CBO to Weigh in on Cost-Sharing Reduction Payments

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Source: Modern Healthcare

A new healthcare must-read will hit everyone’s summer list this week.

That’s when the Congressional Budget Office is set to release a report detailing what could happen to insurance markets if the federal government stops making cost-sharing reduction payments.

The payments, part of the Affordable Care Act, reimburse insurers for limiting deductibles and copays to individual customers with incomes of less than $29,700, or 250% of the poverty level. Premiums for the plans those customers buy do not cover the cost of the generous benefits.

The CSRs have long been a political hot potato and the focus of Republican efforts to dismantle the ACA. House Republicans in 2014 sued to get rid of the payments, arguing that the legislative branch, not the executive branch, allocates federal spending. A federal court agreed. The Obama administration appealed, but the case is now on hold as the Trump administration decides what to do. President Donald Trump has repeatedly threatened to end the payments as a tactic to get Democrats to the negotiating table.

The administration has, in the meantime, been making the CSR payments on a month-by-month basis, creating considerable uncertainty for insurers and state regulators as they try to set 2018 rates. The CMS late last week extended until Sept. 5 the deadline for plans to file their adjusted rates.

HHS officials also told insurers that while “there have been no changes” to cost-sharing reduction payments, the department will change its risk-adjustment methodology in states that have asked insurers to increase silver plan rates on the assumption that the payments stop. Because customers face far less out-of-pocket costs in plans with limited deductibles and copays, there is likely to be more utilization, so it will treat these plans differently in the risk-adjustment formula, according to HHS.

The Kaiser Family Foundation this year reported that ending the payments would end up costing the federal government more than continuing them. The projection is that insurers would be owed $10 billion in CSR payments next year. Kaiser analysts said that premium support to buy plans would increase by $12.3 billion as insurers have to raise rates to account for the lost payments.

House Conservatives Hope to Revive Obamacare Repeal Vote

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Source: The Washington Post

Conservatives in the House hope to revive the failed effort to gut the Affordable Care Act with a long-shot drive to force Speaker Paul D. Ryan (R-Wis.) to hold a vote to simply repeal the health-care law without a replacement.

Members of the conservative House Freedom Caucus want to seize control of the health-care debate by petitioning Republicans to hold a vote on a version of a repeal bill that passed the House in 2015. Conservatives say they believe a repeal measure can pass without a replacement, despite warnings from Ryan and other leaders that the votes aren’t there. The long-shot effort gained momentum last week with support from influential outside groups.

Conservatives said Friday that nearly every House Republican has voted to repeal the ACA in the past — and should be challenged to cast the same vote again. The strategy they are using requires that a majority of the 434 members of the House sign a petition calling on Ryan to bring the bill to the floor. No Democrats are expected to sign the document, meaning that conservatives would have to win support from all but 22 of the 240 House Republicans.

A similar bill failed last month in the Senate, when 45 of the 52 Senate Republicans voted for the measure. Petition sponsor Rep. Thomas Garrett (R-Va.) attributed the Senate failure in part to the view that a plain repeal bill could never pass the House. This new measure is meant to undermine that excuse.

“I want to saw the leg off the chair that says this can’t pass the House,” Garrett said in an interview.

Garrett said the petition is meant to give House Republicans an option — not to challenge Ryan and other leaders who say the bill can’t pass.

“It’s not meant to poke anybody in the eye,” Garrett said.

Ryan has not publicly addressed the petition, but AshLee Strong, a Ryan spokeswoman, said, “The House has already passed a plan to repeal and replace Obamacare.”

If successful, the petition would allow conservatives to bring their bill to the House floor for a vote without intervention from leadership. The legislation they have proposed would gut the majority of the ACA, ending Medicaid expansion, repealing the individual and employer mandates, ending protections for people with preexisting conditions and banning funding to Planned Parenthood for one year. The legislation would not take effect until the end of 2018, to give lawmakers time to craft a replacement.

The proposal earned the praise of conservative activists. The influential Club for Growth on Friday announced plans to monitor how members vote on the petition — and to include the data in their score card, used to determine which members meet conservatives standards.

“It’s time to hold all House members accountable,” the group said in a statement. “It’s time to force a vote.”

