Tag Archives: Healthcare Reform

Mini-medical plans and the “what can I afford” question

Prior to the Patient Protection and Affordable Care Act (ACA), mini-medical plans had no standard meaning, though they typically shared a few characteristics. Such plans provided limited coverage that could be exhausted quickly and/or result in significant out-of-pocket expenses if enrollees needed comprehensive services.

Total annual benefit limits may have been as high as $250,000 with more typical limits ranging from $10,000 to $50,000. Coverage was provided on an expense-incurred basis and used for traditional comprehensive health insurance, with lower premiums the trade-off for dollar-value benefit levels that fell below traditional health insurance.

The ACA effectively eliminated the expense-incurred mini-med market with the prohibition of annual limits on essential health benefits. What role might mini-med plans play in a post-ACA environment? Milliman’s Nick Ortner provides perspective in his article “What can I afford? Mini-med 2.0 and cost-coverage questions in a post-ACA world.”

Substantial amount of ACA plans’ revenue come from cost-sharing payments

Politico Pulse cited a new study performed by Milliman that examines cost-sharing reduction (CSR) subsidies under the Affordable Care Act (ACA). The study was commissioned by the Association for Community Affiliated Plans.

Here’s the excerpt from the morning briefing:

FIRST IN PULSE: COST-SHARING SUBSIDIES ARE A SIGNIFICANT SHARE OF OBAMACARE REVENUES — Cost-sharing subsidies accounted for 7.8 percent of health plan revenues for customers enrolled in Obamacare plans in 2015, according to a new study commissioned by the Association for Community Affiliated Plans.

The study conducted by Milliman also found a huge discrepancy between states that expanded Medicaid and those that didn’t. Cost-sharing subsidies accounted for 4.8 percent of revenues in expansions states, but that share more than doubled in states that didn’t expand coverage. The amount of money at stake: $4.9 billion in assistance to 5.2 million exchange customers in 2015.

Why it matters: The future of the cost-sharing subsidies is in limbo. House Republicans sued to block the funding and won an initial court battle. But they’re being pushed by health plans to continue the payments now that they’re in control of the federal government. Otherwise, insurers warn, the Obamacare markets could collapse on their watch. “The loss of CSR payments in 2017 would trigger significant losses for many insurers in the individual market,” the study concludes. Read the report here.

Milliman identifies six key questions arising from the Trump/ACA executive order

Milliman has published six questions for consideration by healthcare stakeholders about the Trump administration’s recent executive order, which gives a sweeping command to the leaders of the new administration to unwind certain aspects of the Patient Protection and Affordable Care Act (ACA)—especially those components deemed “burdensome.” It remains unclear how the Trump administration will implement this authority, especially because of the interconnected nature of the ACA, but given Milliman’s comprehension of the law, several key questions arise.

“Milliman has been working with clients across the healthcare system to implement reform since before the Affordable Care Act was signed into law, and we stand ready to assist clients in another round of reform,” said Lorraine Mayne, Milliman Health Practice Director. “The executive order signed on Friday is the first step in a new healthcare reform journey. Based on our understanding of the regulatory authority held by various federal and state entities, we have highlighted several complex questions. We’ve drawn a particular focus on what this may mean for the ACA individual health insurance market, Medicaid, and small employers. Changes for large employers are likely less significant while pharmas and others might not see any immediate differences.”

Strategic questions facing healthcare stakeholders include:

1. Will “hardship” undermine the individual mandate? The executive branch does not have the power to undo statutes—that requires an act of Congress—but the administration could defang the individual mandate via expansion of the hardship exception. It’s unclear if individuals would need to apply for such hardship, if proof of hardship might become part of tax forms (e.g., simply a checkbox), or if the administration could simply opt not to enforce the requirement. Some repeal and replace proposals have called for enrollment penalties similar to those in the Medicare Part B program as an alternative to a mandate—after all, any stable risk pool needs to ensure healthy people have an incentive to enroll. But until any alternative measure is installed, a weakening of the individual mandate may result in lower enrollment by healthy people and a sicker, higher-cost risk pool.

2. Are transitional plans here to stay? Thirty-three states allowed insurers to provide “transitional plans” where insureds have been able to keep their pre-ACA health coverage. The option began with the initial 2014 open enrollment and remains available through the end of 2017. Because pre-ACA coverage was subject to underwriting and risk-based rating, many insureds could maintain lower rates in the transitional coverage while those with less favorable terms migrated to ACA markets. As a result, these transitional plans generally have lower risk and the plans sold through the ACA marketplace have higher risk than if the pools were combined. Insurers anticipated that the expiration of the transitional plans had the potential to introduce new, healthier members to the risk pool and lead to lower rate increases. If transitional plans are extended indefinitely, it could deny ACA plans that relief.

