Does Aetna Exit Signal Deeper ACA Problems?

open_enrollment

San Diego Union-Tribune
The insurance giant Aetna will will stop offering Obamacare health plans in 11 of 15 states, citing $200 million in losses this year and more than $400 million since 2014. The announcement, made Monday night, was the latest blow to the Affordable Care Act, which had already suffered the departure of top-five insurers Humana and UnitedHealthcare and has seen double-digit premium increases for many of the carriers that will continue to sell through health exchanges such as Covered California next year. In general, carriers have said too many sick patients are the main reason they’re dropping out of exchanges or raising rates. With not enough young and healthy enrollees to balance out the claims ledgers, the three companies that are pulling out or down scaling said they have lost hundreds of millions of dollars.

So do these developments mark the beginning of the doomsday scenario for Obamacare? Before the law’s main insurance provision took effect in 2014, many experts predicted that guaranteeing coverage to all consumers regardless of their pre-existing medical conditions would eventually create “sick” insurance risk pools that could not cover their costs without large premium increases each year.

The experts disagree on whether the latest pullbacks and significant pricing hikes, floating in a sea of election-year politics, signal that the nation’s health insurance exchanges have reached a terrible tipping point or are simply seeking a new state of equilibrium.

Gary Claxton, director of the nonprofit research group Health Care Marketplace Project at Kaiser Family Foundation, takes a middle position. He said the currently available facts can be interpreted either way, and that means Obamacare’s upcoming open-enrollment period — its fourth annual — is critical. It will all come down to whether the number of enrollees in Obamacare plans continues to grow, he said. “We won’t know until the next open enrollment, are we still moving forward or are we stalled or moving backward?” Claxton said. ” If the market grows, then I think many insurers will find a way to be part of it… The next couple of months are a moment of truth.”

Just how bad the problem is depends on who you ask. UnitedHealthcare said in April that it expects to lose $650 million this year because the cost of its Obamacare policies has exceeded revenue generated from premiums. Then late Monday brought Aetna’s announcement of its deficits. While its book of business includes insurance plans sold outside of Obamacare exchanges as well, all plans on the individual market (not employer-based policies) have been affected by the Affordable Care Act’s edict to take all comers regardless of their health status.

This picture of unprofitability from some of the nation’s largest insurers contrasts with an announcement last week from the U.S. Centers for Medicare and Medicaid Services that said per-member claims were flat from 2014 to 2015 for exchange enrollees, compared with a 3 percent increase for the broader health insurance market.

The federal government gets its data from the Affordable Care Act’s reinsurance and risk adjustment programs, which have collected broad information on all claims in order to reimburse programs that experienced higher-than-average patient expenses. The reinsurance program will go away next year and many organizations, including Covered California, have said insurers are announcing double-digit premium increases for next year to compensate for this change. Neither the insurance companies nor CMS has released full data sets on Obamacare claims, making it difficult for analysts to reconcile these seemingly contrasting pictures about the financial state of health exchanges.

Brian Blase, a senior research fellow at the Mercatus Center, a conservative think tank located at George Mason University in Virginia, said he believes insurers’ reported losses and their decisions to largely leave the exchanges have been brewing since 2014, the first year exchange policies took full effect. A recent analysis of 174 health plans operating in 2014 showed that premiums would have had to be 24 percent higher than they were in 2014 to cover costs, but that the disparity was erased by the government’s reinsurance program, according to the Mercatus study.

When asked why the recent CMS study indicates a very different scenario, Blase was blunt. “I think they did some gymnastics on how they counted or discounted claims. It is inconsistent with everything else I’ve seen and, frankly, I think that their analysis is inaccurate,” Blase said. He said the current negative pattern will likely deepen, eventually leading to repeal or significant modification of the Affordable Care Act’s insurance regulations. “You’re going to have rising premiums and lower choice. I think the political pressure next year to make changes will be significant,” Blase said. But others such as Sara Collins, vice president for health care coverage and access at The Commonwealth Fund, a foundation that supports independent research on health care practice and policy, don’t see dire signs from the latest insurance developments. She noted that major carriers including Blue Cross, Blue Shield and Kaiser Permanente are not pulling out of exchanges. There is evidence, Collins added, that insurance risk pools tend to be healthier when they’re in larger states such as California. Long-term sustainability, especially where premiums are concerns, appears to be a function of size, which in turn lures multiple carriers who compete with each other for business. Collins said this means the estimated 1,000 U.S. counties with only one insurance carrier are likely to see more significant upward pressure on premiums in coming years, a situation that does, as Blase asserts, seem to suggest the federal government needing to step in. Ideas for intervention range from creating a “public option” similar to Medicare or special high-risk insurance pools to subsidize insurance to cover people with the most expensive medical needs.

