“Since 2009, Milliman has been working with its clients to prepare for and implement the healthcare reform law,” said Clark Slipher, Milliman Health Practice Director. “With the law’s constitutionality bound up in court, it’s been an uncertain time for our clients, which include insurers, employers, providers, and state and federal governments. This ruling clarifies the road ahead for American healthcare, and while it is reassuring to know where we are going, healthcare stakeholders face many strategic challenges that will require innovation and sound financial planning in the years ahead.”
Adverse selection may still be a challenge. Even with the individual mandate in place, the success of many insurers under PPACA will depend on their ability to minimize adverse selection.
Medicaid expansion just became a far more complex and variable proposition. The court’s decision to allow states to opt out of Medicaid expansion creates dynamic changes across the healthcare system.
Employers grapple with new options and plan requirements. While reports of the demise of employer-sponsored insurance coverage are premature, these plans still face many potential changes.
What is the effect on early retirees? The role of the employer in covering those between 55 and 65 may change under PPACA.
Rate review scrutiny and no risk selection: Something’s got to give. Keeping rate increases under 10% may become more challenging with many of the traditional cost-control mechanisms no longer available to insurers.
Which states will get on the exchange bandwagon? With the Court decision minimizing uncertainty, there may be increased incentive for states to fast-track exchange planning.
Minimum loss ratios (MLR) pose an ongoing challenge for insurers. Insurers have struggled to comply with the MLR requirements, and increased volatility in medical costs potentially brought on by adverse selection may compound the difficulty for insurers.
Risk adjustment is essential. A new reform calculus is required with traditional risk selection techniques such as medical underwriting no longer allowed.
Will cost shifting hold steady, increase, or decrease? Subsidies, rating restrictions, and an effort to achieve universal coverage all introduce new cost dynamics for insurers, providers, and policyholders.
The cost problem persists. What can be done about it? Certain aspects of PPACA have the potential to affect costs, but this potential needs to be actualized in order to moderate annual cost increases that regularly exceed other consumer spending.
A new video examines key actuarial and operational considerations for state health insurance exchanges. The video includes perspectives from the CFO of the Massachusetts Health Connector and from several actuaries.
We’ll leave the details of the policy to those championing it. The question of what is meant by “cost effective,” though, is of interest. Ron Harris and Clark Slipher offer their perspective on issues of healthcare cost and capacity in their recent article framing the health reform challenge:
Some would argue that cost must not enter into the discussion of how the healthcare system should operate, but this is simply not realistic. All societies have limited resources and, proportionally, the United States already spends much more on healthcare than any other Western nation, with outcomes that too often are inferior. The notion of limited resources is a harsh reality with which we, as Americans, are just now coming to grips. Choices must be made. As a 21st-century society, we want quality healthcare coverage to be available and affordable for all our citizens. In order for that to happen, we must make difficult choices.
One way to reduce costs is through strict, centralized budget controls—thereby fixing supply and effectively producing mandated prioritization and rationing of care. Another way is to identify and substantially reduce the inefficiency and waste that is embedded within the system. Improvement in efficiency and elimination of waste are much more acceptable and enduring strategies within a U.S. context than budget controls and rationing.
Our present quality-related shortcomings, coupled with the comparatively high level of spending on healthcare in the United States, point to a healthcare delivery system that, as a whole, is not performing effectively. Some of this failure is patient and lifestyle driven; some is provider, supplier, and technology driven; some, reimbursement-structure and payer driven; some, government, litigation, and regulation driven—and almost all of it is affected by incentives that are often not productively aligned among the parties or structured to promote optimal performance.
We’ll be offering solutions to these problems in the coming weeks.
Based on years of experience with the current healthcare system, we know that sound and proven approaches to broaden coverage are available, even within a decentralized and pluralistic system of financing. These approaches recognize the multidimensional nature of the circumstances surrounding access to affordable healthcare coverage, including such important considerations as the wide range in individuals’ health status and the broad spectrum of families’ financial means and economic value judgments. Unfortunately, there are also numerous superficially attractive but fundamentally unsound ways to try to broaden coverage that we believe would exacerbate costs and impair access to affordable coverage.
The challenge we face is to reform the system in a meaningful way that will enable full coverage of everyone in the United States without, over the long term, simply spending more.
While covering the uninsured is expensive, the solution may lie in making more with the healthcare dollars we already spend:
The more than 25% potential reduction in healthcare-system inefficiency and waste equates to approximately $600 billion. If the system were made substantially more efficient—achieving, for example, even one-third of this total potential savings—resources sufficient to provide coverage for the uninsured could be available without increasing the current level of overall spending on healthcare.
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