Posts Tagged ‘Exchanges’

Basic Health Program: Putting the “Affordable” in the Affordable Care Act

Thursday, November 10th, 2011

Last week, Community Catalyst submitted comments to HHS about the Basic Health Program (BHP) option in the Affordable Care Act (ACA.) While there are many reasons to be enthusiastic about BHP, its potential to dramatically lower health care costs for some of the most vulnerable members of our society is by far the most compelling.

The Heart of the Matter
Nothing illustrates the benefits of BHP more clearly than this chart from a report by the Urban Institute. It shows health care costs for low-income adults, with and without BHP:

Urban institute chart BHP blog

Urban Institute: "Using the Basic Health Program to Make Coverage More Affordable to Low-Income Households: A Promising Approach for Many States"

The bottom line? BHP can lower health care costs for near-poor families by $1,500 annually on average.

If you’re earning $15,000 a year, $1,500 can make the difference between being able to afford the coverage that you need, and simply going without. The Urban Institute confirms this: they find that if all states took up the Basic Health Plan, coverage rates would increase by 600,000 additional people.

And the benefits of lower health care costs under BHP extend beyond health. An annual survey of New York City residents confirms what those of us who work with this population already know: those earning less than 200 percent Federal Poverty Level (FPL) are just barely able to make ends meet. Forty percent had credit card debt, more than a quarter had unpaid medical bills, and more than a quarter fell behind in rent or mortgage in the last year. For families at this income level, $1,500 can relieve significant financial hardship.

The Basics of the Basic Health Plan
BHP is an option in the ACA that gives states the opportunity to provide alternative coverage to two groups of people who would otherwise get coverage through the Exchange:

  • • Adults earning just above Medicaid eligibility level but less than 200 percent FPL (about $15,000-$22,000 annually for an individual)
  • • Legal immigrants earning under the Medicaid eligibility level (less than $15,000 for an individual), but who do not qualify for Medicaid because of their immigration status

If a state chooses to take up the BHP option, the federal government will give that state 95 percent of the money it would have spent on subsidies for this population in the Exchange. The state can then use that money to contract with health plans (most likely Medicaid plans, which are much more cost-effective than most private plans) to offer coverage for that population that is at least as comprehensive as they would get in the Exchange.

What’s the Catch?
The most common concern about BHP is that it will shrink the pool of covered lives in the Exchange, lessening its negotiating leverage with insurers. While we’re interested in pursuing policy options to mitigate any adverse impact on the Exchange (see our comments for more details), we’re not convinced this threat is as significant as it’s been made out to be.

First, it is not clear to what extent states plan to aggressively use the negotiating leverage they have. According to a report by the Kaiser Family Foundation, of the 12 states with established exchanges only five explicitly empowered their Exchanges to act as active purchasers. Many of the remaining states seem reluctant to even establish an Exchange, let alone use it aggressively. And the Urban Report shows that BHP would decrease the number of total enrollees in the Exchange by 16 percent on average. In most states, this is probably not enough to significantly impact Exchange leverage.

Second, most people in the Exchange will not be impacted by a rise in premiums. Over 80 percent of people in the Exchange are receiving premium tax credits, so what they pay towards their premiums is based on a fixed percentage of their income. If the Exchange lowers premiums, the benefit will flow primarily to the federal government in the form of smaller tax credit liabilities.

Only those who don’t qualify for tax credits – primarily people earning above 400 percent FPL – face the full premium. To secure affordable premiums for this population, states can supplement Exchange negotiating leverage with active rate review and regulation of insurance markets both inside and outside the Exchange

At the end of the day, the ACA is about putting health care coverage within the reach of everyone. By lowering health care costs dramatically for the most vulnerable among us, BHP is an essential tool in helping us realize that promise.

–Katherine Howitt, Senior Policy Analyst

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Posted in Affordable Care Act implementation, Medicaid | 1 Comment »

Exchanges and Advocates: Helping Your State Create a Successful Exchange

Monday, November 29th, 2010

One of the most talked-about provisions in the Affordable Care Act is the creation of health insurance Exchanges to help people and small businesses get coverage. HHS recently released their Initial Guidance to States on Exchanges, which gives you the basics, but how do you actually decide what to focus on in creating an Exchange?

