Alongside the more publicized individual public health insurance exchanges, a relatively new public marketplace for small business health insurance offers another choice to employers.
Federal and state Small Business Health Options Program marketplaces opened since the fall are developing slowly, but the SHOP exchanges show great promise to transform small employer health insurance, according to carriers, state officials, and a Commonwealth Fund study.
Seventeen states and the District of Columbia have opened SHOP exchanges since October, with the federal government operating the small business marketplaces in the remaining states. The performance of the SHOP exchanges varies from state to state, and none of the federally operated exchanges have automated billing or administration, says Sarah Dash, one of the authors of the Commonwealth Fund study and a research fellow at the Georgetown University Health Policy Institute in Washington.
"Basically, there's still a small business market outside the SHOP," she said in interview Friday. "There are still a lot of things in play in terms of enrollment."
Dash says several factors are depressing SHOP exchange enrollment levels, including the federal government's decision to allow renewals of small business health insurance policies through fall 2016, even if they do not comply with the PPACA. "Early renewal takes a whole chunk out of the market that could have entered the SHOP," she said. "They are taking a big customer base out of the SHOPs."
The SHOP exchanges have rolling enrollment, which has eroded employer urgency to join the new market, Dash said. "They have a rolling ability to enroll, so there's not been this rush to a deadline like March 31 [on the individual public exchanges]…We're really just at the beginning."
'Two-Fold Value Proposition'
Jim Sugden, small business marketplace manager at Connect for Health Colorado, says he is optimistic about the long-term prospects of the SHOP exchange in the Centennial State. "We are finding our way along. We are off to a slow start, but it's a new concept," Sugden said in an interview.
The Colorado exchange official said the SHOP exchanges offer a level of choice to employers and their employees which has been elusive in the past. "Our value proposition is two-fold," Sugden said, noting a small percentage of employers are eligible for a small business tax credit. "A larger number of employers will find the larger choice more attractive… I know this can work because choice is a winner if you present it properly. You have to frame the choice in terms of being meaningful for the employees."
Connect for Health Colorado, described as a quasi-public entity by its CFO, Cammie Blais, offers 96 plan designs from six carriers on its SHOP exchange. As of March 1, there were 176 groups enrolled, with about 1,600 individuals either receiving or slated to receive benefits, Sugden said.
The Colorado SHOP exchange should be able to seize a significant share of the state's small business health insurance market, he believes. "I'd really like to see us have 25 to 30 percent of the market," Sugden said, adding the Colorado SHOP exchange could be "financially sustainable" as early as January 2016. "If you look at a business plan for most businesses, you get three, four, or five years to be sustainable."
Dash says the SHOP exchanges have the potential to help the country achieve a value-based healthcare system. "The idea is you aggregate the purchasing power of your individuals and your small businesses," she said. "Big businesses can drive value-based initiatives. They can kind of drive the marketplace more [than smaller players]… The idea behind the marketplaces is as an aggregator and setter of standards. That's the promise as far as the value-based delivery system is concerned."
Rhode Island on a Roll
While the Commonwealth Fund study does not gauge SHOP exchange performance, it does indicate "which ones are working and which ones aren't working," Dash said, noting the states are leading the charge.
"The states that did move forward with establishing their own SHOPs really tried to make this a value-add for small businesses," she said. "Federally run SHOPs just don't have the level of choice. Employers in those states don't have the options that are available in other states."
Several states offer health insurance policies on their SHOP exchanges that exceeded federal standards, according to Dash. She says seven states, including Rhode Island, offer the fullest possible range of plans.
"Our SHOP exchange is one of the only SHOP exchanges in the nation that has been up and running since October 1," HealthSource RI officials said in a statement released Monday. "We've been pleased with the interest we've seen from Rhode Island's small employers, particularly around our unique Full Employee Choice model, which lets the employer select a base or reference plan at a designated contribution level and then gives employees the flexibility to choose from any of the 16 plans offered on our SHOP exchange. Employers appreciate having predictability in cost while still having the flexibility to let their employees choose what's best for them."
As part of their enrollment efforts, HealthSource RI officials said they are working to build partnerships with brokers. "We offer training for brokers and we work hard to let employers know that if they have a relationship with a broker they like and trust, they can continue to work with that broker to enroll through HealthSource RI."
Neighborhood Health Plan of Rhode Island is bullish on the small business insurance policies it is offering through HealthSource RI. "Some of the good SHOP exchange news in Rhode Island is that the site functions well, there have been no significant IT issues, and the experience for businesses and brokers of purchasing coverage in a new way has been positive. We anticipate these early and continuing HealthSource RI successes will build momentum and help grow our state's SHOP exchange over the coming months and year," said Tom Boucher, a spokesman for the health plan.
'Hard to be Definitive'
Brian Kim, senior vice president for account management at Southboro, Massachusetts-based ikaSystems, which is helping health plans operate on the new public exchanges, said it is too early to determine whether the SHOP exchanges are a small business health insurance game changer.
"For health plans, there remains enormous variability in potential outcomes and adoption rates," Kim said. "Flexibility remains the name of the game to be able to participate without over-committing, yet also without hamstringing efficiency and differentiation… The promise of SHOP is very attractive for small businesses, and it very well may be a significant shift for small and large businesses. At the same time, it is hard to be definitive."
According to Kim, three factors will determine the market impact of the SHOP exchanges:
Uncertain market rates for plans available on the exchanges: Rates could mimic premium increases seen in the individual market due to benefit structure requirements; or volume and risk pooling could reduce overall premiums.
The attractiveness of medical underwriting for certain industries with lower risk profiles and uncertainty about the negatively self-chosen market that remains.
The evolution of private exchanges that may allow more medically underwritten rates at a group level.
"At the same time, much of the sensitivity to pricing and market rates is up to the employers and their perception of hiring and retention competitiveness," he said. "The impact of those considerations remains to be seen."
Hospitals will take a financial hit this year as a result of the new federal rule that cuts the Medicare payment rate for most patient stays that span less than two midnights, Moody's predicts.
