Data Insights from the 2016 ACA Marketplace
Robert Wood Johnson offers the following observations about the Affordable Care Act Marketplace:
- Carriers made adjustments in 2016 to reduce their exposure to high costs: In 2016, carriers attempted to minimize their exposure to high costs by reducing the number of plan offerings with out-of-network benefits, among other strategies. This change occurred at all metal levels and in all regions. The number of Silver plans that are HMOs or exclusive provider organizations (EPOs) increased from 61% in 2015 to 69% in 2016. The number of Gold plans declined compared to other metal levels. While the number of Silver plans increased 2.9%, the Gold plans declined by 8.7%. The number of Gold plans declined in most regions.
- Regional price variation in narrowed: There was a geographic convergence in premium prices in 2016, as premiums rose far more in regions that had lower prices the prior year. Nationally, the distribution of average premium prices tightened in all rating areas. This pattern was less straightforward for deductibles, as many combinations of cost-sharing options are on the market.
- Price variation increased within markets: Despite the reduced variation across markets, differences in premium prices increased within markets. The average premium price range increased from 2015 to 2016 in a rating area. This is true for all metal levels and all regions. The distribution has become more skewed, as maximum prices increased more than minimum prices. In 2016, a Blue or a national carrier offered the highest priced plan in a rating area about 75% of the time.
- There are still large regional differences in plan design: Plans in the Northeast and West have a much broader range in premium prices and less variation in deductibles. Plans in the Midwest and South have a smaller range in premium prices and a far greater range in deductibles. There were some changes in these patterns from 2015 to 2016, but there are still important regional differences in plan design.
- More regulated markets have higher premiums and lower deductibles: Federally facilitated marketplaces with the most plan regulation—CA, CT, DC, MA, NY, RI, VT—had the highest premiums and lowest deductibles.
More product changes are likely in 2017. There is room for further reduction in broad network plans. Most entrants in 2016 primarily offer narrow network products. This will probably continue to vary regionally. We may also see further reduction in Gold plans, although carriers must sell Gold and Silver. There are indications that some carriers may reduce their Bronze offerings. The number of Bronze plans increased very little in 2016. There may be reductions in some markets in 2017. The actuarial value of Bronze and Silver plans seems to have grown closer in 2016, and average prices are quite close in many regions. While carriers have resisted government calls for standardization and simplification of plan offerings, the industry seems to be standardizing itself through potential reductions in product offerings.
Premium prices will converge further. While premium increases are expected, some regions are relatively under priced. A further reduction in regional differences will probably take place. Prices may converge at the levels seen in more regulated state-based marketplaces, which may be more appropriately priced.
The weaker markets are smaller, largely rural, have less carrier participation in 2016, fewer plans, and lower premiums. These markets may experience higher premium increases and continued low carrier participation, which will inhibit enrollment gains.
UnitedHealth Group announced that it will exit 26 markets and participate in three. The company has not announced a decision about five others. In states where UnitedHealth Group is exiting, the insurer was priced relatively lower than others, and there tended to be a higher-priced Blue plan in the marketplace. Exit states weak markets with fewer plans, less growth in the number of plans, a smaller range in premium prices, and below average premiums—despite average or above average premium increases from 2015 to 2016.
UnitedHealth Group may have concluded that, due to the small size and low level of activity in certain markets, there would not be enough additional enrollment to offset negative claims experiences, and that it would be hard to raise premiums enough to stop losing money with enrollees. If other carriers follow suit, weak markets may become weaker as they lose carriers and/or experience above average price increases. Humana seems to have positions in weak markets and is priced relatively low in many of them. Humana’s decisions about exiting markets suggests that it may be seeking to reduce its presence in weak markets.
Exchange Consumers Are Becoming Savvy Shoppers
People who get health insurance through the public health insurance exchanges are increasingly confident about their ability to afford coverage. Also, they are just as satisfied with their coverage as are people with employer coverage, according to a Deloitte Consulting survey. Seventy percent of exchange consumers were able to manage their out-of-pocket expenses in the past year and only 25% had higher out-of-pocket costs than expected. However, lower-income people had a hard time paying for out-of-pocket costs.
Greg Scott of Deloitte said, “Health care consumers’ expectations for information and transparency are increasing, as is their interest in intuitive tools to access relevant information. Meeting these expectations should lead to increasingly more confident and satisfied customers.” Paul Lambdin of Deloitte said, “Out-of-pocket costs… are making exchange consumers pay close attention to the details of their coverage and changes in benefits and premiums.”
Knowing what costs to expect could also be increasing confidence. More exchange consumers understand the costs of their coverage than do people with employer insurance. Sixty-one percent of exchange consumers look at the total costs – not just premiums – when evaluating coverage options.
Also, more exchange customers are willing to accept network tradeoffs for lower payments than in 2015. These tradeoffs include a smaller network of hospitals (27% in 2016 as compared to 18% in 2015), a network that does not include their primary-care provider (26% in 2016 as compared to 16% in 2015), and a smaller network of doctors (26% as compared to 18% in 2015).
