Tag Archives: Ron Harris

ACA premium rate reading list

There has been a lot of talk about whether healthcare premiums are going to increase or not under the Patient Protection and Affordable Care Act (ACA). With that in mind we’ve put together a list of articles and studies that should help increase awareness of how health reform may affect premium rates.

KearneyHub.com – Will next year’s insurance premiums go up or down?
Many individuals are interested to know if health exchange premiums are going to increase or decrease in 2015. This article quotes Milliman’s Jim O’Connor discussing how 2014 rates will influence next year’s rates. The article also points out certain variables that may increase rates.

Columbia Journal Review – What’s health insurance really going to cost?
CJR reporter Trudy Lieberman identifies seven tips to help individuals understand factors that will contribute to the setting of health exchange rates in 2015.

Wall Street Journal – Health Plans Rush to Size Up New Clients (subscription required)
This Wall Street Journal article provides perspective on how insurers are gathering data from health plan enrollees to help set future premiums. The article quotes Milliman’s Tom Snook:

“In the past, the whole game was about risk selection,” said Tom Snook, an actuary with Milliman Inc. who works with insurers offering plans on public exchanges. “Now the game’s all about risk management.”

Columbia Journalism Review – Untangling Obamacare: Rate shock
This article considers several issues of interest to the public related to “rate shock” and the affordability of premiums.

Columbia Journalism Review – Untangling Obamacare: What’s behind the rate increases?
The Columbia Journalism Review (CJR) aims to help individuals understand factors that are affecting how health coverage is priced.

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Lots of ink on the individual mandate

While not one of the more immediate provisions in the healthcare reform law, the individual mandate is likely to be one of the most talked-about elements. As we indicated last week, the composition of any health risk pool has significant cost implications, and an effective individual mandate can help encourage better health risks to enter the pool. The individual mandate is intended, among other things, to prevent a selection spiral

There is plenty of related press coverage this week, especially over the subject of whether the individual mandate will pass legal muster. The Internet is crowded with individual mandate-related headlines. Ezra Klein with the Washington Post has weighed in twice (here and here).

How will the public react to the individual mandate? While it has been relatively well received in Massachusetts, the reaction may vary from one location to another. An LA Times op-ed on Wednesday supporting the individual mandate drew some heat

This is one story to keep an eye on.

Healthcare cost: Manage the causes, not the effect

How can healthcare be made more affordable? A new paper, “Manage the causes, not the effect,” by Bill Rifkin, Tom Snook, and Ron Harris, addresses the cost-control question and suggests that the place to look for cost control is not at the premium level but further upstream. Key factors include the composition of the risk pool, unit cost, and utilization. In particular, some of the more promising cost-control measures surround utilization, as a convergence of efficiency and quality has emerged. Certain clinical practices can lead to improved healthcare quality for patients while also reducing waste and inefficiency. 

And in one other interesting (and related) item, a Washington Post op-ed looks at the individual mandate, invoking analysis by Snook and Harris to emphasize the importance of an effective mandate as a cost-control mechanism.

Revisiting the cost and complexity of the most popular FEHBP plan

With the idea of expanding the Federal Employees Health Benefits Program (FEHBP) now in the news, it makes sense to revisit an earlier paper about cost and complexity in health plans, which includes analysis of the most popular FEHBP plan. For example, consider the range of costs among different health plans:

Plan Design

PMPM Value*

Ratio to MMI PPO**




Alternate PPO



HMO-style plan



Most popular FEHBP plan






*For the United States as a whole and a demographic cross-section of the labor force population (including spouses and dependent children).
**This paper uses the plan design employed in the Milliman Medical Index as a baseline for comparison.

Read the full paper here.

Defining an effective individual mandate

What follows is excerpted from the recent healthcare reform briefing paper, “Adverse selection and the individual mandate”:

Proposals for individual mandates usually incorporate an incentive (a carrot) to purchase coverage and a penalty (a stick) for not purchasing coverage.

  • The carrot is a subsidy, voucher, or other financial mechanism to help make insurance more affordable and put uninsured people of limited means in a position where the cost/benefit decision bears a more realistic relationship to their respective income levels. This would reduce the cost component of the cost/benefit decision described above, and thereby encourage more people to purchase health insurance.
  • The stick is a financial penalty of some sort on individuals who fail to purchase coverage. This changes the cost/benefit decision in that it makes the alternative to purchasing health insurance more expensive and therefore less attractive financially.

The strength or weakness in any mandate lies in the level at which these incentives and penalties are set. For example, an insufficient subsidy for healthy but lower-income individuals, even if paired with a tax penalty, may not be enough of an incentive, especially if the tax penalty doesn’t create an imperative to purchase insurance.

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How an ineffective mandate can cause health insurance costs to rise

What follows is excerpted from the new healthcare reform briefing paper by Tom Snook and Ron Harris, “Adverse Selection and the Individual Mandate.”

The idea behind a coverage mandate is to mitigate (or, ideally, totally eliminate) the effects of adverse selection on health insurance costs. If that mandate is so weak as to be ineffective, however, adverse selection will continue to be an issue and health insurance costs will increase as illustrated in the following example.

Consider a potential insurance population comprising three categories: Very Healthy, Moderately Healthy, and Unhealthy. For illustration’s sake, let’s say these groups have the following population sizes and expected average annual healthcare costs:



Average per capita healthcare cost

Very healthy



Moderately healthy






Let’s also say that a strong mandate existed and all 1 million of these lives would be enrolled into the health insurance pool. In this case, the average per capita healthcare cost would be $1,900. But under a weak mandate, the Very Healthy category has less of a financial incentive to participate, and would be more likely to opt out from coverage. The Unhealthy category still has an incentive to participate because of the relatively high costs it expects to have. If, for example, a weak mandate will cause only 50% of the Very Healthy, 80% of the Moderately Healthy, and 100% of the Unhealthy to enroll, then the average per capita cost of the resulting insured population is more than $2,400—27% higher than the strong mandate scenario.

It should be apparent from this example that the relative strength or weakness of a coverage mandate could best be measured by how many of the Very Healthy potential insureds wind up actually enrolling for coverage. The more healthy lives there are in the insurance pool to help bear a share of the costs, the lower the average cost for everyone. 

Click here to read the full paper.