Conservatives said they discussed the plan with Ryan before members left Washington for August recess. Rep. Jim Jordan (R-Ohio) said the speaker didn’t dissuade members from making the attempt but questioned whether they would succeed.

“He doesn’t think there are the votes there,” Jordan said in an interview. “I don’t think he was doing cartwheels.”

Jordan said he believes that more House Republicans will sign on to force the vote after they return from spending six weeks back in their home districts and talking to voters who are angry that they did not fulfill their promise to overhaul Obamacare. Jordan said he was met with immense frustration when he returned to Ohio. He said many Republicans are experiencing similar pressure.

“Voters are frustrated, they are disappointed and they expect action,” Jordan said. “They ask, ‘Why don’t you act like you did when you were elected?’ ”

That argument has already proved persuasive for some Republicans in the House, including Republican Study Committee Chairman Mark Walker (R-N.C.), who announced his support for the conservative plan Friday. The RSC represents the largest coalition of Republicans in the House. Walker endorsed the petition individually and not for the entire group.

“Republicans already sent this bill to the president in 2016, and should do it again,” Walker said in a statement. “The only thing that changed since then is that with Donald Trump as president, this bill would actually be signed into law.”

How the Trump Administration is Spending Millions to Shore Up Obamacare

Image result for trump admin obamacare photosSource: Politico

President Donald Trump has threatened to blow up Obamacare. But his own administration is separately dangling hundreds of millions of dollars before states to bail out their insurance markets.

Alaska will get $323 million over the next five years to coax its lone Obamacare insurer to remain in the market and hold down premiums. At least four other states, including some that have vociferously opposed the Affordable Care Act, are seeking similar deals.

The efforts come as the GOP push to repeal and replace the law is in disarray and state officials in both red and blue states seek ways to shore up their shaky markets. They have the blessing of the Trump administration’s Department of Health and Human Services — even as the president himself is threatening to cut off key subsidies as early as this week. That move could send premiums skyrocketing and potentially collapse insurance markets nationwide.

The White House said Thursday it applauds the stabilization efforts even as Trump steps up the pressure on the Senate to resume efforts to try to pass legislation to repeal and replace Obamacare.

“We support the Secretary’s efforts to give states flexibility to create solutions to relieve the burden of Obamacare that has skyrocketed premiums and reduced coverage choices for the American people,” said a spokesman.

The Alaska waiver, drawn up late in the Obama administration in one of the reddest states in the country, was approved this summer under Trump’s HHS secretary, Tom Price.

State officials pioneered the idea of a stabilization fund when the only insurer in the state’s Obamacare market threatened to raise premiums by more than 40 percent or quit altogether because it was spending more money on sick people’s medical bills than it received from premiums.

A bill passed last year by the heavily GOP state legislature set up a $55 million state program, funded through an existing tax on insurers, to reimburse insurers for high-cost enrollees.

State officials went on to win federal funding this summer from the Trump administration through a provision of Obamacare that lets states develop their own health plans as long as they meet certain criteria, such as covering the same number of people and not adding to the deficit.

“The Alaska example was a microcosm for what could be a successful program,” said Sen. Dan Sullivan (R-Alaska), noting that 2018 average premiums in that state are set to fall for the first time in five years even though his state has among the highest health costs in the country.

That program is likely to take on renewed importance now that GOP repeal efforts have foundered and more states undertake efforts to fix their insurance markets in the face of double-digit premium increases and declining insurer participation. The roots of those problems include GOP moves to undermine the law in ways that hit insurers’ bottom lines and Democratic overconfidence in the number of young and healthy people who would sign up for coverage.

Citing the Alaska model, Price encouraged states in March to stabilize their markets by channeling state and federal money to insurers to offset the costs of treating the most expensive patients — not unlike other risk-reduction programs built into the Affordable Care Act that conservatives derisively called “bailouts.”

Four other states — Oklahoma, Oregon, Minnesota and Iowa — now have waiver applications in the pipeline as a way to keep insurers in their markets and limit premium increases.

In addition, New Hampshire and Maine are considering similar programs.

“I think it is a recognition by many Republican policymakers … that some market stabilization programs can be a good thing,” said Aviva Aron-Dine, a former top Obama HHS official now with the left-leaning Center on Budget and Policy Priorities.

