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Monday, August 8, 2016

Health Care Reform Articles - August 8, 2016

Pope Francis: Capitalism is 'Terrorism Against All of Humanity'

Pope Francis argues that modern economy's worship of 'god of money' leads to disenfranchisement and extremism.
by Nika Knight

Pope Francis surprised reporters on a flight from Krakow to the Vatican late Sunday when he blamed the "god of money" for extremist violence in Europe and the Middle East, saying that a ruthless global economy leads disenfranchised people to violence.
"Terrorism grows when there is no other option, and as long as the world economy has at its center the god of money and not the person," the pope told reporters, according to the Wall Street Journal. "This is fundamental terrorism, against all humanity."
The pope was responding to a journalist's question about whether there is a link between Islam and terrorism, particularly focusing on the fatal attack on a priest by Muslim extremists in France last week.
"I ask myself how many young people that we Europeans have left devoid of ideals, who do not have work. Then they turn to drugs and alcohol or enlist in [the Islamic State, or ISIS]," he said, Reuters reports.
The pope said that no religion has a monopoly on violence, the Wall Street Journal notes:
His own experience in interreligious dialogue had shown him that Muslims seek "peace and encounter," he said. "It is not right and it is not just to say that Islam is terroristic." And he said no religion had a monopoly on violent members.
"If I speak of Islamic violence, I should speak of Catholic violence. Not all Muslims are violent, not all Catholics are violent," Pope Francis said, dismissing Islamic State as a "small fundamentalist group" not representative of Islam as a whole.
"In almost all religions there is always a small group of fundamentalists," even in the Catholic Church, the pope said, though not necessarily physically violent. "One can kill with the tongue as well as the knife."
The remarks followed similar comments made last Wednesday, when Pope Francis argued that the current Middle East conflicts are wars over economic and political interests—not religion or so-called "Islamic terrorism."
"There is war for money," he said on Wednesday, according to the Wall Street Journal. "There is war for natural resources. There is war for the domination of peoples. Some might think I am speaking of religious war. No. All religions want peace; it is other people who want war."

Researchers or
Corporate Allies? Think
Tanks Blur the Line

Think tanks are seen as independent, but their scholars often push donors’
agendas, amplifying a culture of corporate influence in Washington.
by Eric Lipton and Brooke Williams - NYT
WASHINGTON — As Lennar Corporation, one of the nation’s largest home builders, pushed ahead with an $8 billion plan to revitalize a barren swath of San Francisco, it found a trusted voice to vouch for its work: the Brookings Institution, the most prestigious think tank in the world.
“This can become a productive, mutually beneficial relationship,” Bruce Katz, a Brookings vice president, wrote to Lennar in July 2010. The ultimate benefit for Brookings: $400,000 in donations from Lennar’s different divisions.
The think tank began to aggressively promote the project, San Francisco’s biggest redevelopment effort since its recovery from the 1906 earthquake, and later offered to help Lennar, a publicly traded company, “engage with national media to develop stories that highlight Lennar’s innovative approach.”
And Brookings went further. It named Kofi Bonner, the Lennar executive in charge of the San Francisco development, as a senior fellow — an enviable credential he used to advance the company’s efforts.
“He would be a trusted adviser,” an internal Brookings memo said in 2014 as the think tank sought one $100,000 donation from Lennar.
Think tanks, which position themselves as “universities without students,” have power in government policy debates because they are seen as researchers independent of moneyed interests. But in the chase for funds, think tanks are pushing agendas important to corporate donors, at times blurring the line between researchers and lobbyists. And they are doing so while reaping the benefits of their tax-exempt status, sometimes without disclosing their connections to corporate interests.
Thousands of pages of internal memos and confidential correspondence between Brookings and other donors — like JPMorgan Chase, the nation’s largest bank; K.K.R., the global investment firm; Microsoft, the software giant; and Hitachi, the Japanese conglomerate — show that financial support often came with assurances from Brookings that it would provide “donation benefits,” including setting up events featuring corporate executives with government officials, according to documents obtained by The New York Times and the New England Center for Investigative Reporting.
Similar arrangements exist at many think tanks. On issues as varied as military sales to foreign countries, international trade, highway management systems and real estate development, think tanks have frequently become vehicles for corporate influence and branding campaigns.
http://www.nytimes.com/2016/08/08/us/politics/think-tanks-research-and-corporate-lobbying.html?hpw&rref=politics&action=click&pgtype=Homepage&module=well-region&region=bottom-well&WT.nav=bottom-well&_r=0


According to Aetna We Have Two Kinds of Insurance Companies Under Obamacare: The "Less Worse Off" and the "Worse Worse Off"


Surviving Co-Ops Sue Feds Over Inadequate Obamacare Reinsurance Payments While Aetna Complains the Payments Aren't Enough For Their Only "Less Worse Off" Financial Results
I don't know if you noticed the recent juxtaposition between the surviving co-ops complaint that they shouldn't have to pay the big legacy carriers money under the Obamacare "3Rs" reinsurance scheme with Aetna's complaint this week that these same payments aren't enough for them to be confident they will continue in the exchanges.

Of the original 23 insurance co-ops created under the Affordable Care Act, only seven remain.

