including Medicare, that deeper discount would become that provider's new established level for all health plans.
That approach would not only spur the creation of new health plans and free market competition, but also enable the price transparency that President Trump called for during the presidential campaign, Borca says.
Regulating the discounts would make it easier for consumers to comparison shop accurately so they could take control of their spending and help bring down the cost of care overall, he adds.
"The one change that would most affect the cost of healthcare would be forcing providers to publish their rates like everybody else in the world does and then to charge those rates, essentially ridding yourself of these discounted environments," Borca says.
"Whether [providers] do that or not, establishing a discount rate and holding them to it would have a real impact."
New health plans would be encouraged because the government-established discount positions them better to compete with large, well established plans, Borca says. Currently new health plans in a community are hard pressed to take the same discount offered to the bigger players, so the big health plans dominate.
"You'd have an opportunity for an explosion of new health plans if they knew didn't have to go out with hat in hand to negotiate for discounts similar to the ones the big insurance companies have," Borca says.
"If you back out from the health plans that came about to target Medicare or Medicaid opportunities, there have been very few new health plans created in the last 20 or 25 years. To be able to be competitive, you have to get similar discounts, but the hospitals are happy with their arrangements because of the volume, and they aren't going to offer the discount to a new, unknown health plan."
Keeping rates secret and negotiating their relationship with each health plan gives hospitals and health systems a great deal of power. A plan that requires published rates and a uniform discount most likely would be opposed with some vigor by groups representing hospitals and health systems, Borca says.
The proposal would create more transparency for consumers, but the insight would come from the insurers instead of the providers. Even if a provider publishes its rates, the true cost of care will vary significantly from one provider to another and even within the umbrella health plan, he says.
"From a consumer standpoint, having the insurers publish their rates with each provider would give them the most control of their own healthcare choices," Borca says. "They can look at the discounts provided to their own insurers and make an informed decision about where to go for healthcare.
Repealing the health insurance tax would lower health plan premiums about 3%, says the healthcare insurance industry's top advocacy group.
While Congress and President Trump plan their moves to dismantle the Affordable Care Act, the insurance industry group headed by a former administrator the Centers for Medicare & Medicaid Services says the most immediate effect on reducing premiums would come from repealing the health insurance tax (HIT).
Marilyn Tavenner, now president and CEO of America's Health Insurance Plans, which represents its member plans before federal policymakers and lawmakers, called for repealing HIT in a recent blog post. She called the tax "a direct sales tax on health insurance, which directly increases the premiums that people pay."
Tavenner noted that Congress provided a moratorium for the 2017 plan year. In 2018, however, the tax will require employers to pay an average $280 per employee more each year, and $220 more for individuals buying their own insurance coverage.
The health insurance tax will affect premiums at a rate of about 3%, says Kristine Grow, AHIP senior vice president for communications. "Those costs go up for consumers at a time when we're looking for those costs to come down," she says. "It's simply not helpful."
Employers and individual consumers have indicated to AHIP that repealing HIT would have a significant impact, Grow says. For employers, she notes, an additional $280 per employee is a major cost, whether you have 50 employees or 50,000.
A 2014 analysis concluded that over a 10-year period, HIT will result in the loss of 152,000 to 286,000 private sector jobs, and 57% will come from small businesses.
A bill calling for the repeal of HIT is currently supported strongly by both Republicans and Democrats. H.R. 246, the Jobs and Premium Protection Act, which would immediately repeal the HIT, has more than 140 bipartisan cosponsors.
"The environment is best right now for considering this because policy makers are looking at the healthcare system as a whole and considering what could be done in the best interest of American consumers," Grow says.
Chances of Passing
Unfortunately for the bill's supporters, it has about a 1% chance of being enacted, according to GovTrack and its analytics partner PredictGov.
"We've had six years of seeing what works and doesn't work, and the health insurance tax is something that hasn't added value. It's only increased costs for consumers, so now is a really good time for it to be debated."
Repealing the tax soon would help ensure that premiums in 2018 are more affordable for the American people no matter what else is done to change or repeal Obamacare, Grow says.
"This tax also affects those on Medicare and states with Medicaid populations to support, so at a time when we're talking about healthcare and making healthcare more affordable, this would be a welcome action from all of those perspectives," she says.
The Trump administration's first move on Obamacare would shorten health plan enrollment periods and beef up pre-enrollment eligibility verification.