Sixty-six percent of exchange consumers used online tools to compare out-of-pocket costs compared to 58% of consumers with employer coverage. Scott said, “Exchange consumers continue to shop around for coverage and evaluate costs before making decisions and appear to be responding to messages about going online to look for health insurance information.” For more information, visit deloitte.com
The Cost Implications of Private Exchanges
Private exchanges could encourage employees to select less-generous plans, according to a report by Rand. This could expose employees to higher out-of-pocket costs, but premium contributions would drop substantially, so net spending would decrease. On the other hand, employee spending may increase if employers decrease their health insurance contributions when moving to private exchanges. Most employers can avoid the ACA’s Cadillac tax by reducing the generosity of their plans, regardless of whether they move to a private exchange. There is not enough evidence yet to determine whether private exchanges will become prominent and how they will affect employers and their employees.
Workers who choose less-generous plans could risk higher out-of-pocket costs. But their net spending would drop because premiums would drop substantially. Average employee spending could increase if employers lower their health insurance contributions when moving to private exchanges. Private exchanges are unlikely to significantly affect the ACA’s Small Business Health Options Program (SHOP) Marketplaces. For more information, visit rand.org.
Highmark Sues the Fed For Non-Payment
Highmark filed litigation in the U.S. Court of Federal Claims against the federal government. The lawsuit arises out of the United States’ refusal to pay, in full, the amounts owed to the Highmark insurers under the ACA’s risk corridor program for calendar year 2014. Congress intended risk corridors to mitigate insurers’ financial losses from 2014 to 2016 due to a lack of information on past medical costs incurred by new ACA enrollees.
Thomas VanKirk, Highmark Health’s Chief Legal Officer said, “The government’s refusal to make timely and full risk corridor payments to Highmark…is a direct breach of the government’s…obligations. In the case of Medicare Part D, risk corridors protected consumers from market volatility and helped keep coverage affordable. Under Medicare Part D, the government fulfilled its legal obligation to share unintended risk with insurance companies. This time, the government failed to honor its obligations and Highmark has no choice but to file litigation to enforce the government’s obligations to recover the full risk corridor payments owed.”
Highmark says it is owed nearly $223 million for calendar year 2014 alone, minus any prorated amounts the government actually paid. The federal government made repeated admissions that it owed calendar year 2014 risk corridor payments and they would be paid in full. But the Centers for Medicare and Medicaid Services has only paid about $27.3 million. Highmark Health president and chief executive officer David Holmberg said, “We have a fiduciary responsibility to our 5.2 million health plan members to seek payment. Highmark remains committed to the individual insurance marketplace…It is essential that we get the right premium rates, the right care delivery networks, and the right care management programs in place to stabilize the market so that it can sustain itself.” For more information, visit highmark.com.
Group Proposes Replacement to Obamacare
With health care costs and insurance premiums rising, the National Center for Policy Analysis developed a plan to create accessible, affordable and high quality health care for many more Americans. NCPA senior fellow and author Devon Herrick said, “Our health care system is simply not sustainable under Obamacare. Reform is inevitable. The longer that takes, the more hard it will be on everyone, including consumers.”
Dr. Herrick outlines the following alternatives to the ACA:
- Increased flexibility in health plan design.
- Tax fairness regardless of where Americans get their health coverage.
- Increased access to primary care by removing barriers to innovative medical practices and services.
Reform of hospital regulations to better serve patients.
- Reduced costs through price transparency to boost competition and innovation in medical services and prescription drugs.
- Strengthened Medicare, Medicaid, and Veterans Health that better serve the needs of patients.
- Changes in the financing of medical care so that people have control over their health care dollars and the means to pay for medical care over their lifetimes. For more information, visit ncpa.org.
CIGNA Announces Value-Based Contracts For Cholesterol Drug
Cigna has entered into value-based contracts with Amgen and Sanofi/Regeneron for their PCSK9 inhibitors. The contracts modify the cost of the cholesterol-lowering drugs Repatha and Praluent based on how well customers respond to the medications. The program links financial terms to improved customer health. Last year, the FDA approved Praluent and Repatha as the first two specialty drugs in a class known as PCSK9 inhibitors. They are intended for certain people at high risk for cardiovascular diseases who aren’t able to adequately control their bad cholesterol (LDL-C) levels through other treatments.
Cigna is the first health service company to reach value-based agreements for its commercial business with Sanofi/Regeneron and Amgen for their PCSK9 inhibitor drugs. If Cigna’s customers aren’t able to reduce their LDL-C levels at least and what was experienced in clinical trials, the two pharmaceutical companies will further discount the cost of the drugs. If the drugs meet or exceed expected LDL-C reduction, the original negotiated price remains. Christopher Bradbury of Cigna Pharmacy Management said, “Innovating through the contracting approach is one way we are helping our customers and clients get more value for their health care dollar.” Cigna has value-based contracts with pharmaceutical companies covering medications for cholesterol, heart failure, diabetes, multiple sclerosis, and hepatitis C. For more information, visit cigna.com.
