A proposed rule allowing more AHPs could further strain the market for health insurers still participating in the exchanges. The regional plans could siphon off the healthier patients.
The Labor Department's proposal to increase consumer access to association health plans could further undermine the already crumbling health insurance marketplace under the Affordable Care Act.
Consumers may be drawn to lower premiums in AHPs even if they actually aren't getting much for their money, leaving only the sickest and costliest people to be insured on the ACA exchanges, says Gerald F. Kominski, PhD, a professor of health policy and management and director of the University of California, Los Angeles Center for Health Policy Research in the Fielding School of Public Health.
"This will have a big potential impact and it's a negative impact. Insurers participating in the marketplace are not going to be happy about this," Kominski says. "This undermines the marketplace because in this association health plan marketplace you don't have to comply with all the ACA regulations, specifically, the essential health benefits."
If the proposal is adopted, self-employed people and small businesses will be able to form groups across state lines and qualify for group health plans.
Up to 11 million employees of small businesses and sole proprietors who lack employer-sponsored insurance could find coverage under this proposed change to the Employee Retirement Income Security Act (ERISA), the Labor Department says.
What the rule would allow
The two primary changes in the rule would allow AHPs to be offered to membership without regard to state lines, and also allow self-employed individuals to take part in a large-group plan.
Kominski says the AHPs would exacerbate the existing problem of consumers and policymakers focusing almost exclusively on premiums rather than balancing them against what is offered in the policy.
With AHPs not required to provide the same coverage as ACA plans, they are free to reduce premiums to whatever gets people to sign up, he says. They will reduce benefits accordingly, but people do not focus on that aspect until it is too late, he says.
"They're allowed to go back to the pre-ACA market in which they ask how you want to pay for the policy, and they'll give you a plan for that price. It may not cover much, but it will appeal to those who don't expect to need a lot of healthcare services in the coming year," Kominski says. "That will siphon off those individuals into association health plans and leave people with greater health risks and preexisting conditions in the exchange."
Opposition to AHPs
That adverse selection is a key reason insurers oppose the proposed change. Insurance trade group America's Health Insurance Plans released a statement saying it was "concerned that the changes proposed would lead to higher prices and weaker consumer protections in the small group and individual markets, where nearly 40 million Americans get their coverage."
The proposed rule is an intentional effort to destabilize the health insurance market, Kominski says.
"It is apparent that this is the [Trump] administration's strategy, and Congress is willing to go along with it," he says. "Congress isn't even needed to go along with it, because this is being done through the administrative law process rather than creating new legislation."
Newly formed AHPs could bring in enough new people that insurers will have to scramble to make sure they have enough network coverage, says Bruce Carver, associate vice president of payer services at MedeAnalytics, which provides data analytics to the industry.
"As member coverage crosses state lines, regional health plans will need to consider if they have appropriate network coverage to meet access requirements. This may also increase competition in some markets that have few options," Carver says. "This may also have the potential to drive down costs."
Carver also questions how much the cherry-picking of healthier individuals will affect the market. Any merging of individuals into a larger group for insurance coverage should serve the purpose of spreading risk, he says.
"Any time you increase the number of people covered in a plan, you have the capability to diversify risk. The concept of pooling members in a region for covered benefits that improve by putting small groups together into a single larger group is not new," he says. "Some states allow for this type of pooling under group rating programs for disability and workers' compensation benefits."
He agrees, however, that allowing the plans to not cover essential benefits could be a setback to efforts at improving transparency and consumerism, Carvery says.
"This may cause a lot of confusion with members when they are treated by providers and any limitations in coverage will need to be clearly communicated between members and providers, in an already confusing market," Carver says. "Members will need to consider if the plan benefits them based upon preexisting conditions."
Families USA, a consumer healthcare advocacy group, goes so far as to say that the rule change would make it easier for insurers to sell "junk insurance." Senior Fellow Stan Dorn says in a recent blog post that the change "lets insurance companies sell junk plans to millions of Americans currently receiving comprehensive insurance in individual and small-group markets. The proposed rule lets AHPs sell coverage that is exempt from most state oversight and many of the ACA's most important consumer protections."
Dorn points out that the premiums for an AHP will be determined by the health of only a relatively small number of people.
"If an AHP's enrollees are unusually healthy, that AHP's premiums are low," he writes. "By contrast, the ACA carefully structures individual and small-group markets so premiums reflect the average risk level of the entire market, rather than the cost of enrollees in a particular plan. This helps keep premiums more reasonable for everyone."