A gloomy Moody's Investors Service sector comment on the controversial two-midnights rule for inpatient admissions came as little surprise last week to hospital finance executives, but federal officials say the negative impact on healthcare providers is overstated.
The comment, released Wednesday, predicts the "reimbursement difference between inpatient and outpatient cases will decrease profits" at hospitals, with the average revenue reduction per affected case set at $3,000 to $4,000. "Previously, inpatient status was largely determined by medical necessity," Moody's wrote. "We expect the rule change will weaken hospital operating profitability in calendar year 2014 because it will lower Medicare reimbursement for these cases."
Under the rule, which CMS issued in August 2013 but has been delayed until October, hospitals that admit patients for a period of less than two midnights will receive reimbursement at Medicare B outpatient rates. The rule states that hospital admissions shorter than two midnights in length are "generally inappropriate for payment under Medicare Part A, regardless of the hours the patient came to the hospital or whether the patient used a bed."
"The patient is going to stay no more or no less than is medically necessary," Alvin Felgar, president and CEO of Frisbie Hospital in Rochester, NH, said. "The patient is still going to get the same care. We're just going to be paid a whole lot less for it." He was reached at his office Friday.
Moody's also found the two-midnight rule"will accelerate trend of inpatient care shifting to outpatient… pressuring hospital revenues."
In a prepared statement Friday, federal officials said that the investor service report exaggerates the new rule's financial impact on hospitals. "CMS does not agree with the assertion that the two-midnight rule will accelerate the trend of inpatient care shifting to outpatient," the officials said.
"CMS stated the following in the FY 2014 Hospital Inpatient Prospective Payment System (IPPS) Final Rule: 'our actuaries… estimate that there will be approximately $220 million in additional expenditures resulting from the net increase in hospital inpatient encounters [emphasis added] due to some encounters spanning more than 2 midnights moving to the IPPS from the OPPS, and some encounters of less than 2 midnights moving from the IPPS to the OPPS.'"
CMS also pointed to the intent of the two-midnights rule as described in an agency Q&A document, which states the "rule developed, in part, to address concerns regarding benefit eligibility and beneficiary cost-sharing issues associated with prolonged outpatient hospital stays."
'Millions of dollars'
Daniel Steingart, an assistant vice president at Moody's who worked on the analysis of the rule, said in an interview that the financial impact on hospitals will vary from facility to facility, but an overall negative effect is expected on bottom lines. "Right now, we're just starting to see it happen," he said. "It's in the millions of dollars for institutions, for sure."
Two-Midnight Rule Must be Fixed or Replaced, Say Providers
The Moody's sector comment singles out small community hospitals as facing the greatest financial risk from the two-midnight rule because they have a relatively high percentage of short-stay patients and less administrative resources to adapt to the new rule's reporting requirements. "I don't expect this rule to put anybody out of business, but it is yet another challenge," Steingart said, adding many small community hospitals will "absolutely" face credit rating pressure as a result of the new rule.
The administrative costs of implementing the two-midnights rule are mainly linked to documenting patient records to ensure length of stays are properly categorized as outpatient or inpatient.
While the two-midnight standard provides an increased measure of temporal clarity in setting the line between outpatient and inpatient care, a new set of records are required under the new rule because an admitting doctor's medical judgment is a critical factor in determining inpatient admission status. As CMS officials noted Friday, "The rule is based on expected length of stay."
"It's our experience in general that smaller hospitals have fewer administrative resources to deal with this," Steingart said, adding there is insufficient data at this point to quantify the impact of the new rule on administrative costs. "Larger systems tend to have more people who can look at this issue, or any issue."
Felgar agrees and says that Frisbie Hospital, a nonprofit facility with 82 beds and a high proportion of relatively short patient stays, could face decreased profits from the rule. But he said all hospitals will feel the pinch.
"It's going to hit everybody. It's a continuation of the government's efforts to reduce expenditures on healthcare," he said. "I don't see any financial upside at all. It's just another difficulty to overcome."
'Silver Lining'
The rule will have one positive regulatory impact on hospitals and could help cut healthcare delivery costs over the long term, Moody's suggests—fewer Recovery Audit Contractor reviews. "This clarifies it more. There's a strict definition," Steingart said, adding he hesitates to call fewer RAC reviews a significant benefit for healthcare providers. "It's more of a silver lining… It's no great panacea to the hospitals."
Moody's also predicts hospitals will strive to treat patients who are expected to require care for less than two midnights in low-cost settings.
"Over the next two years, we expect hospitals to adapt by adjusting care protocols for the most frequent diagnoses impacted by the rule, and by opening dedicated units to treat these patients," the sector comment states. "Over the last few years, some hospitals have opened lower-cost, separate observation units to care for patients that don't meet the qualifications for inpatient admission but require treatment. This has the potential to lower costs for certain groups of patients."
Steingart said patients reporting chest pains and gastrointestinal symptoms, diagnoses that often land patients on hospital observation status rather than being admitted, could be placed in clinical centers with lower costs than boarding in emergency departments or specialty clinics. But any cost savings hospitals realize from the two-midnights rule will be gained over the long haul, he cautions. "That is not something you can do overnight," he said.
A study of health plan members reflects the impact of healthcare reform efforts and contains at least one surprising result, says the director of J.D. Power's healthcare practice.
J.D. Power and Associates' annual consumer survey of health plan members released this week provides insight about changes in the broad health insurance marketplace and gives a glimpse of how consumers are faring as their role in several markets grows.
The 2014 J.D. Power consumer study is based on data collected in December and January. It reflects the impact of healthcare reform efforts under way nationwide, with at least one surprising result, said Rick Millard, director of J.D. Power's healthcare practice.
"The popular sentiment is that more people are going to change their health plans," he said, noting the latest consumer study found the opposite, with 63 percent of consumer respondents reporting they changed health plans in the 2013 study but only 51 percent changing health plans in the 2014 study.