And, those seven are having a tough time of it. So tough that at least three are suing the federal government over the way the "3Rs" reinsurance scheme works. The are complaining that the risk adjustment provisions of the law unfairly favor the big legacy health plans such as the big publicly traded plans, like Aetna, and the big market share Blue Cross plans.

So, now the co-ops complaint is that they'd be doing fine if it weren't for the Obama administration's flawed risk adjustment program designed to move money from the plans with the healthiest customers to those with the sickest.

The irony that the risk adjustment system is telling us that these co-ops have the healthiest consumers and are still going broke should not be lost.

Meantime, one of the legacy carriers, that has been benefiting from these payments, Aetna, is threatening to pull out of the exchanges because of their big 2016 Obamacare losses and is blaming part of it on the failure of the same risk adjustment system to adequately reimburse them for their losses!

CEO Mark Bertolini told Bloomberg, "the mechanism of risk adjustment in those exchanges is not going to appropriately reflect" their expected $320 million in Obamacare exchange underwriting losses in 2016.

According to Bloomberg:
Bertolini said big changes are needed to make the exchanges viable. Risk adjustment, a mechanism that transfers funds from insurers with healthier clients to those with sick ones, "doesn't work," he said. Rather, than transferring money among insurers, the law should be changed to subsidize insurers with government funds, Bertolini said.

"It needs to be a non-zero sum pool in order to fix it," Bertolini said. Right now, insurers "that are less worse off pay for those that are worse worse off."
Well that's a mouth full.

While the co-ops complain they're getting screwed by having to pay money to the big guys, one of the big guys is complaining they are only less worse off and suggesting the government just has to make up their losses or they are going to take their marbles and go home.

And, let me suggest to Mr. Bertolini that before any Congress appropriates more money to subsidize Aetna in the exchanges there is a better chance Democrats will pass a public option for him to compete against.

So we have two kinds of insurance companies in Obamacare.

The "less worse off" and the "worse worse off."

Other than that, the Obamacare market is "stable."

http://healthpolicyandmarket.blogspot.com/2016/08/according-to-aetna-we-have-two-kinds-of.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed:+HealthCarePolicyAndMarketplaceBlog+(Health+Care+Policy+and+Marketplace+Blog)&m=1

Struggling To Stabilize: 3Rs Litigation And The Future Of The ACA Exchanges

Mike Adelberg and Nicholas Bagley
Six years after passage of the Affordable Care Act (ACA), the individual and small-group insurance markets—the markets that the ACA remade—are still having growing pains. Health insurers have endured large losses and a number of ACA-created co-ops and other small insurers have failed. Consolidation among providers and insurers is an increasing and concerning trend. And many insurers are poised to raise premiums substantially for 2017, further stoking frustration with the insurance industry.
Even as the press vilifies insurers, however, the ACA’s supporters can’t afford to be indifferent to their struggles. Private insurers sell the managed care plans that are the central vehicle for expanding access to middle- and lower-income Americans. One day, those plans may cover many of the 11 percent of Americans who remain uninsured.
Part of insurers’ difficulty is that the risk pool in the individual and small-group markets, particularly on the exchanges, is sicker and smaller than originally projected. But the three programs—reinsurance, risk corridors, and risk adjustment—that the ACA’s drafters hoped would help stabilize premiums in the revamped markets have also not performed as expected. Dashed expectations have led to market instability and to a flurry of lawsuits around the “3Rs.” What does this unpredictable and difficult situation mean for 2017 and for the ACA more generally?

The 3Rs and the Individual and Small-Group Markets

Each of the 3Rs has generated unique operational challenges and political controversies.
Reinsurance is a three-year program that makes payments to insurers for their particularly costly members. Per the ACA, reinsurance payments to insurers are supposed to decline each year. At the same time, some of the funds collected each year are supposed to be returned to the U.S. Treasury. Because collections were lower than expected, however, the Department of Health and Human Services (HHS) opted to prioritize payments to insurers without directing funds to the Treasury.
HHS recently announced that it would pay insurers 55 percent of what they’re owed based on their 2015 experience. Had HHS not prioritized payments to insurers, reinsurance payments would be lower. Nonetheless, the move was controversial: Congressional Republicans are now holding hearings into whether HHS’ effort to prioritize insurers contravened the ACA.
The risk corridor program is also a temporary, three-year program. Insurers that sustain heavy losses are supposed to receive federal support; by the same token, highly profitable insurers are required to return some of their gains to the federal government.
Recent budget legislation effectively required risk corridor payments to be budget neutral, which blocked HHS from finding additional funds to make risk corridor payments. Partly as a result, HHS could only pay out 12.6 cents on the dollar for insurers’ 2014 losses. Similar shortfalls appear likely for the 2015 year, which will be paid this fall. Prominent GOP leaders, including Senator Marco Rubio, have derided the ACA risk corridors as a “slush fund” for insurers. Given the political climate, it appears unlikely that the budget neutrality requirement will be lifted.
Risk adjustment is the only permanent premium stabilization program. In principle, it’s supposed to eliminate insurers’ financial incentive to “cherry pick” healthy enrollees or “lemon drop” sick members. To that end, each insurer must submit demographic data and clinical codes to document the risk profile of its membership. The federal government then totals the risk adjustment score of each insurer in a given state and redistributes money within the state in a zero-sum fashion. Insurers with the highest risk scores are compensated with funds from insurers with lower risk scores.
But the devil is in the details. While the average payout is about 10 percent, risk-adjustment distributions have topped 20 percent of premiums for several smaller insurers, leading to charges that risk adjustment doesn’t accurately measure members’ actual risk, but instead rewards those insurers who most aggressively “code capture.” Such insurers may, for example, pay vendors to sift through claims data and push physicians to assign all applicable diagnosis codes to members.