The move was endorsed by the American Trucking Associations (ATA), a 50-state federation of associations representing the trucking industry. The group called the proposed rule change "a step in the right direction for improving access to affordable, quality healthcare." The trucking industry is primarily comprised of small-businesses, the ATA notes, with more than 90% of registered motor carriers operating fewer than six trucks. That means it is uniquely positioned to benefit from the establishment of AHP, the group says.
In a move that would fulfill a campaign promise, the Trump administration's proposal would allow people across states to jointly purchase health plans.
A proposal from the Department of Labor would allow people in similar lines of work and in different states to join together for the purpose of buying health plans, expanding the availability of Small Business Health Plans, also known as association health plans.
Under the proposal, self-employed people and small businesses could form groups large enough to let them qualify for the savings of group health plans. They also could access plans that do not meet the requirements of the Affordable Care Act, making them less expensive.
President Donald Trump repeatedly called during the campaign for easing the restrictions on consumers’ ability to purchase healthcare insurance across state lines. This proposal is seen as one step in that direction.
The Labor Department notes that up to 11 million Americans working for small businesses or who are sole proprietors lack employer-sponsored insurance and could find coverage under this proposed change to the Employee Retirement Income Security Act (ERISA).
“Many small employers struggle to offer insurance because it is currently too expensive and cumbersome. These employees – and their families – would have an additional alternative through Small Business Health Plans (Association Health Plans),” the Labor Department said in statement announcing the proposal. “These plans would close the gap of uninsured without eliminating options available in the healthcare marketplace.”
The proposed rule applies only to employer-sponsored health insurance. It would allow employers to join together as a single group to purchase insurance in the large group market, which the Trump administration says would open health insurance coverage for millions of Americans and their families by giving them access to economies of scale.
These are the main components of the proposal:
Allow employers to form a Small Business Health Plan on the basis of geography or industry. A plan could serve employers in a state, city, county, or a multi-state metro area, or it could serve all the businesses in a particular industry nationwide.
Allow sole proprietors to join Small Business Health Plans, clearing a path to access health insurance for the millions of uninsured Americans who are sole proprietors or the family of sole proprietors.
The proposed regulation would not restrict the size of the employers that are able to participate in a group or association of employers, but the Labor Department says it expects minimal interest among large employers in establishing or joining an association health plan because they already enjoy many of the large group market advantages that the proposal would afford small employers.
The proposed rule includes some restrictions. Most notably, Small Business Health Plans would not be allowed to charge individuals higher premiums based on health factors or refuse to admit employees to a plan because of health factors.
“The proposed definition includes conditions, including nondiscrimination provisions, designed to continue to draw a line between the sorts of employer-sponsored arrangements that are regulated by ERISA on the one hand, and commercial insurance-type arrangements that lack the requisite connection to the employment relationship on the other, as well as to prevent potential adverse impacts on the individual and small group markets,” the proposal says.
Some small businesses that did not previously offer insurance to their employees might be encouraged to enroll in association health plans, the proposal states. Other businesses might switch from their existing arrangement to the newly available plans.
“In addition, the option for small employers to join association health plans could offer better financial protection to employers (and their employees) than if they self-insured and purchased stop-loss insurance that may not adequately protect them from financial risk,” the proposal says.
Primary care physicians get the carrot when CMS incentivizes reduced readmissions and population health, while hospitals get the stick for the same goals. Nevertheless, hospitals and health systems should benefit from physicians joining the effort.
Hospitals and health systems should benefit financially from efforts by the Centers for Medicare & Medicaid Services to address wide variations in incomes for primary care and specialty practitioners, says the author of a recent analysis.
Researchers at the Urban Institute, with funding from the Robert Wood Johnson Foundation, explored two reform methods CMS is using to address underpayment for primary care in Medicare. The first involves new billing codes that incentivize specific activities that CMS wants clinicians to engage in and, second, is a demonstrations test of whether CMS can achieve favorable outcomes by paying for promising new care delivery approaches.
The analysis indicates that CMS is willing to pay increasingly large amounts for managing the care of patients with chronic conditions—a high-need, high-cost group. Improving the health of these patients could, in turn, save Medicare a lot of money, so CMS has an ongoing interest in figuring out how much it should reimburse for their care, says Rachel A. Burton, a senior research associate in the Health Policy Center at the Urban Institute.