Community Catalyst is here to help. Based on our work on Exchanges over the past few years, we’ve developed a Top Ten Priorities for Health Insurance Exchanges.

Here’s an abbreviated list to get you started:

1. Should Your State Operate an Exchange?
First, advocates need to decide whether you want your state to run the Exchange, or defer to the federal government. While it makes sense for most states to create their own Exchange, this may be more difficult in states with hostile political environments. Right now, we don’t know much yet about what the federal Exchange will look like. So for now, states should focus on creating a state-run Exchange, and revisit the federal Exchange question when more is known in the future.

2. Make Sure Consumers Have a Role
No matter what your state’s political environment looks like, one of the most important concerns is the makeup of the board governing the Exchange. Consumers should be represented in a real way – meaning on the same terms, at least, as other stakeholders.

And the governing body of the Exchange governance should exclude representatives with conflicts of interest because of a financial stake in the health system — including hospitals, physicians, insurers, and brokers. California’s recent Exchange law has strong conflict of interest language for Exchange board and staff.

3. Let the Exchange Negotiate with Insurers
A goal of the Exchange is to provide people with affordable, high-quality health plans. To do this, an Exchange needs the authority to negotiate with health insurers based on quality, premiums, and other factors (and not just accept all plans, like Utah’s Exchange).

At a minimum, a state should not require the Exchange to accept all insurers without any competitive process. In Massachusetts, the Exchange requires all insurers in the small group market to submit health plans, and has the authority to select plans based on “quality and value.”

4. Work Closely with Medicaid
The state should create a “no wrong door” policy between the Exchange and Medicaid. No matter where a person initially applies, the state’s eligibility and enrollment system should ensure the person gets signed up for the appropriate program. Massachusetts uses a single application form for health coverage. The state then determines if the person is eligible for Medicaid or the subsidized plan through the Exchange. Your state will likely need to invest in information systems to update their system – luckily, states can now get a 90 percent federal match for money spent updating Medicaid eligibility systems, including work to coordinate with the Exchange.

5. Protect the Exchange from Adverse Selection
Everyone is worried the Exchange will fall to adverse selection – that is, only people with serious health conditions will enroll and, therefore, it will become very expensive. The Affordable Care Act already does a lot to reduce the likelihood of adverse selection – insurers must use one risk pool for plans, essential health benefits must be offered in plans inside and outside the Exchange, and risk-adjustment will help even out the differences between the markets inside and outside the Exchange.

But these tools will not be enough if states do not apply the same rules to plans inside and outside the Exchange. To protect against adverse selection, states should require plans sold outside the Exchange to have the same benefits, cost-sharing, patient protections, and marketing rules as health plans inside the Exchange. States could also prohibit brokers from steering enrollees to particular plans inside or outside the Exchange.

Want more? For more detailed tips on Exchanges (and 5 more priorities!) see the new Community Catalyst paper, here.

– Christine Barber, Senior Policy Analyst

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Posted in Affordable Care Act implementation | No Comments »

Insurance-palooza – the NAIC National Meeting in Seattle

Monday, August 23rd, 2010

The Summer 2010 Meeting of the National Association of Insurance Commissioners (NAIC) in Seattle Washington wrapped up last week. For those of us not lucky enough to spend a long summer weekend with a group of insurance commissioners, some friends of Community Catalyst provided the inside scoop on the meeting.

– Victory on Medical Loss Ratios. The Executive Committee of the NAIC approved the medical loss ratio recommendation made by the subcommittee on this issue. In spite of receiving a lot of pressure from insurers, brokers and other industries, the Commissioners stayed the course and remained respectful of NAIC process by voting yes on the recommendation, with very few changes.  Thanks to the consumer representatives on the NAIC, who have worked for months to ensure the MLR definition is based on actual medical costs and evidence-based quality improvement efforts. And, thanks to advocates to who called their Insurance Commissioners about this issue. This is good news – and we expect HHS to accept the NAIC’s recommendation.  What this means for advocates: This is a procedural win that is gets us closer to a tool to fight unwarranted premium increases and get consumers better value for their insurance dollars. It also demonstrates that we need to monitor these decisions and make our voices heard as necessary to ensure consumers are protected.