The state officials seeking approval for stabilization plans for 2018 — among them, Obamacare critics and supporters — are unified by their pragmatic approach.

“It’s not a political issue anymore,” said Lanhee Chen, a Republican health care adviser at the Hoover Institute who is a proponent of using Obamacare waivers to let states better tailor the health care law to fit their own needs.

“At least for the intermediate term, as many Republicans have said, Obamacare is probably going to be the law,” Chen added. “The administration has to figure out what its posture is.”

A handful of senators and a few dozen House members have also started discussions on a bipartisan national Obamacare fix, but it’s too soon to know whether legislation will come together this fall. But even Republicans in Congress who are wary of that effort support greater state flexibility — a hallmark of Price’s philosophy.

“There could be far greater flexibility for states to pursue innovative solutions,” said Sen. Ted Cruz (R-Texas), one of the Hill’s most determined Obamacare critics. But he’s made it clear his top priority is taking steps to lower premiums, not having Congress spend more money on insurers to stabilize Obamacare markets.

“As a component in a repeal of Obamacare and an expansion of consumer choices and competition, those stabilization funds have an appropriate place,” Cruz explained. “As a standalone, that’s the wrong solution.”

Other Republicans who praise Alaska’s approach favor making it simpler for other states to enact plans to bring down premiums.

“The waiver authorities already provided for in the ACA law, they were never really granted. They were never really used,” said Wisconsin Sen. Ron Johnson, another critic of Obamacare who is open to state-initiated fixes. “So that might be one of those reforms that we could be looking for.”

Even blue states like Oregon that embraced the health law are seeking ways to prevent unsustainable price increases.

“It was a total no-brainer for us,” said Jake Sunderland, of Oregon’s Department of Consumer and Business Services, which drafted a reinsurance program and estimates the state would receive $30 million a year in federal funds.

Oregon still has a competitive marketplace, but the state has seen insurers leave the market or scale back where they offer plans, in part because Obamacare patients were sicker than expected.

Average premium increases on Oregon’s individual market have topped 20 percent in each of the past two years, according to state regulators. Though seven insurers are expected to sell Obamacare-compliant plans in the individual market in 2018, state officials said they want to intervene now to prevent a mass defection of insurers.

“The reason why a year ago we started exploring how to stabilize the market is because we didn’t want to get to that point,” Sunderland said.

Minnesota found itself in a similar spot. The state saw competition among insurers decline, and health plans capped enrollment. The state, which committed roughly $540 million over two years to fund its reinsurance program, is asking HHS to provide between $138 million and $167 million for 2018.

State officials said the federal government has sent positive signals about the plan, which was the second to be submitted, behind Alaska’s. Oklahoma and Iowa are preparing to submit theirs to HHS in the coming weeks.

“I am not a big fan of the Affordable Care Act and the mandate,” said state Rep. Joe Hoppe, a Republican who sponsored the Minnesota legislation. “But we need to have a safety net for people.”

Conservative Chairman In Talks About Obamacare Stabilization Deal

Image result for meadows and macarthur photosSource: The Hill

Reps. Mark Meadows (R-N.C.) and Tom MacArthur (R-N.J.) are in talks for a bill that would stabilize ObamaCare markets.

The measure would fund key ObamaCare payments known as cost-sharing reductions, possibly in exchange for expanded flexibility favored by conservatives for states to waive ObamaCare regulations through broadening an existing provision known as 1332 waivers.

The talks were first reported by Axios.

A Meadows aide confirmed the discussions but said it has not been discussed by the Freedom Caucus.

In a statement, MacArthur said he wants to stabilize ObamaCare markets while lowering premiums.

“I came to Congress to fix the tough problems facing our country, not walk away,” MacArthur said. “This is why I’ve been working on a plan that will lower the cost of premiums, while stabilizing the individual marketplace, so that we can provide Americans with the high quality and affordable health care they deserve.”

Still, the Freedom Caucus is not giving up on ObamaCare repeal and is at the same time pushing to vote on a repeal-only bill that passed in 2015.

The negotiations are an indication that Meadows could be open to a measure helping to stabilize ObamaCare.