"We first saw them paying physicians $10 per beneficiary per month through one demonstration, and another doubled it to about $20 per beneficiary per month, and that still didn't seem to be enough, so subsequent billing codes have increased it now to about $90," Burton says. "CMS clearly is trying to figure out how to cover physicians' costs and make it worth their time to manage these patients who use a disproportionate amount of resources."
CMS also is showing more willingness to pay physicians for non-face-to-face visits with patients through new billing codes for telemedicine, telephone calls, emails, and brief conversations among staff, Burton notes. CMS will now pay physicians for that care even in a month in which they did not have in-person contact with the patients, she says.
Fair pay
"That definitely suggests they're modernizing how we provide primary care, without having to drag the patient in every month in order to justify payment," she says. "They're also moving toward more of a blended payment approach, still using fee-for-service billing codes to pay for discrete, particular services that they want providers to do, but also using monthly fees meant to cover a laundry list of small things that would be hard to pay for individually. The idea is to pay them fairly for everything they have to do to provide good care to these patients, without breaking every single thing down to a separate charge, because that's not practical."
These efforts should benefit hospitals and health systems by making this group of patients healthier overall, which reduces the likelihood of costly inpatient care and readmissions, Burton says. That is especially important now that the Hospital Readmissions Reduction Program (HRRP) financially penalizes hospitals with high readmission rates, she says.
"There should be more primary care practices that are more actively trying to prevent readmissions now because of their own incentives [and] the new billing codes that are available to primary care practices," Burton says. "It's not all on hospitals now to prevent readmissions. They have partners out there in the community who have the same financial incentives to keep people healthy and out of the hospital."
Medicare is using different financial incentives to get their attention, Burton says. "More of a carrot with the primary care practices and a stick with the hospitals—but with the same ultimate goal," she says.
Any hospitals that were inclined to acquire primary care practices to get them on board with best practices to reduce readmissions—and also direct referrals of a healthier cohort of patients—might back off on those plans now that CMS is incentivizing the practices directly, Burton notes.
The motivation for most primary care acquisitions is obtaining the referrals, of course, but she notes some hospitals may have been drawn additionally to the idea of guiding the physicians to reduce readmissions for the hospital's benefit. That is less necessary now that the physicians have their own incentives.
"This is all a positive move for hospitals and health systems from a financial standpoint," Burton says. "Rather than a big announcement that CMS is changing something in a dramatic way, this has been more of an ongoing, incremental effort but the different approaches are coming together, and I think both primary care providers and hospitals are starting to see the benefits."
Health plans face challenges such as an influx of people into Medicare and more pressure to participate in risk-based contracts. The uncertainty that complicated health plan strategies in 2017 will continue this year and could accelerate.
Health plans are facing a different landscape this year than they have known in years past, and they will have to act quickly to get ahead of the forces that could determine success or failure. The loss of the individual insurance mandate penalty is only one factor complicating their business strategies, but it makes addressing the other factors even more urgent.
Uncertainty over what their business world will look like in the near future continues to be the overriding concern.
The loss of the individual mandate will be the most difficult issue for insurers in 2018, says Tom Bizzaro, vice president for health policy and industry relations at First Databank, which provides pharmaceutical data to health plans and providers. It remains to be seen how much the loss will affect enrollment, and any action on healthcare law by Congress could greatly affect the trajectory of health plans, Bizzaro says.
"They can deal with any situation if they know what the rules and regulations are going to be. I am hopeful that even without the individual mandate, citizens will realize the importance of having medical insurance," he says. "I am also hopeful that Congress will act to stabilize the market. I think as with any industry there will be winners and losers in 2018. The insurers that can be the most flexible and reactive to changes in the marketplace will be the most successful."
Health plans shouldn't expect any relief from the uncertainty that plagued them in 2017, says Joe Paduda, principal of Health Strategy Associates, a consulting firm specializing in managed care for workers' compensation and group health.
"The healthcare delivery sector is undergoing massive disruption, with neighborhood hospitals, payer-owned providers, provider-owned payers, and provider consolidation blowing up entrenched business models," he says. "Marry that disruption with the requirement that insurers have to market, operate, and partner differently in each geographic area, and insurers' massive challenges are daunting indeed."
Internally, the big insurers must figure out how to move much faster, allow much more management autonomy, and rapidly respond to—and create—different local healthcare delivery solutions, Paduda says.
"This will be difficult indeed for businesses based on scale, in an industry that does not reward risk-taking," he says. "Externally, Republicans' ongoing effort to wield a meat axe to Medicare and Medicaid will make it difficult for insurers to plan and implement for those markets beyond the next quarter."