The White House may be moving too slowly for some supporters on its promise to repeal and replace Obamacare, but under pressure from payers, it is taking interim steps to calm an increasingly unstable healthcare insurance market.
With large players such as UnitedHealthcare and Humana pulling out or vowing to exit the marketplace, the Trump administration's first alteration of the Affordable Care Act is meant to shore up the failing market until more significant changes are made.
The Centers for Medicare & Medicaid Services issued a proposed rule for 2018 that would make changes to
Special enrollment periods
The annual open enrollment period
Network adequacy rules
Essential community providers
Actuarial value requirements
The proposal also announces upcoming changes to the qualified health plan certification timeline. CMS calls the proposed changes "critical to stabilizing the individual and small group health insurance markets to help protect patients."
The move comes a day after Humana, one of the nation's largest health insurers, announced that it will stop selling Obamacare health plans next year, citing mounting losses caused by overutilization.
Other major health plans left the market in 2016 for the same reason. Though Humana did not have a major share of the ACA market, the pullout of such a big name nonetheless was seen as one more nail in the coffin for the controversial law.
Anthem, the nation's second largest insurer coverage in 14 states, also has one foot out the door. CEO Joseph Swedish the company is waiting to see what short-term fixes the Trump administration will make to the exchanges before deciding whether to participate next year.
CMS Acting Administrator Patrick Conway, MD, said the proposed rule is intended to ensure that consumers in the individual health insurance markets will have as many health insurance options as possible.
"This proposal will take steps to stabilize the marketplace, provide more flexibility to states and insurers, and give patients access to more coverage options," Conway said. "They will help protect Americans enrolled in the individual and small group health insurance markets while future reforms are being debated."
Consumers Would Have Less Time
The proposed rule offers relief to beleaguered insurers in several ways, first by shortening the upcoming annual open enrollment period for the individual market.
For the 2018 coverage year, the enrollment period would be November 1, 2017, to December 15, 2017, which CMS says would "align the marketplaces with the employer-sponsored insurance market and Medicare, and help lower prices for Americans by reducing adverse selection."
In addition, the rule would expand pre-enrollment verification of eligibility to individuals who newly enroll through special enrollment periods in marketplaces using the HealthCare.gov platform. This proposed change would ensure that special enrollment periods are available to all who are eligible, but would require individuals to submit supporting documentation, a common practice in the employer health insurance market.
This change would help place downward pressure on premiums, curb abuses, and encourage year-round enrollment, CMS says.
To discourage coverage lapses, the rule would allow an issuer to collect premiums for prior unpaid coverage, before enrolling a patient in the next year's plan with the same issuer.
It also would make adjustments to the de minimis range used for determining the level of coverage by providing greater flexibility to issuers to provide patients with more coverage options.
In a move that gives more control back to the states, the proposed rule requires CMS to defer to the states' reviews in states with the authority and means to assess issuer network adequacy.
CMS also announced in the rule its intention to release a revised proposed timeline for the qualified health plan certification and rate review process for plan year 2018 that CMS says will give insurers more flexibility to incorporate benefit changes and maximize the number of coverage options available to patients.
It also was about how the big health plans have influence on so much more than just the premiums their customers pay and the benefits they get.
Judge Amy Berman Jackson of the D.C. District Court sided with antitrust regulators Feb. 1 and determined that the proposed merger would violate antitrust laws by monopolizing too much of the healthcare insurance market. Anthem quickly announced that it will appeal the decision.
The judge's decision was not surprising considering the criticism and questioning that emerged as soon as the insurers announced their plan, says Randal Schultz, a partner at the law firm of Lathrop & Gage and chair of the firm's Healthcare Strategic Business Planning Practice group.
The Department of Justice has not yet released the judge's decision, but Schultz says she must have considered how the reach of big health plans extends into nearly every part of the healthcare industry.
"This issue was about more than just the merger," he says. "The two prime elements of healthcare are how you finance it and how you deliver it, and in this case, the big insurance companies have their fingers in both pies."
Beyond Premiums and Benefits
In addition to how insurers control premiums and benefits, even self-insured employers often rely on big insurers for administrative-services-only (ASO) contracts to coordinate and adjudicate claims, Schultz notes.
"Not only can they set the price they charge to employers for insurance coverage, but if they get the ASO contract, then they can control costs associated with adjudicating claims, they can determine utilization, and of course, they provide the network of providers that the employers use whether they're self-insured or not," he says.