Overall, though, Collins said the current information appears to indicate that Obamacare markets are maturing rather than dying. “It’s not surprising that we’re seeing some shake-up in the marketplace this year. There are going to be winners and losers like any competitive market you can think of. Some will compete and gain market share, others won’t,” she said. Additional information on the changes the Affordable Care Act has wrought in California will be forthcoming. The Kaiser Family Foundation is scheduled to release the fourth and final installment of its California health survey on Friday. The survey has tracked the effects of the law across the state since summer 2013. (c)2016 The San Diego Union-Tribune. Visit The San Diego Union-Tribune atwww.sandiegouniontribune.com.

Employer Sponsored Insurance Rate Remains Stable

Since 2009, employer-sponsored insurance has been on the decline in California. A key question around the Affordable Care Act (ACA) was whether the reforms would further erode employer-sponsored insurance coverage. A recent survey by the California HealthCare Foundation finds that employer-sponsored insurance in the state has remained stable from 2013 to 2015. Worker eligibility for employer-sponsored insurance also remained stable, and even increased among some groups. However, the percentage of eligible workers who chose to enroll in employer-sponsored insurance declined from 86.4% in 2013 to 80.2% in 2015, bringing California closer to the national average take-up rate of 79%. This decline could be caused by the availability of alternative coverage options through Medi-Cal and Covered California.

Covered California Rates Jump 13% in 2017

Covered California Rising costs

Covered California’s premiums jumped 13.2% for 2017, up from about a 4% increase in each of the past two years. However, most consumers will see a much smaller increase or pay less next year if they switch to another plan. California executive director Peter Lee said, “Shopping will be more important this year…Almost 80% of our consumers will be able to pay less than they are paying now, or see their rates go up by no more than 5% if they shop and buy the lowest-cost plan at their same benefit level.”

While premiums will rise, the subsidies will rise as well. About 90% of Covered California enrollees get help to pay for their premiums. The average subsidy covers roughly 77% of the consumer’s monthly premium. “Even though the average rate increase is larger this year than the Past two years, the three-year average increase is 7% – substantially better than rate trends before the Affordable Care Act was enacted,” Lee said.

Covered CaliforniaPremium increases 2014-2015 2015-2016 2016-2017 3-year average
Average weighted increase 4.2% 4% 13.2% 7%
Lowest price Bronze plan 4.4% 3.3% 3.9% 3.9%
Lowest priced Silver plan 4.8% 1.5% 8.1% 4.8%
Second lowest priced Silver plan 2.6% 1.8% 8.1% 4.1%
If a consumer switches to the lowest priced plan in the same tier -4.5% -1.2%

 

Lee said the average rate increase reflects the following factors:

  • A one-year adjustment due to the end of the reinsurance funding mechanism in the Affordable Care Act. The provision was designed to moderate rate increases during the first three years when exchanges were being established. The American Academy of Actuaries estimates that this will add 4% to 7% to premiums for 2017.
  • Special enrollment by some consumers who sign up only after they become sick or need care, which has had a significant effect on rates for two insurance plans.
  • The rising cost of health care, especially for specialty drugs.
  • Pent-up demand for health care among those who were uninsured before the Affordable Care Act.

Lee said, “Covered California is working to address some of these issues on multiple fronts. The exchange is aggressively marketing to attract healthy consumers year-round, and is working to ensure special enrollment is available only to those who meet qualifying circumstances. It is also sampling the special enrollment population to better understand how to make any further improvements needed.”