For commercial lives, profits are solid and sustainable, Paduda notes. However, the group market is highly competitive, commercial insurers have yet to figure out the individual market, and the stock markets want growth.
"Expect the big three to push ever deeper into integrated delivery systems and managed Medicaid programs," he says.
The continued influx of baby boomers into Medicare Advantage plans is an example of how healthcare payer finances will be challenged this year, says Scott McFarland, president of HealthBI, which provides health information technology platforms for providers. He previously was CEO of the Hawaii Health Systems Corporation (HHSC) and the president of wellness and population health at Cleveland Clinic.
Medicare Advantage enrollment numbers have increased every year for the last seven years and that trend will continue in 2018. The increase in Medicare Advantage participants will be both a boon from the sheer numbers and a challenge because of the aging population with chronic conditions and comorbidities that are expensive to treat, McFarland says.
Health plans also can expect the continued expansion of risk-based contracts to impact the payer's bottom line, he says.
"CMS is touting more voluntary provider participation in value-based initiatives, but insurers that manage Medicare and Medicaid plans still must prove quality. And they're pushing that risk down to the providers in their networks," McFarland says, noting that an American Medical Group Association survey indicates that 60% of medical group Medicare revenue will come from risk-based contracts by 2019. Payers are also expanding risk-based contracts into their commercial plans, he notes.
Provider engagement will be the key to making health plans high performers, McFarland says.
"No one else has the direct impact on patient behavior that providers do. Health plans simply won't be able to move the needle on lowering costs while retaining members if providers in their networks aren't engaged, aren't identifying and treating high-risk patients with preventative care, and aren't sustaining any gains," he says. "However, there's been a persistent, big barrier standing in the way: providers lack actionable data to identify high-risk patients at scale and coordinate and track preventative care plans for these patients."
McFarland expects to see a movement this year in which payers share tools and services—free of charge—with providers that give insight into high-risk patient populations and help profitably manage populations with multiple chronic conditions and comorbidities.
"This isn't just a prediction; it builds on an existing trend we've witnessed at HealthBI," he says. "I expect that payers enabling providers with actionable data will continue to gain steam, and in fact, be one of the top objectives for almost all payers in 2018."
Blue Cross Blue Shield health data were combined with information on social determinants of health. The result illustrates how the factors affect commercially insured Americans county-by-county.
A recent report is the first of its kind to identify the health conditions with the most impact on the commercially insured, along with the socioeconomic factors that play into them, for every county in the United States.
Moody's Analytics utilized the Blue Cross Blue Shield Health Index, which identifies the health conditions with the greatest impact on the commercially insured in each county, pairing it with data on socioeconomics and other social determinants of health. The combination reveals how the level of health impact of these conditions is influenced by factors such as income, level of education, community health behaviors ,and local health system characteristics, the companies report.
The report, "Understanding Health Conditions Across the U.S.," shows that social determinants of health drive larger differences in the impacts for common chronic conditions such as hypertension, diabetes and coronary artery disease. In addition, the analysis shows these determinants drive smaller differences in the impact of other conditions such as cancer, substance use disorder and mental health, which are influenced more by individual factors such as family health history and personal lifestyle choices.
Differences in local healthcare system characteristics have a more modest association with the health impact of disease on a community's commercially insured population, the report says.
Maureen Sullivan, chief strategy and innovation officer for BCBSA, says the analysis shows the need for continued improvements in the economic opportunities and social influences that drive healthy behaviors within a community.
The BCBS Health Index uses de-identified data from more than 40 million commercially insured members of BCBS companies. The index shows that five conditions nationally are responsible for 30% of the adverse health of this population: depression, anxiety and other mood disorders; hypertension; diabetes; high cholesterol; and substance use disorders.
The index quantifies how more than 200 common diseases and condition categories affect overall health and wellness by assigning each county a health impact measure between 0 and 1, designating the proportion of optimal health reached by the county's population.
“Altogether, unique health conditions are somewhat driven by socioeconomic, demographic and behavioral factors,” the report says. “However each condition also has distinctive features -- including treatment effects, low prevalence and genetics -- that potentially qualify them for a different analysis method than that of other conditions.”
The findings show that “demographic, behavioral and structural factors impact health conditions in different ways and that greater insight into these differences is critical to understanding county level population health using the BCBS Health Index,” the report says.
A provision in the tax bill that passed on Wednesday means that more Americans will be hit sooner with the Affordable Care Act's "Cadillac tax" on high-quality health plans. Consumer groups are urging Congress to repeal the tax.