"A lot of providers can't survive without a managed care contract, and if you only have two payers in a community and they just happen to have similar price structures, there's no negotiating."
In theory, the biggest insurers could help control the cost of healthcare because they are so influential, and a merger would give the resulting company even more ability to do so, Shultz notes. But that depends on the health plans sacrificing their own interests for the good of consumers and society, he says, and that's not a horse to bet on.
"If I'm an insurer and I'm the only game in town, what incentive do I have for making it less expensive?" he says.
"It's easier to say your industry should work toward that goal when you have a lot of competition and can spread the responsibility. But when you have so much of the market, and all of the market in some areas, you're not likely to sacrifice profits by lowering the cost of what you sell and what you control."
A Call for Transparency
In the unlikely event that the appeal is successful and the merger goes through, Schultz says the federal government should demand that the merged company release to the marketplace the actual cost of care for the population they insure. That would help mitigate the effect of one company controlling so much of the marketplace, he says.
"If smaller employers have a more accurate picture of the actual cost of care, they can make better decisions about deductibles and self-insurance, which itself would create more competition in the marketplace," Schultz says.
"At this point, blocking the merger and letting companies figure out another way to improve their economies of scale is probably the right thing to do."
Anthem CEO Joseph R. Swedish said he was "significantly disappointed" with the federal judge's decision and claimed the merger would save consumers more than $2 billion in medical costs annually.
Almost immediately after the court ruling that shut down its plans to merge with Cigna in a $54 billion deal, Anthem announced Thursday that it will appeal the decision.
On Wednesday Judge Amy Berman Jackson of the D.C. District Court agreed with antitrust regulators that the merger would create an insurance giant that would unfairly control much of employer-provided health coverage in the country.
"The company promptly intends to file a notice of appeal and request an expedited hearing of its appeal to reverse the Court's decision so that Anthem may move forward with the merger, which was approved by over 99% of the votes cast by the shareholders of both companies," the company said in a statement.
Joseph R. Swedish, chairman, president and chief executive officer of Anthem, said he was "significantly disappointed" and claimed the merger would save consumers more than $2 billion in medical costs annually.
"If not overturned, the consequences of the decision are far-reaching and will hurt American consumers by limiting their access to high quality affordable care, slowing the industry's shift to value-based care and improved outcomes for patients, and restricting innovation which is critical to meeting the evolving needs of healthcare consumers," Swedish said.
"Moving forward, Anthem will continue to work aggressively to complete the transaction while remaining focused on serving as America's valued health partner, delivering superior health care services to our approximately 40 million members with greater value at less cost."
In the parallel case argued on the same grounds, a federal judge last month blocked the proposed $37 billion merger of Aetna and Humana. It is not known if that decision will be appealed.
President Trump's pick for HHS secretary says consumers would benefit if health insurance policies could be sold across state lines. At least one broker says that position misses a key fact of selling health insurance.
The plan outlined for reforming the Patient Protection and Affordable Care Act by President Trump's nominee for Health and Human Services secretary, Georgia Rep. Tom Price, MD, (R) calls for permitting the sale of insurance across state lines.
The Senate may vote on Price's nomination within days, and his confirmation would add momentum to Republican plans to repeal or "repair" the ACA. Republican representatives are split on which is the better option, with more conservative members insisting that the entire law be scrapped.
Simply repealing Obamacare actually could make state differences more influential, according to a recent a recent study from Georgetown University's Health Policy Institute.
Prior to Obamacare, the cost and value of healthcare insurance varied greatly from state to state, the report says, so a repeal without some solution for that problem would be a step backwards.
Permitting sales across state lines could be the answer, says Sally C. Pipes, president, CEO, and Thomas W. Smith Fellow of Health Care Policy at the Pacific Research Institute.
"Unleashing competition in the insurance market is a very good thing," Pipes says. "If a family wants to buy coverage in a state that has fewer mandates, they should be able to. States that have a lot of heavy mandates, which push up the cost of coverage by between 30% and 50%, will be encouraged to reduce those mandates in order to keep people buying coverage in their states."
A repeal or wholesale modification of the ACA could prompt more insurers to enter the marketplace, Pipes says, which would greatly increase the choices for consumers if they are able to purchase plans offered outside of their home states.
"Research has shown that interstate insurance sales would make healthcare coverage available to 12 million more people simply by making policies more affordable," Pipes says.
