It could have been worse

In­sur­ers brace for change, ob­ject to loss pro­vi­sion

Modern Healthcare - - Editorial -

It could have been worse. That seems to be the con­sen­sus among in­sur­ers and an­a­lysts on the ef­fect that sweep­ing health re­form will have on man­aged care. In­sur­ers will gain about 32 mil­lion more cus­tomers over the next decade, and there’s no gov­ern­ment-run “pub­lic op­tion” com­pet­ing for that busi­ness. A pro­posed fed­eral in­sur­ance-rate over­sight board also never made it into the leg­is­la­tion.

Still, in­sur­ers and an­a­lysts are con­cerned about some as­pects of re­form, in­clud­ing cuts to the Medi­care Ad­van­tage pro­gram, new taxes on health plans and a pos­si­bly in­suf­fi­cient penalty for peo­ple who choose not to buy in­sur­ance.

“We con­tinue to be­lieve the leg­is­la­tion will have long-term neg­a­tive im­pli­ca­tions on the sec­tor’s prof­itabil­ity and growth,” said Stephen life­time caps for in­di­vid­ual and group health plans, will also be pro­hib­ited. Unin­sured in­di­vid­u­als with pre-ex­ist­ing con­di­tions will be able to get cov­er­age through high-risk pools start­ing this year un­til new health in­sur­ance ex­changes be­come op­er­a­tional in 2014.

De­pen­dents up to age 26 can get cov­er­age through their par­ents’ health plan start­ing this year. And small busi­nesses can qual­ify for tax cred­its up to 35% of the em­ployer’s con­tri­bu­tion to pur­chase health in­sur­ance for work­ers.

Also this year, health plans must re­port the pro­por­tion of pre­mium dol­lars spent on clin­i­cal ser­vices and qual­ity ef­forts. In 2011, large group plans must pro­vide re­bates to con­sumers if they spend less than 85% of pre­mium dol­lars on med­i­cal ser­vices. Small group or in­di­vid­ual plans must spend at least 80% of pre­mium dol- be paid a per­cent­age of tra­di­tional Medi­care costs, be­tween 95% in high-cost ar­eas to 115% in low-cost re­gions of the coun­try. Th­ese changes will be phased in over as many as seven years, de­pend­ing on how steep the re­im­burse­ment re­duc­tions will be.

And start­ing in 2014, Medi­care Ad­van­tage plans will be sub­ject to a min­i­mum med­i­cal­loss ra­tio of 85% (the ra­tio of pre­mium dol­lars spent on med­i­cal costs). A ra­tio be­low 85% would re­quire a re­fund to the CMS. Plans with med­i­cal-loss ra­tios be­low 85% for five straight years would be kicked out of the pro­gram.

If this rule had been in place last year, four health plans—Hu­mana, HealthSpring, Uni­ver­sal Amer­i­can and Unit­edHealth Group—would have seen their earn­ings re­duced by 20% or more, ac­cord­ing to Carl McDon­ald, se­nior an­a­lyst at Op­pen­heimer & Co.

A health in­sur­ance in­dus­try fee was de­layed from 2011 to 2014 in the rec­on­cil­i­a­tion bill, but the amount is now higher. In­sur­ers must pay $8 bil­lion in 2014, with the fee grad­u­ally ris­ing to $14.3 bil­lion in 2018. A tax on high­value or so-called “Cadil­lac” plans was also pushed back from 2013 to 2018.

Many in­sur­ers con­tacted last week de­clined re­quests for com­ment. Wel­lPoint said in a writ­ten state­ment that “af­ford­abil­ity is more im­por­tant than ever be­fore, and we re­main con­cerned the bill passed does not ad­dress long-term cost con­tain­ment mea­sures that will make the sys­tem sus­tain­able.”

Of par­tic­u­lar con­cern to in­sur­ers and in­vestors is the penalty in­di­vid­u­als will pay if they don’t pur­chase health in­sur­ance; they say it is sim­ply too low. In 2014, peo­ple who don’t buy at least min­i­mal health cov­er­age will pay a penalty of $95. The penalty will rise to $325 per per­son in 2015, and to $695 in 2016, or up to 2.5% of in­come. In 2016, the fam­ily cap for the penalty will be $2,250.

Za­haruk of Moody’s wrote that the low penal­ties (com­pared with the an­nual cost of in­sur­ance, even with fed­eral sub­si­dies) could cre­ate a “death spi­ral” for the in­di­vid­ual in­sur­ance mar­ket “by at­tract­ing a large pool of less healthy mem­bers as a re­sult of elim­i­nat­ing med­i­cal un­der­writ­ing, but not im­pos­ing a sig­nif­i­cant enough penalty to per­suade healthy in­di­vid­u­als to pur­chase in­sur­ance.”

Con­sid­er­ing this, it is not a sur­prise that AHIP said last week that it would join a cam­paign headed by Fam­i­lies USA called En­roll Amer­ica to en­cour­age peo­ple to sign up for health cov­er­age.

“It’s in ev­ery­body’s best in­ter­est that peo­ple have health in­sur­ance,” said Zirkel­bach of the part­ner­ship.

Pa­tients wait for eye ex­ams dur­ing a re­mote-area med­i­cal clinic in May­nardville, Tenn.

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