The Senate Health Committee is also discussing a stabilization bill that is likely to include the cost-sharing reductions as well as increased flexibility around the 1332 waivers.

The committee will be holding hearings on the issue when Congress returns in September and is aiming to have a bill by later that month.

Insurers are looking for certainty that the cost-sharing reductions, which President Trump has threatened to cancel, will continue. Many are raising premiums for next year because of the uncertainty, and they need to file their rates by next month.

The chairman of the other main conservative group in the House, Rep. Mark Walker (R-N.C.) of the Republican Study Committee, denounced the approach. “Stabilize = Bailout. We promised to dismantle Obamacare, not to prop it up and ask the American people to pay more,” he tweeted about the Meadows and MacArthur discussions.

Sanders Will Offer “Medicare for All” Bill Soon

Image result for bernie sanders photosSource: US News

 U.S. Sen. Bernie Sanders told a group of seniors that the solution to the country’s health care crisis is to make Medicare available to all, a proposal he plans to introduce shortly after Congress reconvenes in September.

The Vermont independent visited the Franklin County Senior Center in St. Albans on Monday answering questions about health care, social security and President Donald Trump’s budget before heading to an East Fairfield dairy farm to hear from several dairy farmers about the challenges facing the industry, as well their health care concerns.

“Well, we kept the affordable care act alive by the slimmest of margins. Some of us worked very, very hard on that,” said Sanders.

He acknowledged that a “Medicare for all” bill likely won’t pass in the Republican-controlled Congress and with Trump as president. But he said change takes time, and would involve organizing effectively in every state to make it happen.

“If we pass this thing, it’s not going to be tomorrow, it would be the most significant step forward legislatively since I suspect the creation of Social Security in the 1930s. It’s a big deal,” he said.

After meeting with seniors, he told reporters that a white supremacist rally in Charlottesville, Virginia, on Saturday in which a counter-protester was killed, was “a very, very sad moment in American history.”

The former presidential hopeful said Trump bore some responsibility for giving rise to hate groups by not previously condemning them.

Facing increased pressure, Trump on Monday named and condemned hate groups as “repugnant,” and declared “racism is evil” after his previous remarks about violence on “many sides” prompted criticism. Trump called members of the Ku Klux Klan, neo-Nazis and white supremacists who take part in violence “criminals and thugs” in a prepared statement.

Covered California May Let Insurers Recoup 2018 Losses in Future Years

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Source: KPCC

The board that oversees Covered California will consider a plan Thursday to entice health insurance companies to keep selling individual policies on the state exchange even if they lose money next year.

Covered California is proposing that insurers who lose money in 2018 on the exchange 2018 “due to enrollment changes and certain federal laws and policies” would be allowed to make larger profits each of the following three years to recover their losses.

The exchange points to ongoing market uncertainty as the reason for the profit proposal. Health insurers are waiting to see if the Trump administration will continue to fund subsidies that cover certain lower-income consumers’ out-of-pocket costs.

“It’s always a difficult process even in a more stable policy environment where we can predict more readily what federal and state health care policies are going to be,” says Zachary Courser, research director of the Dreier Roundtable at Claremont McKenna College.

The California Association of Health Plans did not immediately respond to a request for comment.

Health insurance companies set their rates based on what they calculate it will cost them to cover the cost of their customers’ health care. Exactly what markets will look like can be hard to predict.

“Health care, of course, has been a sector that has had a higher inflation rate than the rest of the economy,” says Courser.

Covered California is finalizing plans for 2018 now. The state exchange announced an average 12.5 percent premium rate hike across the state, assuming Obamacare remains unchanged in the coming year.

As they prepare for next year, Courser says all state exchanges find themselves in a “difficult spot.”

“They have to find a way to attract enough insurers in order to make these exchanges work for consumers. And I think to do that, they’re trying to offer some pathway forward to attract insurance providers to continue to operate under the exchanges,” he says.

Under the Covered California proposal, the state would refer to each insurer’s historic profit margin to determine whether it needs to raise rates that recoup 2018 losses and “maintain adequate reserves.”

Under the plan, if an insurer has an unexpected profit next year, the exchange would seek through negotiations “to deduct the unanticipated profits for the 2018 plan year from Contractor’s profit margins” over the subsequent one to three years.