While more analysis is needed to determine the reasons behind the unexpected stability in health plan memberships, Millard said the apocalyptic predictions about the impact of the PPACA appear to have been overstated, at least for 2014.
See Also: Health Plans Face Under-Informed Consumers
"Oftentimes, we want to take the facts and fit a frame," he said. "Some people said the reforms would be catastrophic and people are going to be pushed out of their plans. We didn't see that."
On a more predictable healthcare reform note, the J.D. Power study found a discernible impact from the growing number of narrow provider networks such as those health plans are creating in the new public exchanges.
One key network indicator measured in the consumer study is whether a health plan member was able to keep a preferred physician. In J.D. Power's 2013 consumer study, 91 percent of respondents reported retaining their preferred physician.
See Also: Rules to Rein in HIX Narrow Networks Could Drive Away Payers
In the 2014 study, 74 percent of respondents said they were able to keep their preferred physicians. Millard said more data will be required to quantify the exact impact narrow networks are having on consumers, but there is no denying they are having an effect. "Given the push for narrow networks… there's no doubt that was an important factor," he said.
"It's a shift that's important to look at," Millard added. "Being able to have access to the hospitals and doctors you want is definitely a driver of satisfaction."
Leading the Pack
Kaiser Permanente is one of the top performers in the 2014 consumer survey, earning the top customer satisfaction ranking in a half dozen geographic regions across the country. Millard said the Oakland, California-based healthcare consortium has historically scored high on two vitally important measures.
Kerry W. Kohnen,
president of Kaiser Permanente of Georgia
"Number One, they do communicate very well. Number Two, they lead in trustworthiness. Two really critical indicators for driving satisfaction," he said. "In some areas, they literally set the curve."
Kerry W. Kohnen, president of Kaiser Permanente of Georgia, said his staff is following a member-centered approach that promotes consumer satisfaction.
"Kaiser Permanente continues to excel in member satisfaction because of our continued focus on quality, affordability, and convenience," Kohnen said in an email Wednesday. "Our members love the coordination of care that we provide. Whether they are seeing their primary care doctor or a specialist, the doctor has access to our members' complete medical history through an electronic medical record system called KP HealthConnect."
He said having a coordinated continuum of care helps set Kaiser Permanente above some of its competitors. "Outside of Kaiser Permanente, patient care is often uncoordinated. It's common for people to see different doctors for different ailments—and the doctors never communicate with each other," Kohnen said.
"Kaiser Permanente doctors have a team-approach to care, enabling them to make more informed decisions—the first time. That is why we continue to lead other health plans in both quality of care and affordability."
Convenience is another area where Kaiser Permanente is excelling, he said. "When a member walks into one of our medical centers, they can often see a primary care doctor or specialist, get lab work and X-rays, and fill their prescriptions without leaving the building. It's a one-stop-shop healthcare experience. In metro Atlanta alone, we have 29 medical centers to make sure our members have easy access to the care they need."
'Personalized Customer Service'
Connecting with consumers and their communities is a top goal at Health Alliance Plan of Michigan, according to Faisal Khan, director of product management and market intelligence. In the 2014 consumer study, HAP of Michigan ranks highest among health plan members in the Michigan region for a seventh consecutive year.
"HAP is known for excellence in personalized customer service, disease management and wellness programs," Khan said in an email Wednesday. "In addition, our community stewardship is well known. As a company and through our employees, we give back to the communities we call home and work hard to educate our friends, family and neighbors about health and well-being.
"We are known for and excel in providing members with affordable healthcare, informative communications, timely claims processing and a network of the best health care professionals in the region."
One of the keys to HAP of Michigan's customer satisfaction success has been helping members "keep healthy in the first place," Khan said, citing preventative services such as cancer screening, flu shots and physicals, educational tools, and wellness programs.
Many commercial payers are grappling with the challenge of developing direct relationships with individual customers who lack knowledge about the new health insurance exchange markets and confidence to make purchasing decisions.
It makes me nervous to think that the success of an enterprise is dependent upon changing the way people think or habitually act. Counting on a pair of commercial partners to make fundamental change can be downright panic-inducing.
With the rising profile of the consumer in the health insurance marketplace, health plan members and insurers alike face changing roles, with high costs for taking risks that end in failure.
Wanted: A Self-sufficient Consumer
Whether a person has never had health insurance or has had a policy for decades through an employer, the growing number of coverage options available makes becoming an educated consumeressential. In the case of health insurance policies with high deductibles and other out-of-pocket expenses such as the catastrophic coverage offered on the new public exchanges, consumers face high-stakes choices.
After making her presentation during the final general-audience session of last week's AHIP exchange forum, Cammie Blais, a top public exchange official in Colorado, told me one of her prime goals for the 2015 enrollment year is improved consumer "self sufficiency." The Connect for Health Colorado CFO says she is aiming to strike a balance between a fully self-sufficient consumer and the concierge model, where consumers are guided through the process of obtaining and maintaining health insurance.
And, Blais told me that Connect for Health Colorado hopes to continually improve its website to provide consumers with "more robust tools to inspire confidence in the decisions they have to make."
With outreach and education funding for the public exchanges certain to decrease over time, Blais says creating more self-sufficient consumers is critically important to sustaining the new exchange market. Citing the need to reduce in-person customer service as a financial necessity, she says the Colorado exchange team is focusing on a key question: "How do we make the technology do some of the heavy lifting for us?"
It's 'A New World'
For decades, most health plans have relied on agents and brokers to handle the customer service side of their business. With consumers considering options to employer-sponsored health insurance such as policies on public and private exchanges, retail was a hot topic at last week's AHIP exchange forum.
Billing is a relatively easy way for health plans to build relationships with individual consumers, several AHIP forum speakers said. Billing helps a health plan establish regular contact with members, said Mark Waterstraat, chief strategy officer with Omaha, Nebraska-based Benaissance. "Every month, they see you," Waterstraat told one of the small groups of forum attendees who had signed up for seminars that included lunch right before the forum kicked off. "It wasn't a Google search that brought the consumer to you on a one-time basis."
