How is the ACA’S health insurance coverage impacting employer plans?

Coates-SarahIn the shifting landscape of the Patient Protection and Affordable Care Act (ACA), where do employers currently stand, where are we headed—and what is it going to cost? In March, the Congressional Budget Office (CBO) published its Federal Subsidies for Health Insurance Coverage for People Under Age 65: 2016 to 2026, highlighting health insurance enrollment projections, subsidy amounts, and the impact of the ACA on health insurance. The report encompasses all types of coverage for those under 65; the following summary focuses mainly on the impacts associated with employer-based coverage.

The CBO and Joint Committee on Taxation (JCT) currently estimate that, in 2016, total federal subsidies, taxes, and penalties associated with health insurance coverage for those under 65 will result in a net subsidy from the federal government of $660 billion—3.6% of gross domestic product (GDP). This is expected to rise at an average annual rate of 5.4%, reaching $1.1 trillion (4.1% of GDP) in 2026.

The two major culprits in terms of costs are the federal subsidies associated with employment-based coverage, and federal spending for Medicaid and Children’s Health Insurance Program (CHIP) benefits. Respectively, they take up 41% and 43% of the total net subsidy for people under age 65.

Who is covered and how?
According to the report, healthcare coverage is more prevalent now than prior to the ACA.

• In 2016, of the total estimated population (272 million lives), approximately 155 million people are covered by employer-sponsored insurance.
• In 2026, of the total estimated population (280 million lives), the CBO estimates that approximately 152 million people will be covered through employer-sponsored plans.

Currently, the number of uninsured is approximately 27 million. This is expected to increase slightly to 28 million in 2026. According to the CBO report, if the ACA had not been enacted, the total number of uninsured would have been 49 million this year and would have reached 52 million by 2026.

Chart 3

Chart 4

What are the ACA’s subsidies costing taxpayers?
The CBO and JCT have estimated the costs of federal subsidies associated with health insurance coverage for people under age 65. Shown below, these include the tax exclusion for employment-based coverage (of this, $1 billion per year is attributed to small-employer tax credits), and subsidies offered through healthcare marketplaces and related spending.

Chart 5

Health insurance taxes and penalties are projected to reduce total subsidies by $15 billion in 2016 and to grow
to $59 billion in 2026:

Chart 6

This article first appeared in the September 2016 issue of Health and Group Benefits News and Developments.

If you would like to receive the Health & Group Benefits newsletter directly, send an email here.

Open vs. minimally invasive hysterectomy: Commercially insured costs and readmissions

In the United States, approximately 600,000 hysterectomies are performed each year. Several surgical approaches are used to perform them. Open abdominal hysterectomy is the most common and invasive approach. All other approaches are classified as minimally invasive procedures. In this paper, Milliman’s Kate Fitch and Andrew Bochner analyze commercial payer differences in the average costs and readmission rates between inpatient open hysterectomies and three types of outpatient hysterectomies: laparoscopic, laparoscopic assisted, and vaginal.

This article was originally published in the August 2016 issue of Managed Care.

Advanced APM considerations for clinicians

Two value-based reimbursement models exist under the Medicare Access and CHIP Reauthorization Act (MACRA) that tie Part B payments to clinician performance: the Merit-Based Incentive Payment System (MIPS) and the Advanced Alternative Payment Model (Advanced APM) track. The Advanced APM track encourages groups of clinicians to shift from fee-for-service to delivery models in which clinicians assume more accountability and risk for the cost and quality of care. In the initial years of the program, MACRA provides incentive payments to early APM adopters.

This paper written by Milliman’s Lynn Dong and Pamela Pelizzari explores the definition of an Advanced APM, how providers can qualify to be paid under the provisions of the Advanced APM track instead of under MIPS, and why that might be desirable. In addition, the authors highlight the need for careful evaluation regarding APM participation because there is often a complex interaction between the risk inherent in an Advanced APM and the benefits under MACRA.

The article is part of a series examining the impacts of MACRA on providers, alternative payment models, and health plans. To read other articles in the series, click here.

Regulatory roundup

More healthcare-related regulatory news for plan sponsors, including links to detailed information.

Results of GAO study on undercover testing for ACA coverage
The Government Accountability Office (GAO) recently released “Results of recent undercover testing for Patient Protection and Affordable Care Act coverage, and review of market concentration in the private insurance markets” (GAO-16-882T).

For its undercover testing of the 2015 coverage year, GAO submitted fictitious applications for subsidized coverage through the federal marketplaces in New Jersey and North Dakota, and through state-based marketplaces in Kentucky and California.