Covered California is reducing the number of services that are subject to a consumer’s deductible. Starting in 2017, consumers in Silver 70 plans will save as much as $55 on an urgent care visit and $10 on a primary care visit. Consumers in Silver, Gold, and Platinum plans will pay a flat copay for emergency room visits without having to satisfy a deductible, which could save them thousands of dollars.

These improvements build on features already in place that ensure most outpatient services in Silver, Gold and Platinum plans are not subject to a deductible, including primary care visits, specialist visits, lab tests, X-rays and imaging. Some Enhanced Silver plans have little or no deductible and very low copays, such as $3 for an office visit. Consumers in Covered California’s most affordable Bronze plans can see their doctor or a specialist three times before the visits are subject to the deductible.

The contract with health insurers for 2017 ensures that consumers select or are provisionally assigned a primary care physician. Below are the companies selected for the 2017 exchange:

  • Anthem Blue Cross of California
  • Molina Healthcare
  • Blue Shield of California
  • Oscar Health Plan of California
  • Chinese Community Health Plan
  • Sharp Health Plan
  • Health Net
  • Valley Health Plan
  • Kaiser Permanente
  • Western Health Advantage
  • A. Care Health Plan

The following carriers are increasing their coverage areas in 2017:

  • Oscar will be entering the market in San Francisco, Santa Clara, and San Mateo counties.
  • Molina will expand into Orange County.
  • Kaiser will be available in Santa Cruz County.

With the expansion of carriers, 93% of consumers will be able to choose from three or more carriers, and all will have at least two to select from. In addition, more than 93% of hospitals in California will be available through at least one Covered California health insurance company in 2017, and 74% will be available in three or more plans. Rate details by pricing regions can be found in Covered California’s Health Insurance Companies and Plan Rates for 2017, posted online at: http://coveredca.com/news/pdfs/CoveredCA-2017-rate-booklet.pdf.

Californians with Individual Health Coverage Spent Significantly Less on Healthcare

California residents who bought insurance through the individual market spent significantly less on health care in 2014 than they did the year before. The year, 2014 marks the first year of the Affordable Care Act (ACA). The report by the California HealthCare Foundation reveals that median out-of-pocket spending for families with individual coverage dropped from $7,345 in 2013 to $4,893 in 2014. Thirty-five percent of Californians with individual coverage said that health care costs ate up more than 10% of their household income compared to 43% in 2013. The reduced spending is likely due to premium tax credits and cost-sharing subsidies available for the first time in 2014 through Covered California. Spending declines were more pronounced in California than in the rest of the country. In fact, it’s likely California’s spending declines helped pull down the national averages.

Insurance Commissioner’s Statement on Centene’s Acquisition of Health Net

California Insurance Commissioner Dave Jones issued a statement on Centene’s acquisition of Health Net. The following is a summary of his comments:

This transaction provides an opportunity to bring new capital and resources from a major national health insurer largely outside of California (Centene) to enable a California health insurer (Health Net) to continue to compete and offer consumers additional choices in California’s individual, small group, and large group commercial health insurance market. The conditions for my approval of this merger include the following:

  • Merger costs will not be imposed on California policyholders.
  • Health Net will maintain and grow its commercial line of business. There are growth commitments and investment requirements to ensure that Centene continues to invest substantially in Health Net Life and that both companies seek to expand Health Net Life’s present competitiveness in California’s individual, small group and large group health insurance markets.
  • Health Net Life will continue to offer products through Covered California.
  • Centene and Health Net must provide sufficient networks of medical providers and timely access to medical providers and hospitals.
  • Centene and Health Net must improve the quality of care delivered through their health insurance.
  • Health insurance rates will be developed using the same methodologies used before the merger, but with an agreement that rate increases will be kept to a minimum.
  • An adequate distribution channel for Health Net health insurance must be maintained.
  • Senior management for Health Net’s California operations must remain in California and restrictions are placed on Centene’s ability to re-domesticate or move Health Net out of state.
  • Centene will invest further in California by making a $200 million infrastructure investment by establishing a California call center, bringing new jobs to California.
  • Centene and Health Net will invest an additional $30 million in California’s low and moderate income

Health Net has had declining market share and covered lives in its commercial health insurance business. The merger with Centene gives Health Net access to the capital and resources to compete in a California market that’s dominated by three much larger health insurers (Kaiser, Anthem Blue Cross of California, and Blue Shield of California) and several other national health insurers (United Health Care, Aetna, Cigna).