He says one of the keys for health plans offering policies on exchanges is to make is easy for members to pay, including checks, money orders, credit and debit cards, online payment and call centers. "Different people pay in different ways," Waterstraat said.
Kevin P. Kelly, a principal at Deloitte Consulting and midwife to the apparently successful public exchanges in Connecticut, Kentucky, Rhode Island, and Washington, says exchange officials literally have no business billing health plan members. Insisting carriers that should always handle billing, Kelly says, "Push it to where it belongs – to people who are really good at it."
The consumer was front and center in a conversation I had Tuesday with the director of J.D. Power and Associates' healthcare practice. We were talking about J.D. Power's 2014 Member Health Plan Study, which was released Monday. Based on data collected in December and January, the report gauges consumer satisfaction with US health plans by region and by markers such as trustworthiness and communication with members.
Rick Millard, who holds several university degrees including a doctorate in clinical psychology and an MBA, says the 2014 consumer satisfaction study shows health plans understand the importance of connecting with consumers but there is a learning curve to climb. "Plans are trying to figure this out but it's a new world and it takes time," he told me. "I'm not sure they truly understand how to take on this issue… but hopefully they will continue to make strides."
Healthcare providers have raised alarms over narrow provider networks in the public health insurance exchanges, but Moody's Investors Service says proposed rules to open up the networks could drive health plans to drop out of the new market.
Proposed federal rules that would limit the ability of health plans to craft narrow provider networks for the PPACA exchanges would benefit some hospitals, but tighter regulation could create an unbearable level of risk for insurers, market analysts say.
In a healthcare "sector comment" released last week, Moody's Investors Service predicts that plans to limit narrow networks in 2015 would benefit rural hospitals and safety net hospitals because those facilities are the most likely to be left out of a narrow network.
"If [hospitals] are considered essential, that would protect them from being excluded from a narrow network," Moody's Senior Vice President Lisa Martin said Monday of the new rules under consideration at the federal Centers for Medicare & Medicaid Services. "[They provide] protection in terms of market share."
The Moody's sector comment singles out CMS's plan to increase the percentage of "essential community providers" included in a health plan's provider network for a public exchange: "While not mandating the inclusion of a specific provider, the proposal requires insurers offering plans on the exchanges to provide adequate access to essential providers in order to be certified as a qualified health plan. Adequate access means that 30 percent of essential community providers in the plan area must be included in the network, an increase from 20 percent under current regulations."
Moody's defines essential community providers as "safety-net hospitals, children's hospitals, and other providers that serve low-income and medically underserved individuals."
A More Stringent Review Process CMS's proposed rule changes for provider networks include the following justification for the higher essential community provider standard: "As only one issuer submitted a justification for the 2014 benefit year as a means to satisfy the 20 percent ECP standard, we anticipate that our intended proposal of this 30 percent ECP standard for the 2015 benefit year will be a feasible standard for issuers to satisfy."
The proposed rule changes for provider networks include a more stringent review process. According to the CMS Draft 2015 Letter to Issuers released Feb. 4, the network adequacy review for 2014 relied largely on an insurer's accreditation status, state review where the state standards were at least as high as federal standards, and the collection of "network access plans."
For 2015, health plans operating on the exchanges will be required to submit a "provider list" that includes all in-network facilities. "CMS will review the collected provider list to evaluate provider networks using a 'reasonable access' review standard, and will identify networks that fail to provide access without unreasonable delay," the federal agency's proposed rule change says.
The document says CMS will focus its adequacy review on areas that "have historically raised network adequacy concerns," including hospital systems as well as primary care, mental health and oncology providers.
'Difficult to Keep Those Costs Down'
Martin said placing tighter restrictions on narrow networks would undermine one of the prime strategies health plans have employed to lower premiums and provide affordable health insurance on the new public exchanges. "When the networks are narrower, the insurance companies pay the hospitals less in exchange for a higher volume," she said, adding that lowering overall healthcare costs is a top objective of federal reform efforts. "If there are regulations that discourage narrow networks… it's going to become difficult to keep those costs down."
Steve Zaharuk, a senior vice president at Moody's assigned to follow the US health insurance market, says narrow networks are among a limit set of cost containment tools available to health plans. "They look at levers they can push to limit costs, and one way is a narrow network," he said, noting that a relatively high level of benefit coverage is mandated on the public exchanges.
Moody's makes a dire warning to regulators to not push health plans on the exchange too hard: "Forcing insurers to expand their networks will result in higher premiums to cover higher cost networks, discouraging enrollment particularly for the younger and healthier population. If the trend were to continue, these products would eventually become unsustainable and insurers would leave the exchange marketplace."
Zaharuk said health plans will react to any curtailment of narrow networks on a state-by-state and market-to-market basis. "Each market is a little bit different, so I don't think you're going to see any one trigger."
There are no penalties for health plans that choose not to participate in the public exchanges, so large companies that "have other businesses they can pursue" could be tempted to pull out if narrow networks are curbed, Zaharuk said. "At some point, it's not worth it," he said. "Each company is going to have to make a choice on this."
Big Interest in Narrow Networks
The future of narrow networks in the public exchanges and other health insurance markets was a hot topic at last week's exchange forum hosted by America's Health Insurance Plans in Washington.
Diana Dooley, secretary of California Health and Human Services as well as chairwoman of the California Health Benefit Exchange, said she was a strong advocate for narrow networks. "It has been too easy for the plans to pass the costs along, and we need to give insurers more power to negotiate," she said during one of the featured addresses of the forum.
James T. O'Connor, principal and consulting actuary in Milliman's Chicago office, told forum attendees that narrow networks have become an essential consideration for health plans setting premium rates on the public exchanges. "Networks were a key factor in setting the rates we've seen," he said of premiums reported on the exchanges for 2014.