The Litigation

The unexpected difficulties surrounding the 3Rs have damaged the ACA-reformed insurance markets. Several insurers, including United and Humana, have lost hundreds of millions of dollars that they expected to have repaid. Partly as a result, they have chosen to leave the ACA markets in several states in 2017. Other insurers, including a few of the Blues, the backbone of the exchanges, are narrowing their plan offerings.
While insurers and regulators are still negotiating 2017 rates, it appears likely that rate increases will be higher next year than any other year since the ACA was implemented. Meanwhile, insurers with small capital reserves—most visibly the co-ops, but others too—are going out of business. Two thirds of the co-ops have failed, and more will likely fail by January 1, 2017.
Predictably, insurers that were promised relief in the event of large losses are now suing the federal government.

Risk corridor litigation

Insurers have so far filed at least six lawsuits in the Court of Federal Claims to recover money due under the risk corridor program. Although Congress has not fully funded the program, the insurers argue that the federal government has promised to make those payments. The insurers believe that, under the Tucker Act, they can recover the promised funds in court.
The insurers are likely to prevail in these lawsuits — eventually. HHS acknowledges that the insurers are entitled to the promised money under the ACA. And, as the Government Accountability Office’s bible of appropriations law explains, “[a] failure to appropriate [money for a program] will prevent administrative agencies from making payment, but … is unlikely to prevent recovery by way of a lawsuit.”
For now, however, the federal government has moved to dismiss the cases, arguing that they have been brought too soon. In the government’s view, insurers will only know what they’re owed under the three-year program once it has run its course. If that’s right—and insurers cannot know precisely what they’re owed until the end of the three-year program—the eventual date of recovery will be delayed to fall 2017, when HHS will likely make its final risk corridor calculations. Thinly capitalized insurers and co-ops may have a difficult time weathering the delay.

Risk adjustment lawsuit

A struggling co-op, Evergreen of Maryland, recently filed suit to challenge HHS’ implementation of the risk adjustment program. In Evergreen’s view, the administration has arbitrarily designed the program to prevent insurers from taking full account of the health status of their members. Evergreen also believes that HHS improperly ousted states of the responsibility to administer the program and that, in any event, the risk adjustment program should have been amended when it became clear that Congress would not fully fund the risk corridor program.
On the merits, Evergreen’s lawsuit appears weak. Under the law, HHS is afforded wide discretion to administer the risk adjustment program. Even though risk adjustment has contributed to the instability of certain small insurers and could be improved—and HHS is in fact working to improve it—it doesn’t follow that HHS acted unlawfully in structuring the program in the first place. Even though the case appears weak, however, other insurers are expected to follow in Evergreen’s footsteps.
In the meantime, other risk adjustment fights are brewing. Earlier this month, the Illinois insurance commissioner attempted to block a co-op, Land of Lincoln, from paying into the risk adjustment program until HHS pays what is owed on risk corridors. When the federal government rejected the insurance commissioner’s gambit, Land of Lincoln went into liquidation. This early tussle between state and federal officials could presage additional lawsuits and federalism contests.

‘Selective netting’ case

The Iowa Insurance Commissioner, in its role as receiver for the estate of a failed co-op, has sued HHS in an Iowa federal court to block it from recovering on its loans to the co-op before other creditors are paid back. Among other things, the commissioner maintains that HHS owes the co-op’s estate money under the risk adjustment, reinsurance, and risk corridor programs.
In his view, governing regulations require that 3R money should be “netted” with the amount that the estate owes to the federal government on its defaulted loans. For its part, HHS believes that the Iowa court lacks jurisdiction and denies engaging in any “selective netting.” The court has yet to act on the case.

What Do These Challenges Mean For the Future Of ACA-Reformed Markets?

Unanticipated difficulties with the 3Rs have put HHS in a tough spot. On risk corridors, Congress has tied the agency’s hands and spurred a half-dozen massive lawsuits in the Court of Federal Claims. On risk adjustment, small insurers facing unexpected liabilities have taken their concerns to both Congress and the courts. And on reinsurance, the agency’s decision to prioritize payments to insurers over Treasury has sparked legislative outrage and congressional subpoenas of HHS officials.
Although HHS cannot avoid this quagmire altogether, it is taking concrete steps to ease the situation. It has proposed changes to the risk adjustment program, for example, though it remains suspicious of simplistic “circuit breaker” solutions that set limits on the amount any one insurer can owe. The agency is also providing risk-adjustment webinars for insurers that submit risk adjustment data to CMS.
But the risk adjustment program does not add money to unprofitable markets; it only moves it around. More ambitiously, HHS has announced a string of initiatives designed to convince more of the so-called “young invincibles” to purchase insurance this fall. Ultimately, growing and improving the individual and small-group markets’ risk pools is the most effective way to help insurers.
But make no mistake about it: trouble with the 3Rs has spooked insurers and raised questions about the viability of the ACA-reformed markets. Based on preliminary analyses, the 2017 exchanges will have fewer options, larger premium increases, and less generous benefits than any year since the ACA marketplaces came on line in 2014. Congressional intervention has damaged the ACA markets — hurting both insurers that sell health plans and the consumers who purchase them. Perhaps the exchanges will find their footing again, but the difficulties with the 3Rs serve as a stark reminder that ACA implementation remains much harder than supporters anticipated.