"Buying in another state won't be the best option for some people because, for instance, you might not be able to access the providers covered by that plan or your own provider may not be in the network.
"But for some people focused primarily on the costs, like young people, it can be a great idea. It will open up the market place rather than closing it, as we have right now."
Missing a Key Factor
Proponents of interstate sales, however, are missing a key factor in how healthcare insurance is rated and sold, says one insurance broker.
Premiums are determined in part by where the policyholder lives, explains Valerie Clark, president of Clark & Associates Insurance Services, a Reno, NV-based insurance agency specializing in health insurance plans for employer groups.
For local residents, "the networks in Reno dictate a certain price tag and the bulk of the rate you charge somebody is going to be based on those existing contracts," she says.
"The rest is based on age and other demographics. I don't see a lot of room for influence on the costs just because you bought the policy from another state."
Clark also doubts that consumers will be able to save money by buying a policy from a state with fewer mandates. To protect consumers, a state could require that a policy sold to its residents meet that state's requirements, rather than the requirements of the originating state, she says.
"The potential benefit from selling across state lines is pretty small," Clark says. "I do hope that this administration can fix what is wrong with Obamacare, but I don't even see that issue as being in the top 15 of what needs to be fixed."
The American College of Emergency Physicians objects to the Florida Agency for Health Care Administration's partnership with a group that ACEP says is tied too closely to insurers.
Florida's effort to create a consumer website that would help people shop for healthcare services by price has hit a snag, with physician groups saying the site is being developed by a group that is too closely affiliated with health plans. That relationship with insurers will make the website a less objective and dependable tool for consumers, they say.
The Florida College of Emergency Physicians (FCEP) and its national organization, the American College of Emergency Physicians (ACEP), reacted strongly when the state awarded the website development contract to The Health Care Cost Institute (HCCI), which is sponsored by four of the country's largest health insurance companies. HCCI lists Aetna, Humana, Kaiser Permanente, and UnitedHealthcare as its data contributors.
HCCI describes its missions as "to promote independent research and analyses on the causes of rising U.S. health spending, to provide policymakers, consumers, and researchers with better, more transparent information on what is driving health care costs."
ACEP and FCEP, however, said the Florida Agency for Health Care Administration's partnership with HCCI goes against the goal of creating an independent and transparent web tool, and their financial relationship with insurers raises concerns about their objectivity and validity of their data.
"The HCCI data come from the health insurance industry, and there is no transparency or independence," said Jay Falk, MD, president of FCEP.
Falk noted that there were other contenders for the contract that would have been better choices, including Fair Health, which he called an independent, unbiased source of healthcare cost information. Fair Health has been recognized for its independence and transparency by Kiplinger's Personal Finance as the "Best healthcare cost estimator" in 2016.
The Fair Health claims database was developed after United Healthcare was successfully sued by the State of New York for fraudulently calculating and significantly underpaying doctors for out-of-network medical services, using the Ingenix database, Falk said. The formula used forced patients to overpay up to 30% for out-of-network doctors.
UnitedHealth settled with the state of New York and the American Medical Association in 2009 over its use of Ingenix. Per the requirements of the deal, part of the settlement proceeds was used to create the Fair Health database, which is an independent, unbiased source of healthcare cost information.
Rebecca Parker, MD, FACEP, president of ACEP, said it is "disturbing that the state of Florida would opt for this vendor that is principally owned by the insurance industry."
"Health insurance companies have a long history of denying claims and selling so-called 'affordable' policies that cover very little until large deductibles are met—and then blaming medical providers for charges," Parker said.
"For years they denied emergency claims based on final diagnosis, instead of symptoms, until the 'prudent layperson' standard was enacted into law."
The prudent layperson standard, included in the Affordable Care Act, protects patients and providers by preventing insurance companies from denying claims for treatment that appeared appropriate at the time, but in retrospect were determined unnecessary.
Florida state officials and HCCI did not immediately respond to the physician groups' criticism.
Coverage for people chronic illnesses like heart disease, diabetes, arthritis, asthma, and other long-term health problems increased by about five percentage points after the ACA, says Elisabeth Poorman, MD, MPH, an internist with Cambridge Health Alliance in Cambridge, MA. She is one of the study's authors.