O'Connor said narrow networks provide some exchange consumers with a valuable option. "Narrow networks may be more attractive to healthy people," he said, adding narrow networks appeal to consumers who struggle to find affordable healthcare.
If narrow networks are allowed to thrive on the public exchanges, O'Connor predicted they will become a dominant feature in the evolving US health insurance industry. "Over time, the value networks are going to win out," he said.
Rollout and triage have been the dominant concerns for the new public health insurance exchanges in 2014. But a whole new set of challenges looms as payers look ahead to building out and sustaining the centerpiece of the healthcare reform effort.
Diana Dooley
Secretary of California Health and Human Services
A pair of top government officials set the tone early for the Exchanges Forum in Washington, D.C. March 6 – 7 organized by America's Health Insurance Plans.
The first speaker at the exchange forum was Gary Cohen, who has been leading the federal effort to establish the new public exchanges as director of the Center for Consumer Information and Insurance Oversight. CCIIO is a branch of the federal Centers for Medicare and Medicaid Services.
"The Number One thing we learned from 2014 is this is hard work," said Cohen, who is leaving the federal government at the end of the month, when enrollment in the public exchanges for 2014 comes to a close. "As long as we all keep our focus, then I think we will be more successful as time goes by… We have to continue to be willing to learn lessons."
Diana Dooley, secretary of California Health and Human Services as well as chairwoman of the California Health Benefit Exchange, was even more frank in her remarks to the several hundred health plan executives who had gathered for the exchange forum.
"It isn't smooth and it isn't going to be smooth for some time," Dooley said. "We were able to open on October 1 but it was not perfect… We would all like to take a breath, but there's no time."
"I think the hardest work is just beginning," the California official said.
No rest for the weary
For the past two years, the challenges of rolling out and stabilizing the new public exchanges have preoccupied all of the players involved, from regulators to insurers, to healthcare providers. But the main theme at the AHIP exchange forum was the challenges ahead in 2015 and beyond:
The rise of the consumer
Deterioration of the risk pool resulting from last week's federal government decision to allow consumers to keep non-PPACA-compliant health plans until fall 2016
Maintaining education and outreach efforts in 2015
Product design in the evolving public exchange marketplace
Focusing on sustainability of the exchanges and consumer retention
Mark Waterstraat, chief strategy officer at Benaissance in Omaha, NE, said it will be essential for health plans to establish direct relationships with consumers if they are going to be successful in the public exchanges. "We are going to go through a significant transition in this industry," he said, noting that brokers played the direct customer service role in the pre-PPACA health insurance market.
Insurers offering policies on the public exchanges need to look to major retailers as role models and offer one-stop shopping experiences such as a suite of insurance products including medical, dental, vision, life and disability coverage, Waterstraat said. "If we don't get out in front in this move to the consumer, others will," he said.
Cohen defended the decision to allow consumers to keep their non-PPACA-compliant policies. "The last thing we want is for someone who had health insurance to lose it," the CMS official said. "We want to give people as many options as we can."
But one of the actuaries who addressed the forum said allowing people to keep their existing policies through 2016 will likely lead to premium increases over the next two years. James T. O'Connor, principal and consulting actuary at Milliman, said the two-year extension will likely lead to the healthiest people sticking with their existing plans and the least healthy people switching to exchange plans for more affordable comprehensive coverage. "We will see rates set somewhat higher… due to the transition policies," he said.
An Uninformed Consumer Several forum speakers said maintaining outreach and education efforts in 2015 will be a major challenge because of the costs associated with the kind of face-to-face contact that is most effective in educating consumers about the new public exchanges.
"If you look at the uninsured, they are very uninformed," said Rosemarie Day, president of Day Health Strategies in Somerville, MA. "That's a problem and a gap that has to be closed."
Cammie Blais, CFO of the public exchange in Colorado, said face-to-face educational efforts are the most effective way to reach consumers, but the cost of maintaining those kinds of outreach programs will be impossible for most states to maintain. "It's very time consuming and we need to make those programs more targeted," the Connect for Health Colorado CFO said. "We can't sustain that effort long-term."
Blais said Colorado exchange officials are looking for partners in the private sector and public assistance agencies to help carry the educational burden in 2015 and beyond. She said one strategy is to work with health plans, agents, and brokers to provide education about the exchanges to consumers. "We've included them from the beginning," she said, adding it will be a challenge to keep some brokers and agents engaged in the exchanges. "Many, many of them are frustrated with the process. It's unclear how many of them will participate in 2015."
Retention Strategies
Blais said retaining consumers in the public exchanges is going to be one of the prime challenges in 2015. "We can grow, but we have to retain," she said. "We have to start looking at retention strategies as soon as the next open enrollment period."
To achieve high retention rates, officials at the Colorado public exchange are focused on simplifying the renewal process and "messaging to existing customers" about the value of having health insurance at all times, not just when a health crisis strikes. "We really want people to understand how this benefits them every day," she said.
Expect Prolonged Market Instability
While there was widespread agreement at the AHIP forum that the public exchanges are stabilizing, many speakers predicted it will take several years to achieve a stable marketplace.
"It's really every year for the next few years that there's [going to be] a new major challenge," Blais said. "I think it would be unrealistic to say it's going to be totally stable in five years."
When pressed, Blais said the earliest a stable market could be achieved would be 2018, with a "hard period of figuring it out" followed by an adjustment period. "How do we correct and tweak what's already there?" she said. "We will have to have a couple years of data to make those kinds of decisions."
Chris Carlson, principal and consulting actuary at Oliver Wyman, said last week's decision to let consumers keep their non-PPACA-compliant policies through the fall of 2016 will extend uncertainty in the public exchanges. He predicted that many of the "transition folks" will not join the public exchanges until 2017 and the marketplace will not achieve stability until 2019.
"It's going to take a few years … before we are anything close to having everybody insured," Dooley said. "The marketplace is responding at the same time we're trying to get this up and running."
