Pent-up uncertainty may lead to more demand among Americans

While legislation to repeal and replace the Patient Protection and Affordable Care Act (ACA) has halted for now, the future of American healthcare remains in flux. In this article, Milliman’s Kim Hiemenz and Michelle Klein discuss how the uncertainty surrounding healthcare may lead to pent-up demand among many Americans.

Changes to actuarial soundness requirements may or may not accompany changes to Medicaid funding

Proposals to change federal funding for state Medicaid programs using block grants or per capita caps could affect federal actuarial soundness requirements for Medicaid managed care capitation rates. In this article, Milliman’s Michael Cook discusses the following three scenarios that could play out if changes to Medicaid funding happen.

• The continuation of federal actuarial soundness requirements under revised federal funding is a plausible scenario.
• The establishing of individual state requirements if federal requirements are eliminated.
• The continued development of actuarially sound capitation rates by individual states even in the absence of any soundness requirements.

Are essential health benefits here to stay?

With the American Health Care Act scheduled to be up for a vote, and Republicans still negotiating elements of the bill, the fate of essential health benefits (EHBs) is uncertain. Rebekah Bayram and Barbara Dewey’s recent paper “Are essential health benefits here to stay?” explores how consumer choices are affected by mandating benefits, explores the potential effects on premiums, and identifies areas to watch as Congress debates healthcare reform.

The paper has also been referenced in a number of recent media articles. Below is a wrap-up of coverage from the past two days:

• Bloomberg article by Zachary Tracer: Health rules targeted by GOP could upset U.S. insurance market
• Los Angeles Times column by Michael Hiltzik: Eliminating essential health insurance benefits is a lousy idea that won’t save money. Here’s why.
• Business Insider opinion piece by Josh Barro: Republicans may gut an overlooked provision of Obamacare — and disrupt health insurance

Commercial health insurance financial results provide insight into ACA program stability

Milliman has released its annual report on the commercial health insurance market’s financial results, which provides a clear picture of health insurers’ financial experience in a given year. The report, based on medical loss ratio data submitted to the Centers for Medicare and Medicaid Services (CMS) and released in the fall of 2016, provides a final accounting of insurers’ financial results after “3R” transfer payments have been completed. Today’s report details results for 2015, the second full year of implementation of the Patient Protection and Affordable Care Act (ACA). The report also summarizes estimated effectuated insurance marketplace enrollment through 2016 and corresponding federal expenditures on premium and cost-sharing assistance. As the United States approaches a potential new round of healthcare reform, Milliman’s report is a helpful tool in analyzing the effect of current ACA financial assistance components to consumers and the impact on the health insurance industry from the insurance marketplaces and “3R” programs.

Key takeaways from Milliman’s report include:

• Underwriting margins in the individual market deteriorated from a 6.0% earned premium loss in 2014 to a 9.6% loss in 2015. The 2015 underwriting losses were due in large part to the risk corridor program funding shortfall.
• With no funding currently scheduled, the cumulative risk corridor payment shortfall has reached $8.3 billion, with nearly 90% owed to insurers in the individual market.
• Since 2013, individual market enrollment has increased from 10.9 million to 17.5 million, driven by the introduction of the insurance marketplaces and associated premium assistance. Conversely, the fully insured small group enrollment has shrunk from 17.3 million to 14.7 million, which is attributable primarily to fewer small employers offering coverage.
• The insurance marketplaces continued to take on a greater role in the individual health insurance market, with 56% of estimated 2016 market-wide enrollment attributable to coverage purchased in the marketplaces, relative to only 36% in 2014.
• From 2014 to 2016, the percentage of individual market enrollees receiving premium assistance has increased from 31% to 47%. Similarly, enrollment in cost-sharing reduction plans is estimated to have increased from 21% to 32% of national individual market enrollment.

Milliman’s overview of financial results provides a comprehensive look at insurers’ financial experience as well as the number of Americans impacted by marketplace subsidies under the ACA. As new healthcare proposals are debated in Washington, we believe this report provides a valuable tool for policymakers and insurers looking to better understand how insurance markets may react to future regulatory and legislative changes.

To receive regular updates of Milliman’s healthcare reports, contact us at here.

How to stabilize the ACA marketplace ahead of change

Any upcoming changes to the Patient Protection and Affordable Care Act (ACA) will not likely be fully implemented until 2019 or 2020. The stability of the individual and small group health insurance markets during this period of transition will depend on the regulatory changes that are made in the interim and the transparency of those changes.

A new paper by Milliman’s Lindsy Kotecki and Hans Leida presents five key considerations for promoting market stability for the 2018 and 2019 benefit years under the assumption that they are transitional years with many current ACA rules in effect.

1. Don’t collapse the stool.
2. Extend risk mitigation programs.
3. Extending the transitional policy.
4. Consider interim rule changes carefully.
5. Transparency is key.

What should payers and providers understand about joint venture health plans?

Joint venture health plans are still relatively new to providers and payers. It’s important for both sides to engage a skilled actuary who can assess the potential risks and benefits of such a partnership. In this article, Milliman actuary Lynn Dong provides some perspective on the following questions that providers and payers must consider concerning joint venture arrangements.

• How much is the provider system’s volume likely to increase?
• What is the provider’s range of potential outcomes under the rate concession or risk-sharing arrangement? How does this compare with the current contractual reimbursement arrangements?
• What insurance risks are transferred from the payer to the provider, and how will these risks be managed?
• How will the responsibility for care management, ongoing data and financial reporting, and financial settlements be allocated? What additional resources will be needed from the provider and payer to perform these functions?
• What ongoing data and reports will be made available to the provider? What level of detail will be available, and how often will this information be provided?
• What are the key financial, strategic, and business risks for the provider and payer?