– Brokers feel the love. In a bizarre turn of events, the NAIC spent their summer weekend drafting an “ode to brokers.” The resolution, sponsored by a number of Insurance Commissioners, expressed support for the work that brokers do for the insurance market.  A clause in this resolution suggests that brokers should be favored as Navigators, the entities that will help to explain and enroll people in coverage and plans through the Exchange starting in 2014. This is inconsistent with the intent of the ACA, which clearly lists potential Navigators as “trade, industry, and professional associations, commercial fishing industry organizations, ranching and farming organizations, community and consumer-focused non-profit groups, chambers of commerce, unions, small business development centers, other licensed insurance agents and brokers, and other entities.” (Section 1311(i)). It is unclear what weight this NAIC resolution holds.  But one thing is certain: brokers were flexing their muscles in Seattle, and many Commissioners were impressed. What this means for advocates: We need to educate Insurance Commissioners and others in state government about the importance of community-based groups in providing public education, health plan information, and enrollment assistance, other critical roles of Navigators.

– Everyone’s thinking about Exchanges. NAIC created a tentative workplan for the subgroup charged with working on Exchanges. They are dividing into 14 smaller workgroups (leads should be posted on the NAIC website soon).  But we hear that one of the subgroups will work on a “skeleton” model law for states, which will basically track the statutory requirements and no more. Other subgroups are likely to respond to HHS’s request for recommendations on (1) network adequacy, (2) marketing standards and (3) quality measures.  Another group will tackle “principles and priorities” on a number of other big exchange topics such as governance and operations. (TBD). Another high-level liaison group will work with state Medicaid heads on plans for collaboration. What this means for advocates: The NAIC may have helpful resources as states begin to design Exchanges.  More to come.

– Lastly, though not specific to NAIC, rate review grant announcements were also made last week. A number of Insurance Commissioners talked about using the funds to increase consumer involvement in the process and get more information out to public. What this means for advocates: If your state applied for and received a grant to increase rate review, now is the time to work with your Commissioner on a plan to increase consumer involvement in the premium oversight process.

– Christine Barber, Senior Policy Analyst

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Posted in affordability, national health reform | No Comments »

The Insider: Trench Warfare

Thursday, May 13th, 2010

While political and legal attempts to repeal the Patient Protection and Affordable Care Act may draw the most attention, the real success or failure of the law will play out in hundreds of regulatory battles that will take place largely out of the public eye.

One of the first such battles is the definition of “medical loss ratio” (MLR).  The MLR is the percentage of premium dollars that a health insurer is required to devote to the medical care of its enrollees.  Under PPACA, individual and small group plans must spend 80 percent of premium dollars on medical care (as opposed to advertising, administration and profit), and larger groups must spend at least 85 percent. Failure to meet these required thresholds would trigger a rebate to policy-holders.   However, PPACA allows expenditures designed to improve quality of care and state and federal taxes to be exempted from the MLR calculation.

Industry representatives are not satisfied with these qualifiers, and are lobbying for special transition rules for those carriers that will have trouble meeting the MLR standard, warning that insurers may choose to exit the market rather than pay rebates.  Some are also arguing for special laxer rules for small carriers or for certain types of insurance.  They claim that small carriers have higher administrative costs but lower premiums for comparable coverage, and could be driven from the market without special consideration.

If it is indeed the case that small carriers have lower premiums (despite higher administrative costs), it is likely because these small insurers are underwriting more aggressively—a practice they will be forced to discontinue in 2014.  There doesn’t seem to be any good reason now to allow them to keep cherry-picking healthy enrollees who they will then be able to hang onto in “grandfathered plans” once reform fully kicks in—making the risk pool worse in the Exchanges.

The National Association of Insurance Commissioners (NAIC) is charged with developing recommendations to HHS to implement the MLR provision.  NAIC recommendations are expected by June 1.  The extent to which the NAIC (and ultimately HHS) gives in to the special pleadings of the industry will be one early indication of the willingness of state and federal regulators to stand up to special interests as implementation proceeds.

–Michael Miller, director of strategic policy

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Posted in Health Reform Insider, national health reform | No Comments »