The tax reform bill passed by Congress eliminates part of the Affordable Care Act by removing the penalties for not having individual health insurance, but it leaves intact another part of the law that imposes a hefty tax on health plans that have certain set threshold amounts.
The solution is to eliminate the Cadillac tax too, says a coalition of businesses, patient advocates, employer organizations, unions, local governments, healthcare companies, and consumer groups called the Alliance to Fight the 40/Don't Tax My Health Care. The coalition is urging Congress to repeal the portion of the ACA that imposes a 40% tax on health benefits above set threshold amounts that are adjusted annually for inflation.
In addition,The Tax Cuts and Jobs Act will cause more Americans to be hit sooner by the tax because it changes the way the threshold amounts will be calculated, explains James A. Klein, president of the American Benefits Council, part of the coalition. The law now requires that the tax be assessed using the "chained Consumer Price Index (CPI)," which means the thresholds will be increased at a much slower rate.
"This will subject more Americans to the Cadillac tax sooner because healthcare inflation will outpace any increase in the thresholds using the new chained CPI," Klein says.
"The clock is running out for millions of Americans whose healthcare costs are rising because of the Cadillac tax," he says. "Congress should act now to address this onerous tax that forces employers to reluctantly cut benefits and increase out-of-pocket costs in an attempt to avoid it."
The tax will discourage employers from creating innovative and cutting-edge benefit plans to help maintain a healthy workforce, Klein says.
"Taxing the benefits could compel employers to stop offering wellness programs or on-site clinics and, ultimately, drive up costs for workers and employers, alike," he says. "Repealing this tax has strong bipartisan, bicameral support. Now is the time for Congress to protect healthcare coverage for working families."
Rep. Mike Kelly (R-PA) and Rep. Joe Courtney (D-CT) are leading the effort in the House to repeal the tax and have more than 220 cosponsors on H.R.173. In the Senate, the bipartisan effort is spearheaded by Sen. Dean Heller (R-NV) and Sen. Martin Heinrich (D-NM) with 20 Senate cosponsors on S.58.
"Workers simply can't afford to pay more for their healthcare," says Rep. Mike Kelly. "We must repeal the Cadillac tax before it taxes workers out of their healthcare coverage. I stand committed to working with my colleagues to send the Cadillac tax where it belongs—to the junkyard."
More than 1 million workers who have employer-sponsored health insurance plans will be hit by the Cadillac tax in Nevada, said Sen. Dean Heller.
"That is why I have led the fight to fully repeal this onerous tax, and authored legislation that would do just that," he says. "I will continue to encourage my colleagues to act to prevent hardworking Nevadans and Americans around this country from bearing the burden of the Cadillac tax's devastating impact."
Employer-sponsored health coverage protects more than 178 million Americans, the coalition notes.
A significant portion of American consumers make too much money for health insurance tax credits but can't afford standard health plans.
Health plan leaders and politicians have left a large swath of Americans with few choices when it comes to obtaining health insurance.
The enrollment period that ended Friday saw consumers in many states seeking individual coverage and facing limited choices, after insurers pulled out of their markets because of high-utilization costs that made policies unprofitable. The insurers left in some of those states offered only plans with high premiums and deductibles.
Consumers experienced the most difficult decision-making during the enrollment period since the Affordable Care Act was enacted, says a leading broker.
Insurers are pushing away many consumers as they find ways to work around the ACA's challenges to their profitability, says B. Ronnell Nolan, HIA, CHRS, president and CEO of Health Agents for America, which represents health insurance brokers who work with consumers seeking coverage both on and off the state exchanges.
Companies have become more involved with Medicare Advantage and Medicare supplemental policies, for example, as a way to remain profitable even though the group and individual markets have proven difficult in many states.
"The consumers are struggling to be able to pay for insurance," she says. "The companies enjoyed their cost-sharing subsidies to keep the payments rolling in every month, whether the consumer got anything out of that coverage or not.
"This year, those folks that were above 138% of poverty to about 250% of poverty got a better deal than they've gotten in the past, because they got a tax credit that more than makes up for the premium increase in a lot of cases," Nolan says. "Those folks who were above 400% of poverty had to make hard decisions whether they could afford some type of insurance or … going without and paying the penalty. The conversations with those folks were hard, sad, and depressing at times."