ACA Participation Boosts Pressure on Blue Plans

Blue Cross Blue Shield (BCBS) plans saw a 75% drop in net income from 2013 to 2015, according to a report by A.M. Best. BCBS plans faced a higher risk population in the ACA exchanges. The drop in earnings can also be blamed on higher costs of generic prescription drugs and expensive new specialty drugs. BCBS plans saw a 35% drop in underwriting earnings in 2015 and a 35% drop in investment income from 2013 to 2015. Also, the ACA health insurer fee resulted in a 1.3% decline in consolidated earnings in 2015. The fee has a greater effect on net income since is not tax-deductible.

High enrollment morbidity in the ACA exchanges has a large negative financial effect on the whole industry, including BCBS companies. Carriers are trying to attract younger and healthier enrollees through active outreach, technology, and customer engagement. BCBS companies are looking to control the cost of care through narrow networks, disease management programs, better care coordination, and increased provider collaborations. These initiatives are particularly important in saving money by providing appropriate quality care for higher-risk individuals. A.M. Best expects the earnings pressure to continue at BCBS companies. The lower earnings and growth in premiums from increased membership may drive down of risk-adjusted capitalization.

Net-premiums grew 14% over the past three years for BCBS companies. The increase has been greater at publicly traded companies, which tend to be more active in Medicaid managed care and Medicare Advantage. Both of these programs have had stronger enrollment growth form the aging U.S. population and Medicaid expansion through the ACA.

One-Third of Doctors Consider Quitting After Passage of the ACA

Thirty-six percent of all doctors, and 45% of private practice doctors say they are more inclined to leave the medical profession because of the Affordable Care Act (ACA), according to a study by CompHealth. Fifty-one percent of doctors surveyed view the ACA unfavorably while 30% view it favorably. Physicians in private practice are most pessimistic, with 61% saying they view the law negatively. Doctors also say the following about practicing medicine after the ACA:

  • 47% say the ACA has improved access to healthcare and insurance.
  • 44% say the ACA has had a neutral effect on their patients’ quality of healthcare.
  • 76% of all doctors, and 86% of private practice doctors say they are not properly compensated by ACA reimbursements.
  • 38% say their salaries have decreased.
  • 44% spend less time with their patients.
  • 68% spend too much time entering data.
  • 59% spend too much time doing paperwork.

To cope with challenging circumstances, 40% of doctors are supplementing their income by filling in for other doctors, moonlighting, and consulting.

Emergency Visits Have Not Gone Down Since the ACA

Emergency

Emergency visits are increasing despite the Affordable Care Act (ACA), according to a report by the Centers for Disease Control and Prevention. Jay Kaplan, MD, FACEP, president of the American College of Emergency Physicians (ACEP) said, “The reliance on emergency care remains stronger than ever. Just because you have health insurance does not mean you have access to timely medical care. Every shift, I treat patients who couldn’t access a primary care physician and had no choice but to come to the emergency department because their condition worsened dramatically. America has severe primary care physician shortages; many doctors will not accept Medicaid patients because Medicaid pays so inadequately.”

According to a 2015 ACEP poll, three-quarters of emergency doctors said that emergency visits had gone up since the implementation of the ACA. Most said that the availability of urgent care centers, retail clinics, and telephone triage lines have done little to reduce emergency visits.

There is strong evidence that Medicaid patients don’t have timely access to primary care and specialty care. The median wait time for Medicaid providers is two weeks, but over one-quarter have wait times of more than a month. More than half of providers listed by Medicaid managed care plans are not offering appointments to enrollees. This is despite an ACA provision that boosts pay to primary care doctors who treat Medicaid patients.