Paul Wann, senior director at Boston-based ikaSystems, said it will take three to five years for the public exchange market to "settle down," but he was optimistic about the long-term. "We have to get consistency – the soon the better. That's the way we do business in the private sector. That's how we survive," he said.
Regardless of how the public exchanges evolve in the coming years, they are almost certainly going to be a major factor in the broader health insurance marketplace far into the future, Wann said. "There's a lot of money invested in this. It's going to be hard to kill it," he said. "It's moving in the right direction, we just need to keep the momentum going."
President Obama's hallmark domestic policy initiative has been blunting the worst shortcomings of the US healthcare system. But it is unrealistic to expect the PPACA alone to totally transform the practice and financing of medicine.
"Every revolution evaporates and leaves behind only the slime of a new bureaucracy." – Franz Kafka
After receiving a recent HealthPocket.com study on the Top 10 medical services excluded from health insurance policies on the new public exchanges, my first reaction was "here we go again" – here is yet another black eye for the PPACA rollout.
HealthPocket.com, which is based in Sunnyvale, CA, found that eight of the top 10 medical services excluded from health insurance policies before the PPACA are also excluded from insurance policies on the new public exchanges. "There hasn't been a dramatic change from the pre-exchange market to the post-exchange market," Kev Coleman, HealthPocket.com's head of research and data, told me last week.
But on close examination, Coleman says, it becomes apparent why the pre-exchange and post-exchange Top 10 lists are nearly identical, for a host of financial, historical and moral reasons. "The health system expresses itself in that Top 10 list," he says.
The No. 1 medical service excluded from insurance policies before and after creation of the new exchanges is long-term care, which is associated with burdensome costs. "Long-term care is extremely expensive," Coleman said. "If you're inside any institutional facility, it costs tens of thousands of dollars."
Two of the other classes of medical services that appear on both lists, dental and vision care, have historically tenuous holds in the health insurance marketplace. "Originally, people paid out of pocket for all their healthcare needs," Coleman said. "Things like dental insurance and vision insurance come along much later."
Harald Schmidt, MA, PhD,
And, he says, a strong moral case can be made against health insurance policies covering cosmetic surgery, which holds the No. 2 slot on both Top 10 lists of excluded medical services.
Evidence-based Medicine Raises Questions of Cost
Coleman and a pair of medical ethicists I spoke with Monday said the HealthPocket.com study contains elements of a brewing conflict over evidence-based medicine.
"Health insurance costs reflect costs of care," Coleman said, adding that evidence-based medicine seeks to "bend the cost curve by covering procedures that have the best clinical outcomes. But then you get into a very sensitive area."
Harald Schmidt, MA, PhD, an assistant professor at the University of Pennsylvania's Department of Medical Ethics and Health Policy, told me that doctors will have difficulties following the dictates of evidence-based medicine when treating individual patients. "They are very often at the sharp end of patients asking for something they saw on TV," he said of physicians. "On other things, there may be stronger shades of gray."
The murky areas present quandaries for all healthcare providers, Schmidt said. "Should you pay for useless care? That's the easy case. But what do you do when something works but it is expensive?" he said. "That's the really thorny one… There are always value judgments involved. That's something we're going to be looking at in the future as we define value when we have to figure cost into the equation."
One set of solutions to pay for treatments that are expensive but effective has been the steady increase in copays and other forms of cost sharing, Schmidt said: "Coverage alone isn't the only thing that matters."
Arthur Caplan, PhD, director of the Division of Medical Ethics at NYU Langone Medical Center, emphasizes that knowing the probability of clinical outcomes does not obviate the need to make value judgments about medical services that are marginal, longshots, or offer low benefits at high cost. "If you don't get agreement on the ethics, the evidence isn't enough," he said.
The Limits of Revolution
For those of you who find the HealthPocket.com study yet another discouraging report from the frontlines of the nation's healthcare reform battles, take comfort in humanity's past experience with revolution before you give up on the PPACA's impact in the future.
One of my first political science courses as an undergraduate included theoretical analysis of the French Revolution. I can see the instructor in my mind's eye and recall one of his fondest maxims: Revolution cleanses a society of its worst abuses, but fails to wash away the majority of longstanding institutions and traditions.
The evolution of the PPACA appears to be following this maxim.
President Obama's hallmark domestic policy initiative has been blunting the worst shortcomings of the US healthcare system, for example, by requiring insurance policies to cover pre-existing conditions. But it is unrealistic to expect the PPACA alone to totally transform the practice and financing of medicine.
"[The Obama administration] is finding that there's still a combination of unintended consequences as well as large issues that are not addressed," Coleman said.
The PPACA's focus on access and affordability has left the question of essential benefits in health plans largely off the revolutionary menu. "We never really have had a fight about benefits," he said.
A move by CMS to tweak the public health insurance exchange rules grants a measure of relief to states where individuals have struggled to enroll because of faulty state exchange websites.
They are still looking at the fine print, but state officials are welcoming a decision by the federal government to ease public exchange enrollment for individuals in states with exchange website woes.
On Feb. 27, the U.S. Centers for Medicare & Medicaid Services issued a bulletin announcing the availability of advance payment of the premium tax credit and cost-sharing reductions for individuals who have had trouble enrolling in states with troubled exchange websites.
The bulletin says the enrollment relief measures are being granted in states that "have had difficulty in providing timely eligibility determinations to applicants and enrolling qualified individuals in Qualified Health Plans through the Marketplace during the initial open enrollment period for the 2014 coverage year."
The open enrollment period ends March 31.
In comments to HealthLeaders Media this week, state officials in Massachusetts, Minnesota, and Oregon, which have all experienced significant problems with their exchange websites, praised both the substance and the spirit of the CMS bulletin.
"Here in Massachusetts, we have put in coverage extensions and transitional coverage that help people who may be having trouble accessing the website, and we are working on identifying how that programming crosses over with the CMS guidance," said a spokesman for Massachusetts Health Connector. "That said, throughout our transition to the Affordable Care Act, we have been working very closely with CMS and the federal government to ensure that we are delivering the choice, benefits, and expanded subsidy opportunities to as many people as possible in Massachusetts."