The California Department of Managed Health Care and the state Department of Insurance have the final say over contracts with health insurance firms.

Climbing Cost of Decades-Old Drugs Threatens To Break Medicaid Bank

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Source: Kaiser Health News

Skyrocketing price tags for new drugs to treat rare diseases have stoked outrage nationwide. But hundreds of old, commonly used drugs cost the Medicaid program billions of extra dollars in 2016 vs. 2015, a Kaiser Health News data analysis shows. Eighty of the drugs — some generic and some still carrying brand names — proved more than two decades old.

Rising costs for 313 brand-name drugs lifted Medicaid’s spending by as much as $3.2 billion in 2016, the analysis shows. Nine of these brand-name drugs have been on the market since before 1970. In addition, the data reveal that Medicaid outlays for 67 generics and other non-branded drugs cost taxpayers an extra $258 million last year.

Even after a medicine has gone generic, the branded version often remains on the market. Medicaid recipients might choose to purchase it because they’re brand loyalists or because state laws prevent pharmacists from automatically substituting generics. Drugs driving Medicaid spending increases ranged from common asthma medicines like Ventolin to over-the-counter painkillers like the generic form of Aleve to generic antidepressants and heartburn medicines.

Among the stark examples:

  • Ventolin, originally approved in 1981, treats and prevents spasms that constrict patients’ airways and make it difficult to breathe. When a gram of it went from $2.58 to $2.90 on average, Medicaid paid out an extra $54.5 million for the drug.
  • Naproxen sodium, a painkiller originally approved in 1994 as brand-name Aleve, went from costing Medicaid an average of $0.72 to $1.70 a pill, an increase of 136 percent. Overall, the change cost the program an extra $10 million in 2016.
  • Generic metformin hydrochloride, an oral Type 2 diabetes drug that’s been around since the 1990s, went from an average 10 cents to 13 cents a pill from 2015 to 2016. Those extra three pennies per pill cost Medicaid a combined $8.3 million in 2016. And cost increases for the extended-release, authorized generic version cost the program another $6.5 million.

“People always thought, ‘They’re generics. They’re cheap,’” said Matt Salo, who runs the National Association of Medicaid Directors. But with drug prices going up “across the board,” generics are far from immune.

Historically, generics tend to drive costs lower over time, and Medicaid’s overall spending on generics dropped $1.6 billion last year because many generics did get cheaper. But the per-unit cost of dozens of generics doubled or even tripled from 2015 to 2016. Manufacturers of branded drugs tend to lower prices once several comparable generics enter a market.

Medicaid tracks drug sales by “units” and a unit can be a milliliter or a gram, or refer to a tablet, vial or kit.

Old drugs that became far more expensive included those used to treat ear infections, psychosis, cancer and other ailments:

  • Fluphenazine hydrochloride, an antipsychotic drug approved in 1988 to treat schizophrenia, cost Medicaid an extra $8.5 million in 2016. Medicaid spent an average $1.39 per unit in 2016, an increase of 347 percent vs. the year before.
  • Depo-Provera was first approved in 1960 as a cancer drug and is often used now as birth control. It cost Medicaid an extra $4.5 million after its cost more than doubled to $37 per unit in 2016.
  • Potassium phosphates — on the market since the 1980s and used for renal failure patients, preemies and patients undergoing chemotherapy — cost Medicaid an extra $1.8 million in 2016. Its average cost to Medicaid jumped 290 percent, to $6.70 per unit.

A shortage of potassium phosphates began in 2015 after manufacturer American Regent closed its facility to address quality concerns, according to Erin Fox, who directs the Drug Information Center at the University of Utah and tracks shortages for the American Society of Health-System Pharmacists.

When generics enter a market, competition can drive prices lower initially. But when prices sink, some companies inevitably stop making their drugs.

“One manufacturer is left standing … [so] guess who now has a monopoly?” Salo said. “Guess who can bring prices as far up as they want?”

According to a Food and Drug Administration analysis, drug prices decline to about half of their original price with two generic competitors on the market and to about a third of the original price with five generics available. But if there’s only one generic, a drug’s price drops just 6 percentage points.