Risk Adjustment Gone Wrong

by Jonathan Halvorsen
The Affordable Care Act was intended to usher in a new era of competition and choice in health insurance, and at first it succeeded. But increasingly, provisions in the law are undermining competition and wiping out start-up after start-up. If something isn’t done soon, the vast majority of new insurers formed in the wake of the ACA will fail, and many old-line insurers that took the opportunity to expand and compete in the new markets will leave. It’s a classic story of unintended consequences and the difficulties of regulation.
Flush with optimism after the ACA passed, dozens of new insurers formed to take advantage of the environment created by the law. Twenty three of these were co-ops given start-up funding by the ACA. In most states the new plans only grabbed a small share of the market, but enough to put pricing pressure on larger incumbent plans. In a few states, like New York, the start-ups and other new entrants grabbed over half of the business on the exchanges.
To the surprise of many, price increases in health insurance remained low by US historical standards even as the recovery continued and people who had been without insurance were finally able to get it. How much of that modest cost trend is due to an improved competitive marketplace on the exchanges is speculation, but what is clear is that the doomsayers about the ACA were wrong. Costs did not explode, and even with higher 2016 rate increases we are not back to the bad old days (yet).
One of the cornerstones of the ACA, however, has had the opposite effect intended, and it is now threatening the destruction of much of the good that has happened to health insurance competition and choice. The ACA had three measures to stabilize the exchanges and improve competition—reinsurance, risk corridors and risk adjustment. Reinsurance has worked largely as intended to mitigate the effect of unexpectedly high claims. Risk corridor payments were similarly intended to soften the highs and lows of bad guesses about medical costs, but were dramatically reduced by Congressional Republicans. This played a role in forcing about half of the co-ops to close by the end of 2015. It was a deliberate political outcome rather than a regulatory misjudgment. In any case, both of those programs were intended to be temporary until insurers could gain experience in the new post-ACA environment. They end in 2016, so their benefits and harms have essentially been delivered, unless Congress is willing to reverse course and fully fund the risk corridors before time runs out.
On the other hand, the risk adjustment payments are permanent, and their scope expands beyond the exchanges to all individual and small group health insurance. These risk adjustment payments are having a large and surprising impact on insurers across the country for reasons that sometimes have no real competitive justification, making some companies that are already dominant and profitable even more dominant and more profitable.  The point of giving a bonus to plans with higher than average risk and penalizing plans that enroll members with lower than average risk is to prevent the business strategy of skimming the market to find the lowest risk enrollees. The idea is to prevent health insurers from profitably pricing below their competition because their products attract members who use fewer health care services, and force insurers instead to compete on the quality and efficiency of services delivered. Is that happening?
Take New York, where I live and work. UnitedHealth, the largest insurer in the US, is also one of the largest players in the NY individual market and is by far the largest player in the small group market (under the name ‘Oxford’). It is profitable locally and nationally, and has been for some time. In the small group market, it did not participate in the new exchange at all, yet it was due a net $281 million in risk adjustment payments. In the individual market, it had limited participation and was due a net $86 million in payments in 2015. The next highest beneficiaries of payments received $13.5 (small group) and $48 million (individual).
In the small group market in New York, about 9 of every 10 dollars paid in risk adjustment went to United/Oxford in 2015, largely for clients that United had before the ACA took effect and that it continued to serve off the exchange. There is no change in these payments based on profitability, so a company breaking even or losing money because it priced aggressively to grow is still forced to pay, while a profitable company will still receive money so long as it has members in higher risk demographics or with higher risk diagnoses.
A key feature of the way the risk adjustment program works is that the payments come from other plans in the same state. It is a zero sum game. So, other plans in New York gave their largest competitor a total of about $367 million dollars in 2015. This was also the year that the fastest growing ACA co-op in the nation, HealthRepublic of NY, went bankrupt owing its competitors $191 million in risk adjustment payments, because the formula determined that its members had health risk that was too low. It owed about 37% of its total 2015 premium revenue. Even if HealthRepublic did not have other problems, it could not have long survived these kinds of payments in a business (health insurance) that, despite its reputation, typically has a profit margin of around 5%. It could easily have taken a decade for Health Republic to make back in profit what it lost in one year’s worth of risk adjustment. Of that $191 million owed in risk adjustment payments, the vast majority was slated for United and its Oxford subsidiary. Similarly, other smaller plans trying to expand the small group market have been paying out millions.
In New York’s individual market, the second and third largest recipients of risk adjustment funds have been venerable Blue Cross/Blue Shield plans (Excellus and Empire, a subsidiary of Anthem). Blues plans in many states are the ones getting the best shake out of the risk adjustment program. In contrast, those paying out the large sums have mostly been smaller competitors that are either start-ups, or non-profit Medicaid plans that expanded into the individual commercial market. The companies that are paying are often losing money even before the payment. How is this helping competition or stability?
The problem is by no means isolated to New York. On August 1st, New Mexico Health Connections (NHMC) and Minuteman Health of Massachusetts sued the federal government, charging that the risk adjustment program unfairly penalizes new entrants and advantages old line insurers that have long dominated the individual and small group markets. For 2015, NMHC was required to pay out 15% of its total premium in risk adjustment payments. In the case of New Mexico, and many other states, the primary beneficiary is the local Blue Cross/Blue Shield plan.
Similar scenarios (and in some cases, lawsuits) are playing out in Maryland, Washington, Oregon, California and other states.