Plan options for helping with healthcare costs
Consumers above 400% of poverty felt the entire wrath of the premium and deductible hikes, she says. If they found the plans available on the exchanges untenable, they generally had to choose between three options: the Christian Ministries plan, short-term medical plans, or going without coverage. However, as Congress has debated the tax bills that include eliminating the individual mandate, it has made the option of forgoing coverage a bit easier for some.
The Christian Ministries plan is a form of cost-sharing and is ACA-compliant, so it protects consumers from incurring a penalty from the individual mandate. Short-term medical plans have gained favor recently because the Trump administration has taken steps to allow coverage for up to 364 days without having to reapply, but these plans are not ACA-compliant, and consumers would have to pay the penalty in addition to their premiums, unless Congress acts to remove the mandate and penalty.
But even if the penalty endures, short-term plans still may work out better for many consumers than paying the sky-high rates of traditional ACA-compliant plans, Nolan says.
Nolan and her colleagues have been advising consumers to assume that the penalty will remain. Even though the tax bills may eliminate the individual mandate, she notes that the Internal Revenue Service is currently sending hefty bills to employers for failing to provide group insurance. That signals that the IRS will enforce the individual mandate aggressively if Congress ends up not abolishing it, she says.
"[The IRS has] said they are not going to accept a tax return in 2018 for 2017 unless you check the box saying whether you had coverage, so the writing on the wall is that they are taking a hard line on this and planning to make good on that penalty," Nolan says. "Congress could change that by passing a tax bill that eliminates the penalty, but Americans are having to make important life choices right now based on what Congress may or may not do, and that is creating a lot of sleepless nights for people."
A program designed to help poor people afford prescription drugs is being used by hospitals to generate easy profits, according to a Pacific Research Institute report.
A well-intended program designed to help poor people obtain prescription drugs is riddled with abuse and creates a perverse incentive for healthcare providers to game the system for profit, according to a Pacific Research Institute report.
The research, written by Wayne Winegarden, PhD, also says the program is hurting healthcare quality overall.
The 340B Program may have started with the best intentions but has evolved into a “complicated mess, rife with abuse, and has encouraged health providers to put profitmaking ahead of serving the poor,” says Winegarden, a senior fellow in business and economics at Pacific Research Institute.
“Our study shows that Congress must reform 340B, so we can get back to the original mission—ensuring America’s poor have access to life-saving prescription drugs at a low cost,” Winegarden says.
The 340B Program extends Medicaid prescription drug discounts to healthcare providers that largely serve the poor, with participating drug manufacturers providing 20-50% discounts to qualifying clinics, hospitals, and pharmacies.
The federal government provides little guidance or oversight, however, so there is no requirement that hospitals provide the discounted drugs solely to people who are truly in need, Winegarden says.
Hospitals can prescribe discounted medicines purchased through the 340B Program to patients who have insurance and can pay full price, he explains. The hospitals pocket the difference and thereby profit from a program intended to ease the financial burden on poor patients.
The practice is so brazen that more 340B hospitals have been set up in recent years to serve higher-income patients and secure more profit, he says. The rules of the 340B program itself contribute to the problem because discounts are based on a share of the drug’s costs, he says. That means participating hospitals are encouraged to prescribe high-priced medicines; they earn more revenue when prescribing the most expensive drug possible.
The program has also led to a rising trend of healthcare consolidation, Winegarden says, as independent practices are not eligible for 340B discounts and are losing patients. The 340B program has played a role in how hospitals have increasingly acquired independent practices and set them up as hospital outpatient departments, the report concludes.
“Judging the 340B program on its outcomes, not intentions, reveals that the program is, at best, a very expensive and inefficient way to help vulnerable populations afford the medicines they need. It is, consequently, in desperate need of reform," the report states. "The best politically feasible reform would return the scope of the 340B program to its original purpose of serving uninsured and low-income patients, and improve the oversight and administration of the program."
Specifically, the Pacific Research Institute says Congress and the Trump administration should update the law governing the 340B program so that it clearly defines who qualifies for the discount. This should include only those patients who are truly in need, the report says.
“This would ensure that the subsidized drugs would only benefit the intended patients, and it would prevent covered entities from exploiting the program as a potential profit center. Non-340B patients would also benefit since drug prices would no longer reflect the cross subsidies necessary to offset the loss of revenue caused by the abuse of the 340B discount program,” the report says.
Last month, the Centers for Medicare & Medicaid Services announced a final rule to cut payments by 28%, or about $1.6 billion. About 40% of U.S. hospitals use the program.