The increases paid by Medicaid ultimately fall on taxpayers, who pay for the drugs taken by its 68.9 million beneficiaries. And those costs eat “into states’ ability to pay for other stuff that matters to [every] resident,” said economist Rena Conti, a professor at the University of Chicago who co-authored a National Bureau of Economics paper about generic price hikes in July. The manufacturers’ list prices for the drugs named here also rose in 2016, according to Truven Health Analytics, which means customers outside Medicaid also paid more.

Conti said that about 30 percent of generic drugs had price increases of 100 percent or more the past five years.

Medicaid spending per unit doesn’t include rebates, which drug manufacturers return to states after they pay for the drugs upfront. Such rebates are extremely complicated, but generally start at the federally required 23.1 percent for brand-name drugs, plus supplemental rebates that vary by state, Salo said. Final rebate amounts are considered proprietary, he noted. “All rebates are completely opaque … [it’s] “black-box stuff.”

Fox said drug prices could also jump when a pharmaceutical product changes ownership, gets new packaging or just hasn’t had a price increase in a long time.

Recently named FDA Commissioner Scott Gottlieb has made increasing generic competition a core mission. Plans include publishing lists of off-patent drugs made by one manufacturer and preventing brand-name drugmakers from using anti-competitive tactics to stave off competition.

Doctors, pharmacists and patients don’t always receive warning when a price hike is about to occur, Fox said.

“Sometimes, we will get notices. Other times, it’s like a bad surprise,” she said, adding that the amount of wiggle room for alternatives depends on the drug and the patient.

Following some price hikes, doctors can use fewer units of a drug or switch it out entirely, she said.

Ofloxacin otic, long used to treat swimmer’s ear, became so expensive when generic manufacturers exited the market that doctors started using eye drops in patients’ ears, Fox said.

When old drugs get more expensive, hospitals try to eliminate waste by making smaller infusion bags and keeping really expensive drugs in the pharmacy instead of stocked in readily available shelves and drawers. But that’s not always possible.

“These drugs do have a place in daily therapy. Sometimes they’re life-sustaining and sometimes they’re lifesaving,” said Michael O’Neal, a pharmacist at Vanderbilt University Medical Center. “In this case, you just need to take it on the chin, and you hope one day for competition.”

Return of Health Insurance Tax Will Hike Premiums by 2.6% Next Year, Report Estimates

Health Insurance conceptual focusing on Premiums

Source: Fierce Healthcare

The return of the Affordable Care Act’s health insurance tax—which insurers have long lobbied against—will likely increase premiums by an average of 2.6% in 2018, according to a new analysis.

The ACA’s tax on fully insured health coverage was in effect from 2014 to 2016, and its purpose was to help offset the cost of the tax credits for ACA exchange enrollees. But on late 2015, Congress passed a one-year moratorium on the tax for 2017 as part of a spending bill.

This moratorium meant $13.9 billion that would have been due this year wasn’t collected, saving policyholders an estimated 3% on their premiums, noted the analysis (PDF), which was produced by consulting firm Oliver Wyman and commissioned by UnitedHealth.

But the delay expires in 2018, and with the tax’s return, premiums are expected to rise. The firm estimates an average 2.6% increase in 2018 and rate increases of between 2.5% and 2.7% in each subsequent year through 2027.

Looking at it by market segment, the analysis stated that those projected rate hikes equate to $158-per-person premium increase in the individual market, $185 per person and $500 per family in the small-group market, $188 per individual and $540 per family in the large-group market, $245 per Medicare Advantage member and $181 per Medicaid managed care enrollee.

In total, the return of the tax is projected to increase health insurance premiums by as much as $22 billion next year, and $267 billion from 2018 through 2027.

Executives from the country’s largest publicly traded insurers have mentioned the potential impact of the tax’s return in their recent earnings calls with investors and analysts. Anthem CEO Joseph Swedish, for example, noted during the insurer’s second-quarter call that when the moratorium is lifted, it will likely spur a 4% to 5% premium increase for ACA exchange plans.

Unsurprisingly, the health insurance industry has continually pushed for the tax’s repeal. Indeed, a study produced by Oliver Wyman back in 2011—and commissioned by America’s Health Insurance Plans—predicted that the tax’s implementation would raise premiums.