What Went Wrong?
Risk adjustment works relatively well in other nations and in the Medicare program, so why does it seem to be failing here? I don’t think anyone has the full answer at this point, but a few trends seem to be emerging.
Risk adjustment requires an insurer to report on the health risk of its members, and to do that it needs good data. Plans that played the game better from the start set a high priority on collecting and reporting on that information. However, it is much harder to get good data if a member just joined than if you have had that member enrolled prior to the ACA exchanges and can mine your data warehouse for all those ICD codes that boost the risk score. The dominant pre-ACA players had more years of member data, and mature analytics capabilities, to help them maximize their risk scoring. This has created a serious penalty for new entrants in the first few years which CMS has not addressed.
The Maryland co-op suing the federal government has taken this concern a step further and alleges that incumbent insurers actively encouraged their members to seek services in order to be diagnosed as higher risk so that the plan would receive increased risk adjustment payments. This may be straying into tinfoil-hat territory, but the potential for some gaming is there.
More important than the reporting issues, some of the difference in member risk between insurers is also real, but it is not clear that the difference is well-captured in the risk adjustment model, or that it should always generate a payment.
For example, another advantage of incumbency is that older, higher-risk people are more likely to want to stick to names they have known for years in health insurance (e.g., the local Blue Cross/Blue Shield plan) and not want to take a chance on upstarts. Brokers in the small group market may steer clients towards the companies they have long been most comfortable doing business with. These forces of inertia create a barrier to newcomers, which is normal, but it gets compounded as an issue because for each sicker person who doesn’t switch to a new or less-known brand, it contributes to the financial transfer payment the upstart plan owes under the risk adjustment program.
It’s also not clear if some plans are being penalized for being too good at preventive health. The CMS model does not seem to be able to tell the difference between a plan that has low risk people because they enrolled that way, and one that has low risk people because it works more effectively to prevent chronic diseases and cancers. It’s unlikely this is a major factor, just because so few health plans actually seem to be able to move the needle on preventive health care. It may, however, be an issue in some cases and certainly could become a bigger issue down the road.
Finally, and this is the real wild card, products that attract sicker patients have historically tended to be those with richer benefits, larger networks, lower penalties for going out of network, and fewer approvals to get care. That’s understandable, but having people gravitate to such plans will make controlling costs harder. And by rewarding plans with less cost-control that attract higher risk patients, the ACA may be inadvertently incentivizing health insurers to promote such products because they can predict that the plans with worse cost control will be subsidized by the stricter cost-control plans that attract healthier people. That’s a scary thought for the future of premiums on the exchanges, and doesn’t seem to have been accounted for in the policy papers outlining the risk adjustment goals and methodology.
With the ACA’s risk adjustment, it is possible that there will be a perpetual skew of risk towards products that are less well-designed to control it, which is reinforced by the risk adjustment mechanism in a manner that doesn’t allow more tightly controlled products to compete well, with the result that certain products are pushed out of the market, competition is lessened, and premiums have less pricing pressure.
All of the issues described above are fixable, but time is rapidly running out to do so after the damage of the risk corridor reductions, and now these large and ongoing risk adjustment payments. The seven remaining co-ops are hanging by a thread, with one or two exceptions. Firms that expanded into new markets with the ACA have had to retrench or reconsider further expansion. Even well-capitalized start-ups can’t continue forever to hemorrhage dollars through risk adjustment payments to their competitors. It’s hard for David to win in a fight against Goliath when you risk-adjust the rock out of his slingshot.
All that said, it is true that the Goliaths are not all standing tall. While United has done well in New York, it made headlines a few months ago when it announced it was losing about $500 million annually on the exchanges and was pulling out of most states. Aetna and Cigna, other insurance giants with well known brands, have also experienced losses and are pulling back on expansion plans. The Blues, including Anthem, have generally been winners, but even adding profits from the Blues and the few others that have stayed in the black, the average plan had a net loss of 4% on the individual market in 2014. The small group market has remained profitable at about a 3% margin overall, though as the example of New York shows there are big winners and losers hidden in the average.
The data is clear that insurers have been playing an aggressive game on pricing, especially on the individual exchange. This can’t continue much longer, and plans will need to price to maintain a margin of 3-5%. With the current risk adjustment model giving such large and hard to predict results, achieving pricing discipline to yield a stable margin will be a challenge, to say the least.
A fix to the risk adjustment model can’t wait. It will have to be thoughtful to minimize gaming and to achieve the objectives of bringing stability and encouraging competition based on quality and efficiency rather than actuarial risk selection. Perhaps a solution in the short term is to lower transfer amounts so their impact is lessened until the reporting and methodology can be ironed out. For a longer term solution, one of the more simple refinements may be to add a restriction that plans that are already profitable or have medical loss ratios below a certain percent (say 85%) should not receive these payments, or payments should be made on a sliding scale related to MLR. Similarly, unprofitable plans could be removed from some or all obligations of making risk payments. Likely, more radical changes are needed.
CMS is well-aware that there are problems. Let’s hope it makes enough changes before the innovations and competition among insurers that sprang up with the ACA whither and blow away.
Jonathan Halvorson edits the New Economy section for THCB. FD: As a consultant Jonathan works with startups, providers and health plans, advising clients on policy issues, strategic direction and related topics.