On Monday night, Minnesota Governor Mark Dayton issued a brief but emphatic statement on the CMS bulletin. "I guarantee that my administration will do everything possible to provide Minnesotans with all the federal tax credits for which they are eligible," the first-term Democrat said.
Officials at MNsure, the public exchange in Minnesota, were cautiously optimistic that the CMS bulletin will help residents in the state who have struggled to enroll online. "There are a number of important decisions for MNsure to make in regards to this bulletin," the Minnesota officials said. "There will be opportunities for Minnesotans to secure retroactive coverage when warranted, which is certainly a positive step for consumers who need affordable health insurance. We are still assessing this situation, and we are working very closely with our health insurance company partners to determine how we will proceed."
A spokeswoman for Cover Oregon also said state exchange officials were working in tandem with insurers to make the most of the flexibility offered in the CMS bulletin. "We will work closely with our carriers to get this policy implemented so that Oregonians get the financial help they are eligible for," she said.
Enrollment has been one of the prime areas for cooperation between CMS and insurers in the rollout process for the public exchanges since they were launched in the fall.
In November, CMS announced a pilot program in Ohio, Florida, and Texas to allow individuals a "direct enrollment" option to buy health insurance. "If consumers choose to directly enroll in a Marketplace plan through an insurance company, they still will be able to compare products, and choose the one that offers them the best value for their dollar," Julie Bataille, CMS director of communications said in an agency blog post on Nov. 22. "Consumers will be informed that they can compare and select other plans on HealthCare.gov, and prior to buying a health plan, [a] consumer's application will be securely routed to HealthCare.gov to assess their eligibly for coverage along with potential discounts on premiums and cost sharing."
In her blog post, Bataille said the direct enrollment pilot program was linked to ongoing efforts to improve the rollout of the public exchanges. "Issuers utilizing direct enrollment in these three states will provide detailed feedback on their experiences to feed into our real-time work to make improvements for both consumers and issuers," she said.
CMS has issued a clarification on its rule governing how Medicare classifies and pays for short hospital stays, but healthcare providers are still crying foul over the new standard.
A top policy official at the American Hospital Association says last week's Two Midnight Rule guidance letter from federal officials provides welcomed clarifications but leaves the policy fundamentally flawed.
"This is guidance that hospitals have been waiting for," said Priya Bathija, senior associate director of policy at the AHA. "It's been very hard for hospitals to operationalize Two Midnights without the guidance."
She praised the directive in the Feb. 24 guidance letter calling on Medicare Administrative Contractors to "re-review" all claim denials under the Two Midnight Rule's probe and educate process prior to Jan. 30. The Centers for Medicare & Medicaid Services says the MAC claim denial re-reviews are supposed "to ensure the claim decision and subsequent education is consistent with the most recent clarifications. The MAC may reverse their decision and issue payment outside of the appeals process if the MAC determines that a claim is payable upon re-review."
Last week's guidance letter from CMS is the second is less than a month. On Jan. 30, CMS issued a guidance letter that included an update on physician certification of short-term hospital stays.
"The probe and educate review will be beneficial to find out whether hospitals are complying," Bathija said. "It requires the MACs to be consistent. All of the MACs across the country will use the guidance from Jan. 30 to evaluate claims."
Under the rule, which CMS issued last year on Aug. 2, hospitals that admit patients for less than two nights will receive reimbursement at Medicare B outpatient rates. The rule states that hospital admissions shorter than two midnights in length are "generally inappropriate for payment under Medicare Part A, regardless of the hours the patient came to the hospital or whether the patient used a bed."
CMS made its case for the so-called "Two-Midnight" policy in a prepared statement released with the final rule on Aug. 2. "The rule improves value and quality in hospital care and provides clarification about when a patient should be admitted to the hospital and responds to recent concerns about extended Medicare beneficiary stays in the hospital outpatient department," CMS officials said.
"The rule also moves forward with health care delivery system reforms made possible by the Affordable Care Act. These include a new program aimed at improving safety in hospitals and refining the Hospital Readmissions Reduction program."
CMS's prepared statement includes this comment from Administrator Marilyn Tavenner: "This rule helps improve hospital care and establishes clearer guidance to hospitals for when we will consider inpatient care to be appropriate so the system works better for patients and providers."
Rule Resistance
From the AHA's perspective, "This Two Midnights standard is just arbitrary," Bathija said, adding the policy penalizes hospitals for being efficient in patient care or providing treatments that involve a short-term hospital stay.
Bathija said the AHA is asking CMS to either develop a better payment methodology within the Two Midnight policy or to replace the rule with a better method to pay for short-term hospital stays.
The American Medical Association, which has also been an outspoken critic of the new policy, expressed an even more skeptical view following the release of last week's guidance letter.
"The new policy does not solve the problem of unanticipated financial liabilities for patients, and increases documentation burdens for physicians," AMA President Ardis Dee Hoven, MD, told HealthLeaders on Thursday. "Recent guidance from… CMS on the order and certification requirements for physicians leaves many questions unanswered, and has not alleviated confusion. While we are encouraged by CMS's recent delay in enforcement and the decision to have Medicare Administrative Contractors review their application of the new policy, these issues continue to cause tremendous difficulties for physicians and patients."
Hoven said CMS needs to cut its losses and move in another direction. "We will continue to work with stakeholders to rescind the Two Midnight policy and pursue alternative workable solutions," she said.
On Feb. 20, the AMA and seven other medical societies filed an amicus brief in a case before the Second Circuit of the US Court of Appeals pitting a half dozen Medicare beneficiaries against HHS Secretary Kathleen Sebelius.
In the filing, the medical societies assert that they are "concerned that those patients covered under the Medicare Program should receive the benefits to which they are legally entitled and that those patients do not suffer financial hardship on account of arbitrary administrative decisions."