3. What impact could the executive order have on selling insurance across state lines? President Trump argued repeatedly in favor of selling health insurance across state lines during the presidential campaign. And, in fact, the executive order includes a provision calling on agencies to “encourage the development of a free and open market in interstate commerce for the offering of healthcare services and health insurance.” However, it is not clear how this executive order can actually do that; statutory change is probably required. McCarran-Ferguson remains in place, which gives insurance regulatory authority to the states, and thus would seemingly prohibit interstate sales. Practically speaking, it’s unclear why a state would cede authority to allow for a plan from another state to sell insurance in its market or how interstate regulation would actually work.

4. Will the executive order fast-track pending 1115 waivers? The federal government now may be willing to grant more flexibility to state Medicaid programs requested through pending Section 1115 waivers. As of today, there are 11 new Medicaid 1115 waiver applications pending with the federal government. The executive order may encourage the federal Department of Health and Human Services (HHS) to quickly approve these waivers and empower states to make changes. The approval of the 1115 waivers would lead to a number of Medicaid transformation projects for the requesting states, which include, but are not limited to, healthy rewards accounts, work requirements, and integrated mental health programs.

5. Could the employer market be at the center of the action? Over the years, employers have repeatedly expressed concern about the extra burdens placed upon them by the ACA. These concerns related to higher taxes and fees (e.g., the insurer fee passed on to them in the form of higher premiums, the Cadillac tax, and the employer mandate penalties). Employers have also taken issue with increased administrative reporting requirements. Small-group employers have faced even greater changes than the large-group market, with limited plan design choices and restrictive premium structures. Many employers would applaud a loosening of restrictions. It could start with a reduction in paperwork. An easing of reporting requirements for employer groups could signal a relaxation on other requirements.

6. Will essential health benefits be affected? The ACA created the notion of minimum essential health benefit (EHB) categories. Through regulation, HHS allowed states some flexibility in the definition and implementation of EHBs. One such measure was allowing individual states to select a “benchmark plan” to use as a comparative standard. This would allow states to cover the required categories while at the same time recognizing their own mandated benefits. If EHB regulations are relaxed, some modifications to these minimums may occur. The requirement to provide what are sometimes viewed as controversial benefits such as contraception coverage could potentially be modified by an executive order, or when and if the ACA is modified or replaced. Also linked to this issue is the calculation of the actuarial value of the benefits after cost sharing is applied. This process is dictated by law and regulation and will need to be carefully watched as reconsideration of ACA proceeds.

Repeal, replace, or reform: Key policy discussions affecting the individual health insurance market

How might the Patient Protection and Affordable Care Act (ACA) be affected by the incoming Trump administration? The new administration and the Republican Party are considering a number of policy ideas regarding ACA’s repeal, replacement, and reform. In this article, Milliman’s Scott Weltz, Fritz Busch, and Nick Krienke highlight key policy discussions to monitor that will have a significant impact on individual health insurers.

This is the first in a series of papers Milliman will publish as the country contemplates another round of healthcare reform. We have also compiled a reading list of relevant papers from our ongoing analysis of the ACA. To view that library, click here.

Increases in self-insured employers and stop-loss coverage

Under a self-insured group health plan an employer shoulders the financial risk for providing healthcare benefits to its employees. Stop-loss insurance can help an employer mitigate the risk associated with high-cost or catastrophic health claims.

While large employers have customarily self-insured, small and midsized employers have increasingly weighed the benefits of self-insurance since the passing of the Patient Protection and Affordable Care Act (ACA), spurring growth in the stop-loss market. In this article, Milliman’s Mehb Khoja discusses the ACA’s impact on self-insurance and on stop-loss coverage.

Here is an excerpt from the article:

The stop-loss market is believed to be a roughly $15 billion industry, up from $8 billion to $10 billion pre-ACA. Its growth is related to the increased prevalence of self-funding along with the changes from ACA which increased premiums, plan enrollment, or both for stop-loss insurance carriers….

… ACA has considerably increased the need for and expanded employer interest in stop-loss coverage due to several factors:

• Removal of annual and lifetime maximums (prior to ACA, a cap on annual expenses on an employer-sponsored plan was common and allowed stop-loss insurance carriers to limit their exposure).
• Removal of pre-existing condition exclusions (prior to ACA, employers could temporarily exclude high risk members).
• The individual mandate and extending dependent coverage to age 26 have all increased membership in employer-sponsored plans.
• Expanded taxes on fully insured health plans.

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.

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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.

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

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

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