Some Seniors Surprised To Be Automatically Enrolled In Medicare Advantage Plans
Only days after Judy Hanttula came home from the hospital after surgery last November, her doctor’s office called with bad news: Records showed that instead of traditional Medicare, she had a private Medicare Advantage plan, and her doctor and hospital were not in its network.
Neither the plan nor Medicare now would cover her medical costs. She owed $16,622.
“I was panicking,” said Hanttula, who lived in Carlsbad, N.M., at the time. After more than five hours making phone calls, she learned that because she’d had individual coverage through Blue Cross Blue Shield when she became eligible for Medicare, the company automatically signed her up for its own Medicare Advantage plan after notifying her in a letter. Hanttula said she ignored all mail from insurers because she had chosen traditional Medicare.
“I felt like I had insured myself properly with Medicare,” she said. “So I quit paying attention to the mail.”


With Medicare’s specific approval, a health insurance company can enroll a member of its marketplace or other commercial plan into its Medicare Advantage coverage when that individual becomes eligible for Medicare. Called “seamless conversion,” the process requires the insurer to send a letter explaining the new coverage, which takes effect unless the member opts out within 60 days.
Medicare officials refused recently to name the companies that have sought or received such approval or even to say how long the Centers for Medicare & Medicaid Services has allowed the practice. Numerous insurers, including Cigna, Anthem and other Blue Cross Blue Shield subsidiaries, also declined to discuss whether they are automatically enrolling beneficiaries as they turn 65.
But others say they’re moving ahead.
Aetna will begin the process soon for its marketplace members in 17 Florida counties. The effort will kick off with individuals who qualify for Medicare in November, spokesman Matthew Clyburn said. They’ll receive 90 days advance notice instead of the required 60 and a postcard they can mail back, he said, and the company will follow up by phone to make sure they understand the change.
In November, UnitedHealthcare will start to automatically enroll members of its Medicaid plans in Tennessee and Arizona into its Medicare Advantage plans, a spokeswoman said.
And Humana, the nation’s second largest Medicare Advantage provider, has asked for federal permission to also do auto-enrollment. The process “will benefit people who want to stay with the same insurance company,” said Mark Mathis, director of Humana’s corporate communications. “It would simplify administration, eliminating a step in the process, and help maintain continuity with the same company.”
Medicare officials are developing a procedure for reviewing seamless conversion requests as well as a system to monitor implementation, spokesman Raymond Thorn said. A company given approval must automatically enroll all Medicare-eligible beneficiaries. But because federal law prohibits marketplace insurers from dropping a member who qualifies for Medicare, both marketplace and Medicare Advantage coverage continue until the person cancels the marketplace plan, Thorn explained.
Sally Thomphsen, who lives outside Chicago and had an individual health policy from Blue Cross Blue Shield last year, was more than surprised when she received her member card for a Medicare Advantage plan shortly before turning 65. Printed on the card was the name of her new primary care physician, someone she didn’t know.
“I almost hit the ceiling,” said Thomphsen, who had already enrolled in traditional Medicare.
She demanded that Blue Cross cancel her enrollment and reported the situation to Erin Weir, health care access manager at the local advocacy group AgeOptions. Weir heard a similar story from another local woman, who’d received a letter from her insurer saying a Medicare Advantage plan was “selected for you because it is similar to your current plan. Unless you contact us, you will be automatically enrolled.”
After learning about the problem both from constituents and health care advocates, Rep. Jan Schakowsky (D-Ill.) wants stronger consumer protections. “I am exploring the option of requiring an ‘opt-in’ so that Medicare beneficiaries are adequately informed and able to make the choices that work best for them,” said Schakowsky, whose district includes the Chicago area.
The Lovelace Medicare Advantage plan in which Hanttula found herself is run by Health Care Service Corp., which administers Blue Cross Blue Shield plans covering 15 million beneficiaries in Illinois, Montana, New Mexico, Oklahoma and Texas. A Health Care Service spokeswoman said it “offers seamless conversion enrollment on a limited basis.” She would not provide details.
Hanttula finally solved her problem with help from a Medicare counselor at New Mexico’s Aging and Disability Resource Center, who contacted David Lipschutz, a senior attorney at the Center for Medicare Advocacy in Washington. He advised the counselor to tell Medicare officials that the retiree was enrolled in Medicare Advantage without her knowledge even though enrollment must be voluntary.
Eventually, officials disenrolled Hanttula from her unwanted plan, restored her traditional Medicare coverage and agreed to cover her medical bills.
Lipschutz said giving beneficiaries the chance to opt out doesn’t adequately safeguard consumers. An insurer’s notification letter can easily be mistaken or overlooked in the deluge of marketing materials seniors receive.
“The right to opt out doesn’t exist if they didn’t get the notice or if they did get the notice but didn’t understand it,” he said.