For the 2016 coverage year, GAO submitted fictitious applications through the federal marketplaces in Virginia and West Virginia, and through the state-based marketplace in California. The results of these undercover tests, while illustrative, cannot be generalized to the full population of enrollees.

To review market concentration, GAO examined data reported by issuers to the Centers for Medicare and Medicaid Services (CMS) for fiscal years 2011 through 2014, the latest data available.

To download the entire report, click here.

Health insurance coverage in the United States
The U.S. Census Bureau report “Health insurance coverage in the United States: 2015” presents statistics on health insurance coverage in the United States based on information collected in the 2014, 2015, and 2016 Current Population Survey Annual Social and Economic Supplements (CPS ASEC) and the American Community Survey (ACS).

Here are some of the report’s highlights:

• The percentage of people with health insurance coverage for all or part of 2015 was 90.9%, higher than the rate in 2014 (89.6%).
• In 2015, private health insurance coverage continued to be more prevalent than public coverage, at 67.2% and 37.1%, respectively. Of the subtypes of health insurance, employer-based insurance covered 55.7% of the population for some or all of the calendar year, followed by Medicaid (19.6%), Medicare (16.3%), direct-purchase (16.3%), and military coverage (4.7%).
• Increases in both private health insurance coverage and government coverage contributed to the overall increase in coverage between 2014 and 2015. The rate of private coverage increased by 1.2 percentage points to 67.2% in 2015 (up from 66.0% in 2014), and the government coverage rate increased by 0.6 percentage points to 37.1% (up from 36.5% in 2014).

To read the entire report, click here.

CMS announcement shapes MACRA implementation

norris-colleenOn September 8, Andrew Slavitt, Acting Administrator of the Centers for Medicare and Medicaid Services (CMS), made a significant announcement on the CMS blog regarding the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) implementation timeline.

According to CMS, providers will be allowed to “pick their pace” with respect to the Quality Payment Program (QPP) in the first year of MACRA implementation. Mr. Slavitt has outlined four proposed “pace” levels in which providers can enter the QPP.

Colleen Norris graph

The blog post is light on specifics; however, the way options 1 through 3 are described indicates that the financial penalties in the QPP may be substantially lessened in the first year of program implementation.

CMS is scheduled to release the final rule by November 1. We will provide more details on this change, and what it means for the market at that time.

Benchmarking provider cost using Medicare allowed

There are many reliable research statistics from the private sector and the federal agencies that support the evidence that medical costs are rising and the current pace is unsustainable. Medical cost trend has two primary components, the number of services provided to patients (utilization) and the cost of each of those services (unit cost). While utilization management can be important for achieving cost savings, some employers are now giving further attention to the significant price variation in unit cost. Chart 1 below provides an example of the price variation using the average reimbursement as a percentage of Medicare in Buffalo, New York; Indianapolis, Indiana; Ventura, California; and nationwide. As shown, going from Buffalo to Indianapolis reflects an 80% increase in cost, based on unit price alone.

Benchmarking provider cost using Medicare allowed_Figure 1

We regularly encounter employers who don’t fully understand the impact of provider reimbursement variation on their medical plans’ financial performances. This comes as no surprise, given the limited transparency and complexity of current provider reimbursements.

Limited transparency of provider reimbursement (allowed charges)
For employers, the industry standard technique of benchmarking commercial allowable charges has historically been traditional discount analyses, which compare discounts to billed charges. However, these approaches do not provide the required rigor and precision to understand medical service reimbursement analysis—both across markets and within a given market. This is because billed charges are not standardized across providers or different services. As a result, the exact same discount could mean very different things, depending on the provider and service—in some cases, price differences of over 300%. In addition, providers often optimize their billed charges to enhance reimbursement on contracts based on billed charges.

Employers generally have had a difficult time measuring unit cost, which is solely due to the complexity of various medical procedures. There is a large amount of price variation within each inpatient diagnosis-related group (DRG) and outpatient type of service. Chart 2 below provides a powerful illustration of how reimbursement can vary significantly across even a single inpatient DRG or outpatient service category. The chart compares the commercial reimbursement for inpatient joint replacement and an outpatient MRI in three different metropolitan areas with what the government would pay under Medicare allowable. The variation in inpatient joint replacements, a large bundle of complicated services, is much lower than outpatient MRIs, which reflects a specific service that generally has little variation in intensity compared with a joint replacement.

Benchmarking provider cost using Medicare allowed_Figure 2

Continue reading