“Additionally, since the program is intended to help the vulnerable populations, measures should be adopted that ensure that the 340B savings are passed along to the uninsured patients when filling their prescriptions at the covered entities or their contract pharmacies,” the Pacific Research Institute report says. “The possibility that these populations do not receive discounted prices when purchasing their medicines violates the entire spirit of the program. More stringent oversight practices should also be implemented to eliminate the proliferation of abuse in the program.”
The Pacific Research Institute describes itself as a nonpartisan nonprofit that "champions freedom, opportunity, and personal responsibility by advancing free-market policy solutions" in healthcare and a variety of other areas.
Healthcare financial leaders often lack a true understanding of the cost of care across service lines or populations. Focusing too much on clinical data from the medical record can lead to overlooking critical claims and demographic data.
Managing costs across populations and networks depends on constant and thorough data analysis, but CFOs and other hospital leaders often are working with incomplete data as they make critical decisions about resources and revenue.
Fifty-eight percent of healthcare leader respondents in the June 2017 HealthLeaders Media survey, Cost and Revenue Strategies, cited that the lack of data on the true cost of care was the biggest barrier to achieving sustainable cost reductions.
Data fragmentation will make it difficult for many healthcare organizations to move to value-based care, says SCIO Health Analytics President Rose Higgins. Headquartered in West Hartford, Connecticut, SCIO provides analytics to support healthcare organizations.
"This becomes critical in the path to profitability. Most hospitals and healthcare systems, physician groups as well, are living with a tremendous amount of margin compression," she says. "When you couple that with the uncertainty of payment changes, revisions of the Affordable Care Act, and other developments, it becomes difficult to ensure operational effectiveness without understanding what's occurring in the populations you treat—particularly the populations with which you have risk-based contracts."
Taking on a commercial or CMS-based risk for certain patient populations makes it critical to know the costs of care across all settings of care, she says.
In the HealthLeaders Media survey, 36% of respondents said that they could determine the true cost of care for all (6%) or most (30%) of the care provided, while 51% said they could do it for some care provided, and 13% said that they were unable to determine the true cost for any care that they provided.
"When part of that care takes [you] outside your own borders, you can have leakage of revenue into other organizations," she says. "Making sure you have visibility to available data from those locations in which care delivered is important, or a proxy for that data such as claims data that can give you a more fulsome view into what's transpiring and the financial impact."
Twenty-six percent of survey respondents said they expected that by using information technology to target inappropriate claim denials, this could yield a positive financial impact for their most recent fiscal year.
Partnering
Fragmented data also can be problematic when the organizations looks at profitability and wants to consider partnerships with service lines, because it is important to understand the population and radius of care before aligning with them, she says. Contracting at the network level also requires understanding the potential volume gained in return for offering a lower price, for example.
"Fragmentation of data makes that a tough task for most organizations to accomplish," Higgins says.
Healthcare leaders are addressing data fragmentation by creating more partnerships that allow the sharing of data across organizational boundaries, as well as embracing price transparency that affords a more a level playing field with employers who can share data about their patient populations.
Forty percent of the survey respondents said that their organizations provided price transparency to patients for all (12%) or most (28%) care. Forty-one said that their organizations did this for some care provided, and 18% said that they were unable to do this for any of the care that they provided.
Healthcare organizations also are looking at data in more of a strategic marketing context, Higgins says, getting a better idea of the demographics they serve and the companies that might offer a good market for expansion.
"Organizations that are interested in taking risks and being part of narrow networks or tiered network strategies have to get to this level of data to successfully protect their margins and create revenue upticks," she says. "For those organizations that placed a bet on clinically integrated networks and looked at that as a means of creating a referral feeder into their organizations for certain types of services, it is crucial to do a thorough analysis on the productivity and efficiency of that, integrating these various sets of data. You need those different data sets so that you can look at them strategically."
A common mistake is to think only in terms of clinical and transaction-based data, Higgins says. A claims view, at a minimum, also is necessary to get a true view on costs.
"Organizations that spend all their time and resources on clinical and transaction-based data derived from the EHR are going to fall short of that longer-term impact you're hoping for," she says. "You'll be able to manage the clinical care that's delivered in that setting and manage the key quality metrics you're required to report but, ultimately, you cannot truly understand the picture of what's happening with populations and service lines. Claims are absolutely required to do that."
CFOs should think of data as an asset with both strategic and operational value, Higgin says. Invest in data science both within the organization but also with partnerships that enable access to the most needed data.