Is involuntary enrollment in Medicare Advantage plans the new norm?

by Diane Archer - It has been the norm that when people first go on Medicare, they are automatically enrolled into traditional Medicare unless they affirmatively choose a Medicare Advantage plan. In recent years, however, involuntary enrollment in Medicare Advantage plans has become the new norm for a small but growing number of people.  Automatic Medicare Advantage enrollment undermines people’s choice, placing millions of people with Medicare at significant financial and health risk.
Susan Jaffe reports for Kaiser Health News that, when you first become eligible for Medicare, your health plan, under some circumstances, has the right to automatically enroll you in its Medicare plan (a commercial health plan like Aetna or Human that typically only covers care from doctors and hospitals in its network).  Here’s how it appears to work.
Under this “seamless conversion” policy, health insurers have access to data that lets them know when their members enroll in Medicare. At that time, so long as  the Centers for Medicare and Medicaid Services (CMS) approves, they have the  right to move their members from a state health exchange plan or other health plan into their Medicare Advantage plan.
However, CMS does not notify the people who are involuntarily enrolled in their health plans’ Medicare Advantage plans that they are no longer in traditional Medicare. It relies on the insurers to notify their members. Of course, people may not read their mail, particularly mail from insurers they thought they were moving on from once they enrolled in Medicare. As a result, they may assume they are enrolled in traditional Medicare, seek care, and end up racking up tons of bills from out-of-network providers.
By allowing the insurers to automatically involuntarily enroll people in their Medicare Advantage plans, CMS is working against the interests of people with Medicare; it is disregarding its own advice to people choosing a Medicare plan to compare their options carefully. People are only protected if they receive and read the required health plan notification informing them of their automatic enrollment and their right to opt out within 60 days.
Insurers’ Medicare plans may have networks different from the networks available to their members pre-Medicare eligibility. They are also likely to have very different copays and deductibles. And, they are likely not to be a smart choice for people who want to continue to see the doctors they know and trust. Indeed, traditional Medicare is the only choice that maximizes the likelihood of that continuity of care.
Shockingly and inexplicably, CMS was not willing to tell Jaffe, the reporter, how long this practice has been in effect or which insurers had approval to use this “seamless conversion” process. As disturbingly, neither Cigna, Anthem or Blue Cross would tell Jaffe whether they were automatically enrolling people in their commercial Medicare plans.
Jaffe learned that Aetna is about to launch the process in parts of Florida. Humana and United Healthcare said that they plan to automatically enroll people as well.
Congresswoman Jan Schakowsky is looking into the possibility of an “opt-in” for people, rather than an opt-out, so that people consciously enroll in a Medicare Advantage plan only if that’s what they want to do. Until that happens, CMS could protect people if it automatically disenrolled them from a Medicare Advantage plan if they sign up for a Medicare supplemental policy. Since only people with traditional Medicare need such a policy, enrollment in a supplemental policy is a good indicator that they do not want to be enrolled in a Medicare Advantage plan.
Enrollment in a Medicare Advantage plan must be voluntary. So, if you or anyone you know is enrolled in Medicare Advantage plan involuntarily and unknowingly racks up bills from out-of-network doctors and hospitals, call your local State Health Insurance Assistance Program or SHIP for assistance disenrolling.