Now, other organizations are joining the lobbying effort against the tax. In a recent letter sent to GOP leaders in the House and Senate, 36 conservative groups and activists urged Congress to act swiftly to prevent both the health insurance tax and the medical device tax from going into effect in 2018.

“Allowing the health insurance tax to go into effect in 2018 will directly hurt middle and low-income families,” they wrote.

Medicare Advantage: Perfect Insurer Profit Center

Image of Medicare Advantage Rubber Stamp Grunge Design with Dust

Source: Bloomberg

The turmoil around the Affordable Care Act has created heartburn for health insurers. The industry is betting that a different government program will soothe its ills.

Big insurers have retreated from Obamacare’s individual market, where fighting over the future of the health law has contributed to financial losses. They’re focusing instead on Medicare Advantage, a politically popular program that’s being embraced by a growing population of older Americans.

The market is dominated by two large players: No. 1 UnitedHealth Group Inc. has seen the number of people enrolled in its Medicare Advantage plans climb by 23 percent over the past year to 4.8 million, while No. 2 Humana has held steady at 3.3 million.

Both Obamacare and Medicare Advantage give consumers assistance to buy a health plan of their choosing. But under Medicare Advantage the government picks up much of the cost, ensuring a steady revenue stream for insurers. Plan premiums, which are largely paid by the government, average almost $1,000 a month.

Obamacare has been a much more mixed proposition. The relatively young law has come with an unending political headache, as Republicans have vowed to tear it out by the roots and President Donald Trump made its repeal a centerpiece of his presidential campaign. That opposition to the law culminated this month with Republican’s failed repeal effort, yet the administration still has options to sabotage the law — and has threatened to do so.

Aging Americans

Medicare Advantage is the private version of the U.S. government’s Medicare program for the elderly. It’s also open to some disabled individuals. As the U.S. population ages, more retirees are opting for such plans over traditional Medicare. About a third of Medicare beneficiaries, or roughly 20 million people, were covered by the private plans as of June, according to the Centers for Medicare & Medicaid Services.

That makes Medicare Advantage one of the few areas of expansion in an otherwise stagnant industry. And its popularity could insulate it from Washington caprice: Seniors are a powerful voting bloc, so margin-threatening political changes are less likely than in businesses like Obamacare.

“It’s both fundamentals and it’s policies,” said Ana Gupte, an analyst at Leerink Partners. “There’s bipartisan support, but fundamentally also it’s a large, growing and profitable market.”

Medicare Advantage enrollees are insurers’ favorite kind of customers — they stick around. Once they select a plan, they tend to stay enrolled for years. Obamacare users by contrast are often in and out of the market, and tend to shop every year for the lowest price. A UBS survey found that 12 percent of Medicare enrollees changed plans for 2017, compared with 39 percent in Affordable Care Act plans.

Gupte estimates that by 2020, half of the growing number of Medicare beneficiaries will be in Advantage plans — some 38 million people in all. UnitedHealth has a similar outlook.

“There’s just a real strong overall value proposition with Medicare Advantage,” Steven Nelson, the CEO of UnitedHealth’s insurance operation, told investors on July 18. “We’re seeing that not only just with the folks that we serve, but as we talk to policymakers, too, there’s really strong support for it.”

Humana’s Medicare membership stagnated this year as the insurer pulled back from some markets and held benefits steady in an effort to improve profits. The effort succeeded in boosting earnings, and Humana said on Wednesday it plans to improve the appeal of its products for next year, boosting membership growth.

Major health insurers have benefited from minimizing their exposure to Obamacare. All six for-profit health plans in the Standard & Poor’s 500 Index reported second-quarter earnings that beat analysts’ estimates, and the S&P Managed Health Care Index of insurer stocks is up more than twice as much as the broader index this year.

Startups Circling

As big insurers aim to expand their share of the market, investors have poured money into startups targeting Medicare Advantage. Clover Health, which offers the plans in New Jersey, raised $130 million at a $1.2 billion valuation in a recent funding roundBright Health, which is making a big push into Medicare plans by teaming up with hospital systems, has raised a total of $240 million from investors.