The legal brief claims that the Two-Midnight Rule imposes an unfair burden on Medicare beneficiaries. "The refusal by HHS to afford the plaintiffs the benefits that come with inpatient status led many of them to substantial medical and financial hardships," the medical societies state. "The financial losses for each of the [Medicare beneficiaries] ranged from $4,000 to $30,000."
'Ill-conceived and Poorly Drafted' Mark Bogen, senior vice president and CFO at South Nassau Communities Hospital in Oceanside, NY, offered a scathing assessment of the Two Midnight Rule via email Thursday:
"The Two-Midnight Rule came out as a way by CMS to deal with the RAC process that they created, which resulted in a huge backlog of unadjudicated appeals and the mounting threat of lawsuits from the AHA and other interested parties on behalf of the hospital industry. It was ill-conceived and poorly drafted and it is why the 'enforcement' has been delayed until October 1, 2014, for now…
"I believe that instead of measuring/defining inpatient status based on the 'clock' they would have been better served to create a system, which they ultimately did do for the Transfer Issue back in 2002, whereby these short stays would be paid using the [diagnosis-related group] methodology but would be reduced for the fact that the stay was short.
The ability to have to monitor this at the Hospital level has added untold burden and cost and does not lead at all to the triple aim (Patient Satisfaction, Quality Outcomes and Lower Cost) as well as it in fact shifts the financing cost between Part A (Medicare tax component of FICA) and Part B (basically a premium-based financing) and shifts cost to the Medicare Beneficiary…
Bogen, echoing the AMA and AHA, said "the Two-Midnight rule needs to be repealed and a more thoughtful process needs to be contemplated."
A study commissioned by America's Health Insurance Plans is predicting a second consecutive year of deep payment cuts for Medicare Advantage programs which "could result in a high degree of disruption in the MA market."
America's Health Insurance Plans is projecting a 5.9 percent cut to Medicare Advantage payments in 2015 and the group issued a stern warning Thursday that the reduction in funding would have dire consequences for the popular program.
After taking a 6 percent hit in the current year, an MA payment cut of similar size in 2015 "puts at risk the coverage of millions of seniors," AHIP President and CEO Karen Ignagni said during a conference call announcing a study, which was conducted for AHIP by New York-based management consulting firm Oliver Wyman. "You add something of this magnitude… that is a material impact."
Ignagni said the industry association had commissioned the study to help clear up confusion linked to last Friday's notice letter from the Centers for Medicare & Medicaid Services. "One thing we know is there is a lot of confusion and uncertainty about the impact [of the proposed cut]," she said. "There's no one number in the Friday notice, which is what makes this study so important."
Glenn Giese, principal at Oliver Wyman and one of the authors of the commissioned report, said MA would take a "5.9 percent cut if this payment notice holds up." For beneficiaries, he said the payment cut would result in reductions of MA benefits or increases in MA out-of-pocket costs from $35 to $75. The dollar impact on beneficiaries from the 6 percent MA payment cut in the current year ranges from $30 to $70, according the study.
5-Star MA Plans Bonuses Would be Trimmed
The study includes a detailed accounting of the factors contributing to the projected 5.9 percent cut, with the prime factors as follows:
PPACA quartile impact: -2.4 percent
Reduction of bonuses in 5-star rating system: -1.9 percent
Ratebook change: -1.9 percent
Projected insurer fee: -0.8 percent
Risk score normalization factor: +3.2
Elimination of home assessment diagnoses: -2.0
Projected Effects on the Market
The study's authors conclude that the proposed payment cut poses a threat to the MA program, including a reversal of enrollment growth that has pushed the number of seniors in the program above 15 million.
"We find that the payment policies proposed in the 2015 Advance Notice in combination with the continued phase-in of the ACA cuts and other legislative and regulatory cuts… could result in a high degree of disruption in the MA market," the report states. "This includes the potential for plan exits, reductions in service areas, reduced benefits, provider network changes, and MA plan disenrollment due to declines in plan value from 2014 to 2015."
Ignagni said MA insurers are particularly worried about the 41 percent of MA beneficiaries who have annual incomes below $20,000. "They are on very low incomes and they are very cost-sensitive," the AHIP president and CEO said.
CMS is slated to reach a final decision on the 2015 payment level for Medicare Advantage on April 7.
New Political Battle Line
With the Patient Protection and Affordable Care Act a focal point of this fall's mid-term elections in Congress, the proposed payment cut for Medicare Advantage has sparked a political firestorm in Washington.
On Tuesday, six Republican Senators sent a letter to HHS Secretary Kathleen Sebelius, blasting the proposed payment cut. In addition to Senate Minority Leader Mitch McConnell (R-KY) and Minority Whip John Cornyn (R-TX), the letter was signed by Sens. John Barrasso (R-WY), Roy Blunt (R-MO), Jerry Moran (R-KS) and John Thune (R-SD).
"During the debate on Obamacare, many of us warned about the impact on America's seniors of raiding Medicare to finance a new entitlement program," the senators wrote. "At the time, we cautioned that the steep cuts to Medicare Advantage required by Obamacare would cause seniors to lose access to many of the health plans and benefits that they had liked, contrary to the President's promises."
On Wednesday, the proposed MA payment cut was the inspiration for political theater, as senators from both sides of the isle participated in a C-SPAN spectacle.
Republicans including Cornyn suggested the proposed payment cut would cannibalize Medicare Advantage to prop up the PPACA. "The truth is, these cuts in Medicare Advantage will force many seniors to pay higher premiums and further undermine their existing healthcare arrangements," the Texas senator said.
Senate Democrats fired back, highlighting the most popular PPACA reforms such as providing health insurance regardless of pre-existing conditions. Standing next to a poster listing several early accomplishments of President Obama's hallmark domestic policy initiative, Sen. Chris Murphy (D-CT) defended the proposed MA payment cut. "We were paying private insurance companies 13 percent more than it cost the federal government to run Medicare," Murphy said. "It just didn't make sense."