 

Covered California Announces Contract Changes with Carriers


ContractCovered California adopted significant changes to its contracts with health insurers. The contract provisions were developed over the past year with consumer advocates, health plans, clinicians, other stakeholders, and subject matter experts. Plans must do the following for years 2017 to 2019:

• Ensure that all consumers select or are provisionally assigned a primary care clinician within 30 days of when their plan goes into effect.
• Exchange data with providers. This will enable physicians to be notified if their patients are hospitalized and track trends and improve performance on chronic conditions, such as hypertension or diabetes.
• Identify hospitals and providers that deliver poor-quality care or unwarranted high-cost care. Health plans will be expected to work with them to improve their care or lower their costs. Hospitals that don’t improve and don’t provide justification will be excluded from Covered California networks as early as 2019. Covered California will adopt a payment system for hospitals, such as the one employed by the Centers for Medicare and Medicaid Services (CMS). Over time, it will put at least 6% of reimbursement at risk or subject to a bonus payment based on quality performance.
• Manage high-cost pharmaceuticals and help consumers understand the effectiveness and costs of their drug treatments as well as any alternatives.
• Track health disparities, identify trends in disparities, and reduce disparities, beginning with four major conditions: diabetes, hypertension, asthma, and depression.
• Develop programs to identify and manage at-risk enrollees with requirements to improve in targeted areas.
• Provide tools to help consumers understand their diagnosis and treatment options and understand their share of costs based on the contracted costs of their plan.

Covered California will encourage plans to promote advanced models of primary care including patient-centered medical homes and integrated health care models, such as accountable care organizations. Also, Covered California is improving its patient-centered benefit design for 2017 plans. Outpatient care in Silver, Gold, and Platinum plans will not be subject to a deductible. Bronze plan consumers would get three outpatient visits that are not subject to the deductible, in addition to the free preventive visits. For 2017, Covered California is proposing to lower out-of-pocket costs for primary care and urgent care.

 

Costs and Eligibility Are the Biggest Barriers for the Uninsured

Two-thirds of uninsured Californians were eligible for coverage in 2014, but most said they did not enroll because of the cost. The remaining third were ineligible for coverage under the Affordable Care Act due to their immigration status, according to a study by Berkeley’s Center for Labor Research and Education and the UCLA Center for Health Policy Research. The study finds uninsured Californians fall into four groups:

  1. Undocumented residents 32%: Residents who don’t qualify for health coverage under the Affordable Care Act are predominantly low-income, Latino, and have limited English proficiency.
  2. Those eligible for Medi-Cal 28%: Adult citizens and legal immigrants with incomes at or below 138% of the federal poverty level and children at 266% of the poverty level.
  3. Those eligible to buy health coverage through Covered California with a federal subsidy 31%: Citizens and legal immigrants with incomes from 139% to 400% of the poverty level.
  4. Those eligible to buy health coverage through Covered California without a federal subsidy 9%: Citizens and legal immigrants with incomes above 400% of the poverty level, which disqualifies them from federal subsidies.

The largest percentage of citizens and legal immigrants (46%) cited cost as the main reason for being uninsured. Miranda Dietz, a researcher at UC Berkeley said, “We’re a relatively high cost-of-living state. It’s no wonder that some Californians, who may be unaware they qualify for health subsidies and other programs, still find the cost of health insurance out of reach.”

California has more than 1 million undocumented immigrants who don’t benefit from the Affordable Care Act. Nadereh Pourat, director of research for the UCLA center said, “Hundreds of thousands of men, women and children, not to mention the workers who power California’s economy, are one health emergency away from potential financial ruin because they lack insurance. From an economic perspective, it’s bad business to rely on workers and then not offer them equal health protection. And from a humanitarian perspective, it’s just wrong.”

UCLA and UC Berkeley also collaborated on a related on Medi-Cal study. About one-third of those who were uninsured, but eligible for Medi-Cal thought they were ineligible or didn’t know if they were eligible. Another 20% said they were getting insurance, reflecting a major backlog during the first year of processing applications, which has largely been resolved since then. Both studies were funded by the Blue Shield of California Foundation. The study notes that many previously uninsured Californians have enrolled for coverage, but fully covering those still uninsured will require changes in policy to improve affordability and expand eligibility.

Last Updated 10/14/2020

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