"Those resources are often in short supply, so making decisions about how you invest and who you partner with is key," Higgins says. "You have to be willing to make those investments and commit your organization to not just acquiring this data but also integrating it and deriving value from the data. You then have a rich set of insights that can help inform your operations as well as your strategic intentions, and you can build competency that will help you be successful in some very uncertain circumstances."
Healthcare plans are already raising premiums and deductibles through the roof, but they will have to raise them even higher if the individual mandate is removed and healthier consumers leave the plans. Those rising prices could drive even more consumers to forego coverage, since they could do so without fear of a penalty.
The only consumers who stick with the exorbitantly expensive health plans will be the ones whose healthcare expenses would be even higher. That's a progression that cannot end well for insurers, health plan leaders and analysts say.
Removing the individual mandate would upset the balance built into the ACA for health plans, leaving them with the obligation to cover sicker consumers at an artificially low cost without requiring the sign-up of the healthier people that keep the companies profitable.
The individual mandate is the one brake stopping the healthcare system from rolling back to the pre-ACA days, says CEO John Baackes of L.A. Care Health Plan, which covers more than 2 million Medi-Cal members.
"There is no question that the penalties associated with the ACA's individual mandate motivated people to enter the marketplace. Enrollment here at L.A. Care more than doubled when the minimum penalty rose to $695 last year. Without a penalty, the motivation to buy in is gone, and younger, healthier people are more likely to drop out," he says. "Those who stay in the market will have to pay more. But really, everyone is going to pay more. There's no way around it."
The repeal of the individual mandate is included in the tax bills being finalized on Capitol Hill. The Congressional Budget Office has estimated that premiums on the marketplaces will increase by at least 10% in 2019 if the individual mandate is repealed, notes Brady Bizarro, an attorney with The Phia Group, a consulting company that focuses on healthcare cost containment.
"Without the mandate, insurance companies may find it exceedingly difficult to make a profit and are likely to leave the marketplace, especially the individual exchanges that tend to insure the sickest people," Bizarro says.
No one knows for sure how many young, healthy individuals will drop their health insurance coverage if the mandate is repealed, Bizarro says. For employer-sponsored plans, especially self-funded plans that tend to be less expensive than their fully-insured counterparts, it may be that healthy workers keep their coverage as part of their overall benefit packages.
However, it is certain that a significant number of consumers who pay full freight for their own policies will drop their coverage, and they are generally going to be a healthier group, Bizarro says. This could leave health plans in an untenable position: forced to provide coverage for consumers with high utilization, without the balance of the individual mandate providing consumers with low utilization.
The end of penalties will mean a return to the old system of more consumers turning to the ER for services, and the resulting high-cost care will be another reason for all providers to raise premiums, Baackes says. Some health plans will find that they just can't be profitable under those conditions.
"As a not-for-profit entity, L.A. Care will be among the last ones standing as it is part of our mission to provide health coverage to the most vulnerable communities," Baackes says. "But an end to the mandate penalties would certainly begin the death spiral of the ACA."
The ACA addressed the problem of unaffordability for individuals with preexisting conditions through its "guaranteed-issue" and "community-rating" provisions, he explains. Together, they prohibit insurance companies from denying coverage to these individuals or charging them higher premiums based on their health status.
"These provisions do not address the problem of healthy individuals choosing to forego coverage until they become sick. This is a phenomenon known by health policy experts as adverse selection, and, if left unsolved, it inevitably leads to a death spiral in which only the sickest people remain in the health insurance market," Bizarro says. "In fact, the guaranteed-issue and community-rating provisions make this problem worse, since insurers would be forced to cover these individuals and be barred from charging them higher rates."
That can only lead to higher premiums, says Jennifer Riley, vice president of product development for Hodges-Mace, a benefits management company.
"While unpopular among many, the individual mandate is one leg of the three-legged stool that attempts to stabilize the individual insurance market while also providing expanded access. If you knock out that leg, the stool becomes increasingly unstable," she says. "Insurance is based on the principle of pooling risk and as you take away one of the incentives and, potentially the only incentive for the healthiest in the risk pool, insurance providers will have to increase premiums in response. Couple this with the grim future of cost-sharing reduction payments from the federal government and the result is a continued upward spiral in cost."
The decline in the number of uninsured and the rise in individual coverage under the ACA were sparked not just by the individual mandate, but also the improved access and subsidies, she notes. That means losing the individual mandate likely would not see a return to pre-ACA levels in enrollment.
"Nevertheless, the progress made by marketplaces to increase the number of insurers available in certain regions will likely see a decline as insurers pull back to the markets where they are most comfortable," Riley says.