About half of adults have more than one chronic medical condition, so Poorman and her colleagues reviewed data from the Behavioral Risk Factor Surveillance System, an annual survey conducted by the U.S. Centers for Disease Control and Prevention to see if Obamacare helped these people obtain insurance and gain regular access to medical care.
The researchers analyzed the responses of more than 600,000 adults with at least one chronic disease in the year before and the year after the ACA was implemented.
States that expanded Medicaid under Obamacare experienced a larger increase in coverage of the chronically ill, the study authors found. On average, Medicaid-expansion states increased coverage by almost six percentage points, from 82.8% with insurance before the ACA to 88.5% after the law went into effect, the findings showed.
But even states that didn't expand Medicaid experienced an increase, rising 4.2 percentage points from 77% before to nearly 82% after the ACA was enacted. However, nearly one in seven of those with a chronic disease still lacked coverage, including 20% of chronically ill black patients and one third of chronically ill Hispanics, the researchers found.
The Affordable Care Act's reforms also significantly increased the percentage of chronically ill people who could afford a doctor's visit and who had a check-up within the past year, the study found. But the law did not significantly improve chronically ill people's ability to establish an ongoing relationship with a primary care physician, Poorman said.
"Getting people connected with a primary care doctor is a longer-term, more intensive effort than getting people covered," she said.
Poorman also noted that the chronically ill may be unable to gain coverage if they lose their current plan, Poorman said.
"If you have coverage under your employer and you lose your job, when you re-apply for new insurance you will not be able to qualify for coverage if you have a pre-existing condition," Poorman said. "The people who need care the most are probably going to be the least likely to get it."
The broken deal means Aetna owes $1 billion to Humana and may signal how the Anthem-Cigna ruling will be decided.
A federal judge this week blocked Aetna's plans to buy Humana in a $37 billion deal, thwarting the effort to create a mega-insurer that would have had unprecedented reach and influence in the health insurance market.
Agreeing with the Department of Justice attorneys who filed the suit, the judge said a merger of between the two already giant companies would stifle competition and hurt consumers.
An Aetna spokesman said the company is considering an appeal of the decision. Humana did not immediately issue a response. With the deal quashed, the terms of the proposed merger agreement require that Aetna now pay Humana a $1 billion breakup fee.
In a separate but similar case, Anthem is still awaiting a court's decision on its effort to purchase Cigna for $48 billion.
U.S. District Judge John D. Bates in Washington said in his ruling Monday that the Aetna/Humana merger would violate antitrust laws by reducing competition among insurers to the point that consumers could not be assured of fair market pricing and availability.
Arguments for Merger 'Not Persuasive'
Calling the proposed merger "presumptively unlawful" in the market for private Medicare Advantage plans, Bates also wrote in the 158-page ruling that he had "serious concerns" regarding the companies' claims that the savings from operating the companies as one would result in lower costs for customers.
"It is very likely that a significant share of the claimed efficiencies may be retained by the merged firm rather than being passed on to consumers," Bates wrote. He said his conclusion was "strongly supported by direct evidence of head-to-head competition as well. The companies' rebuttal arguments are not persuasive."
Aetna pulled out of the Affordable Care Act exchanges in 17 counties across Florida, Georgia and Missouri after the Justice Department sued to block the merger. Aetna made the move "specifically to evade judicial scrutiny of the merger," he wrote.
Ruling Suggests Possible Anthem/Cigna Outcome
The ruling is not surprising, says Randal Schultz, a partner at the law firm of Lathrop & Gage and chair of the firm's Healthcare Strategic Business Planning Practice group.
"It's what a lot of us expected, given the nature of healthcare today. We're looking for ways to provide care efficiently, and also ways to pay for healthcare efficiently," Schultz says. "A huge insurer can affect both of those elements because they will be the only game in town for a lot of employers not big enough to self-insure. They would be able to charge whatever premiums they want, and they could dictate the fees paid to providers."
The ruling also gives a strong hint as to the outcome of the Anthem/Cigna deal, he says, because the issues at hand are essentially the same. Allowing one and not the other would put the government in an awkward position and encourage an appeal by Aetna, Schultz notes.
"I think the decision is logical, especially now with all the changes coming down the pike with changes to the Affordable Care Act and other parts of how we provide and pay for healthcare," he says.
"In addition, if the merger went through there would still need to be some regulations and requirements in place for a company that dominates markets like this, and Trump has put a moratorium on new regulations for some time. The judge made the right decision."