Vivek Garipalli, Clover’s CEO, says the Medicare Advantage business model lets his insurer profit by taking better care of customers.

“You have a direct correlation with improving someone’s long-term outcomes and generating higher margins,” he said. “Our customers are with us for a long time.”

Garipalli said that his company won’t be selling Obamacare plans anytime soon. That’s in part because of the political threats the program faces, and because Obamacare customers switch plans so frequently.

“The exchange market, at least for Clover and the way we think about building our business, the churn is just really really high in individual insurance,” he said. “It didn’t really fit our model because it’s hard to build an outcomes-focused business.”

Despite the potential for growth and profits nationally, insurers have avoided offering Medicare Advantage plans in 147 counties across 14 states, according to an analysisfrom the Kaiser Family Foundation. Obamacare offerings are far more comprehensive — 19 counties are at risk of having no insurer options next year.

Playing Catch-Up

Cigna Corp.Aetna Inc. and Anthem Inc. all say that growing in Medicare Advantage is a top priority, either by building their businesses on their own or by acquiring smaller firms that have been racing to grab a slice of the market.

Anthem said last week that it’s looking at deals for Medicare Advantage firms to “augment our growth profile.” Cigna told investors on June 21 that making deals to increase sales to the U.S. senior population was among its top M&A priorities. Medicaid specialist Centene Corp. is expanding in six new markets next year for Medicare Advantage plans, with a focus on low-income seniors.

Aetna, after being forced to scuttle a deal for Medicare specialist Humana, is working to expand its footprint, with a goal of eventually reaching 75 percent to 80 percent of seniors, up from 60 percent next year. Aetna’s overall government business, which includes Medicare and the Medicaid program for the poor, already accounts for half the company’s revenues, and Aetna says Medicare will keep growing quickly.

“We’re trying to grow as fast as we reasonably can in Medicare.” Aetna Chief Financial Officer Shawn Guertin said in an interview. “I’m optimistic about the competitive positioning that we’ll have in the market” next year.

Want a Better Obamacare Rate? You May Have to Call the Movers

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Source: Sacramento Bee

Under preliminary Obamacare rates announced by Covered California, premiums on exchange plans will rise by an average of 5.7 percent in Sacramento, Placer, El Dorado and Yolo counties.

That’s less than half of the statewide average of 12.5 percent, and consumers could virtually avoid an increase altogether if they shop around.

But in 22 counties stretching from Del Norte to Tuolumne, premiums on plans sold through the exchange are set to increase by an average of 33.2 percent. Residents who switch plans can save a little, but still face an average hike of about 29 percent.

According to Covered California, the disparity reflects the number of insurance carriers serving a particular area as well as the number of providers. Rural areas often have less competition between providers, and there’s also less coordination of care – which helps keep costs down – between the providers that do exist.

The differences also reflect who is buying the coverage and how many services they are using, according to the California Association of Health Plans.

Northern California consumers, on average, pay 78 percent more than those in Southern California. A 40-year-old in Northern California, for example, would pay an average monthly premium of $496 compared to $379 in Southern California.

The same regional differences exist with CalPERS’ purchase of health coverage for state employees, the exchange said.

Everyone in the Covered California region that includes Sutter, Yuba and 20 other counties in line for Covered California’s highest average premium increases next year will have two insurance companies to choose from: Anthem and Blue Shield. Some residents, depending on where they live, also might be eligible for plans offered by Kaiser Permanente.

Missing from the region’s lineup for 2018 will be Health Net, which is pulling its health-maintenance organization and health savings plan products.

In the Sacramento region, all consumers will have access to at least one insurance company, while some can choose from as many as four: Blue Shield, Health Net, Kaiser and Western Health Advantage.

Seventeen of California’s 19 pricing regions reflect county boundaries. Consumers in Los Angeles County, though, pay different premiums based on where they live.

An enrollee in Monterey Park, in the county’s eastern pricing region, faces an average premium increase of 13.4 percent. On the other side of Interstate 710 in Los Angeles, in the western region, consumers are in line for a slightly smaller average increase, 13.2 percent.

This week’s Covered California rates now go to the Department of Managed Health Care for public review. The agency expects to finish that process by October, a spokesman said Thursday.

Last Updated 8/2/2017

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