How Common Procedures Became 20 Percent Cheaper for Many Californians

by Austin Frakt

At a time when health care spending seems only to go up, an initiative in California has slashed the prices of many common procedures.
The California Public Employees’ Retirement System (Calpers) started paying hospitals differently for 450,000 of its members beginning in 2011. It set a maximum contribution it would make toward what a hospital was paid for knee and hip replacement surgery, colonoscopies, cataract removal surgery and several other elective procedures. Under the new approach, called reference pricing, patients who wished to get a procedure at a higher-priced hospital paid the difference themselves.
For example, in 2011 the Calpers maximum contribution for a knee or hip replacement surgery was set at $30,000. A Calpers patient receiving knee or hip replacement surgery at or below this reference price paid the usual cost-sharing: 20 percent of the cost, up to a maximum of $3,000. But a patient electing to use a hospital that charged, say, $40,000 paid the usual cost-sharing in addition to the $10,000 above the reference price.
As Calpers initiated the new approach, 41 of the several hundred hospitals in California could provide knee and hip replacement procedures at or below $30,000 and with acceptable quality, as measured by things like low readmission rates and high rates of use of guideline infection controls. Some hospitals charged more than $100,000 for the procedures.
The results of knee and hip replacement surgery reference pricing were striking, as were those for cataract removal, arthroscopy and colonoscopy. In a series of studies, James Robinson and Timothy Brown, University of California, Berkeley, health economists, found that under reference pricing, Calpers patients flocked to lower-priced hospitals and outpatient surgical centers. Prices and total spending for the procedures plummeted.
For knee and hip replacements, lower-priced hospitals saw their market share increase by 28 percent. As higher-priced ones lost market share, many chose to reduce their prices. Prices for the procedures fell by an average of more than 20 percent, saving Calpers and its patients $6 million over two years.
Under reference pricing for cataract removal surgery, the average price paid also dropped by nearly 20 percent, saving $1.3 million over two years. For colonoscopies, $7 million was saved — a 28 percent drop. And for knee or shoulder arthroscopy, prices fell by about 17 percent. For these procedures, Calpers reduced patient cost-sharing if they chose a free-standing, outpatient surgical center, as opposed to a much more expensive hospital.
During the period of time Calpers saw 20 percent price declines for reference-priced services, typical health care prices paid by employer-sponsored plans rose by about 5.5 percent.
Despite the success of the effort by Calpers, reference pricing is not a full solution to rampant health care spending growth. Because it relies on encouraging patients to visit lower-priced hospitals and surgical centers, it works only with procedures for which patients can reasonably shop around.
This excludes care over which patients have little control, such as that provided in emergencies or while they are already hospitalized or incapacitated. One study estimated that about 40 percent of health care spending is for services for which patients could shop.
But there is another reason reference pricing is hard to install broadly. It requires patients to have ready access to comprehensible price and quality information. Such transparency is not commonplace. Even when this information is available, consumers with cognitive impairments or who are overwhelmed with illness and other demands would have trouble making the best use of it.
Some consumers might prefer to delegate to insurers the decisions about where to obtain care. In narrow network plans, for instance, insurers select high-quality hospitals and negotiate the best price; patients pay the same amount out of pocket no matter which hospital they visit within the network. Reference pricing shifts some of the burden of figuring out where to obtain care from insurers to consumers. On the other hand, compared with narrow network models, it preserves broader choice for the consumer.
Reference pricing also requires sufficient competition among hospitals. If the number of hospitals is too low, patients will not have a choice about where to receive care, and hospitals will not have an incentive to reduce prices. Assessing the degree of competition, quality and choice for the purposes of establishing and updating reference prices imposes an administrative cost that should be weighed against any savings.
For this reason, some large employers are contracting with regional “centers of excellence,” such as the Cleveland Clinic, to which patients can be referred even if there is limited hospital choice in their hometowns.
Another concern is that reference pricing could encourage lower quality, as health care organizations cut costs to reduce prices. Analysis by Mr. Robinson and colleagues did not find adverse effects of reference pricing, however. “Significant reductions in cost with no change in quality: That’s called improved value,” he said.


Maine Voices: How I almost got charged $200 for an $8 prescription

If I weren't a doctor used to searching the internet, most likely I would be without my medication this week.
ELLSWORTH — Pricing of and access to medication are handled in an insane manner in the United States. It has been said that between 20 and 30 percent of prescriptions are never filled, presumably because of cost or access issues.
Comparing plans is nearly impossible, because drug tiers, co-pays, deductibles and coinsurance vary from plan to plan and drug to drug. Those with high drug costs are likely to fall into the dreaded “doughnut hole,” in which all pharmacy benefits go away, until you have reached an out-of-pocket limit of thousands of dollars.
The complexity almost seems designed to trap the unwary into paying more. Why must things be so complicated, and seemingly, so arbitrary?
My own recent experience is instructive.
I went to Walgreens to refill a prescription for zolpidem. The prescription was valid, but my insurer, Humana, refused to pay for it. I was informed by Walgreens that I could alternatively pay about $200 cash to fill the prescription. Instead, I purchased seven tablets for $17 cash, buying me a week to sort out the problem.
TAKE THAT, WALGREENS!
After 90 minutes on the phone with six Humana staff (who provided me several incorrect explanations for their refusal to pay for the prescription), I was finally able to learn that my private Humana Medicare D policy limits me to only 90 tablets a year of zolpidem. However, they might allow more with a prior approval. No guarantee.
It was suggested that I ask my doctor to fill in their form and wait to see if it was approved. Since my doctor was away, and it was not apparent whether the process would be successful anyway, I asked Humana to send me the form but kept searching for another solution.
I was aware of several startup companies that are taking advantage of the huge profits to be made in pharmaceutical sales. Their business model relies on negotiating low prices with pharmacy chains because the startups can provide patient volume. Even though the prices paid are very low, both the pharmacy chain and the startup make a profit.
So I went to Blink Health online to see what they offer. For the grand total of $8 I could fill the prescription that Humana refused to fill and that Walgreens was going to charge me $200 to fill (in the absence of a Humana approval).
Blink charged my credit card $8 and allowed me to print a page (or bring a picture of the page on my phone) to Walgreens, or any one of 19 other pharmacy chains, to collect my prescription.
Wow! I could hardly believe this would work, but I was excited to try it. I gave Walgreens the $8 piece of paper and easily collected my three-month prescription without paying a penny more.
This cost me less than the Humana co-pay would have been.
In my view, it is unacceptable that Humana has given itself the right (with government approval) to decide that some physician prescriptions for its insured patients should be covered for only three months each year. Clearly, this sets up patients to be price gouged, because in my case, anyway, the prescription would still need to be filled for the other nine months.
PRICE GOUGING ENABLED
It is also unacceptable that a medication on which Walgreens and Blink presumably make a profit at $8 is nonchalantly sold for $200 cash to those patients not savvy in the ways of the system.
Why do we Americans accept this treatment? Why has our government created systems that encourage it? I am a Medicare patient, and all of the above has been Medicare-approved.
No wonder health care costs over $10,000 per patient per year in the United States.
If I weren’t a doctor, used to searching the internet, and had not kept looking for ways around this conundrum, most likely I would be without my medication this week. How many of my patients are without theirs?
— Special to the Telegram



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