How the ACA Is Driving Telehealth
Virtual medical visits are growing due to the Affordable Care Act (ACA) and a rising prevalence of chronic conditions, according to an analysis from Frost & Sullivan. The market is expected to achieve a compound annual growth rate of 17.8% from 2015 to 2021. Telehealth virtual visits are gaining traction among health plan providers, payers, and employers for non-emergency conditions, such as allergies, colds, ear aches, upper respiratory infections or skin conditions. Telehealth is also attractive to parents who want to avoid dragging young children to a pediatrician. Some services focus on providing second opinions by specialists. Doctors’ and patients’ familiarity with desktop and mobile video services is driving telehealth. Since early adopters are satisfied with the services, providers are encouraged to establish telehealth services for behavioral health and other specialized therapeutic areas.
Teladoc, American Well, MDLive, and Doctor on Demand are the four major competitors attempting to build a virtual telehealth service on a national scale. Each company believes that telehealth virtual visits will become a preferred method of seeing a doctor or behavioral health professional over the next five years. As companies pursue diverse business models and strategies, they have vastly different ratios of video visits to phone calls or secure messaging. Numerous smaller participants are focusing on specific geographic areas or medical specialties. For more information, visit frost.com.
Medicare Rights Center Supports Part B Drug Payment Model
Medicare Rights Center president Joe Baker testified in support of the CMS proposal to test new ways to pay for prescription drugs under Medicare Part B. He addressed a hearing held by the Subcommittee on Health of the U.S. House Committee on Energy and Commerce. The following is a summary of his comments:
Calls to withdraw the Part B Drug Payment Model fail to acknowledge…unrelenting beneficiary access challenges under the payment system. We applaud CMS for proposing to test solutions could alleviate calamitous cost burdens that cause too many older adults and people with disabilities to forgo necessary care. We urge members of Congress to support and strengthen the proposal by recommending improvements that put patients at the center of the payment model…Challenges affording health care affect nearly one in five callers on the Medicare Rights Center’s helpline. Sky-high cost sharing for Part B prescription drugs is a notable concern, most often for cancer and immunosuppressant medications. People with Medicare and taxpayers deserve a Medicare program that pays for high-value, innovative health care. The Part B Drug Payment Model presents an important opportunity to ensure that the Medicare program meets this high bar.
Lawsuit Filed Against Anthem Blue Cross’ Covered California Network
A recent lawsuit alleges that Blue Cross excludes qualified doctors from its Covered California network solely for financial gain and profit. The result is that patients have to delay or forgo medical care because there are too few doctors, according to the lawsuit, which was filed on behalf of LA Laser Center and Dr. Daniel Taheri, a skin cancer surgeon. The plaintiffs are asking the Los Angeles Superior Court to stop Blue Cross from limiting the size of its Covered California provider network. The LA Laser Center and Dr. Daniel Taheri filed the lawsuit after Blue Cross denied their application to become participating providers in Blue Cross’ Covered California network. Even though LA Laser and Dr. Taheri meet Blue Cross’ eligibility criteria and are participating providers in Blue Cross Prudent Buyer PPO, Blue Cross said that its Covered California network is a narrow network in which not all Prudent Buyer doctors are included. Dr. Taheri wrote to Blue Cross stating, “On a weekly basis, we turn over dozens and dozens of patients for skin cancers and melanomas who are under the umbrella of Blue Cross California Care. There are no other dermatologists on panel within hundreds of miles in many of the communities that we practice. These patients have zero access to dermatologic care. They have complained to Blue Cross and were told to ask the provider (me) to apply.”
California’s Uninsured Rate Falls To Another Record Low
A new survey from the Centers for Disease Control and Prevention (CDC) reveals that California’s uninsured rate had fallen to 8.1% at the end of 2015, a full percentage point lower than the national uninsured rate of 9.1%. The survey comes on the heels of a CDC report last November that had California’s uninsured rate at 8.6% as of June 2015. Also, a U.S. Census report in September showed that California had reduced the number of uninsured by more than 1.7 million people through 2014. The reduction was more than 1 million more than the next-closest state, Texas. California’s uninsured rate in the 18 to 64 age bracket was 23.7% in 2013 and 16.7% in 2014, before falling to 11.1%. The CDC says the 12.6% drop is the fourth-largest among states during that time.
Employers Want Guidance About Voluntary Benefits
Thirty-nine percent of employers that don’t have a financial advisor for voluntary benefits say it would be extremely valuable to have one, and 57% say it would be at least somewhat valuable, according to a study by MassMutual. The study, conducted by Greenwald & Associates, surveyed 565 U.S. employers ranging from those with fewer than 25 employees to those with 1,000 or more. Tom Foster of MassMutual said, “Employers are increasingly looking for help from financial advisors with voluntary benefits as their employees’ financial needs become more complex. Our research shows that advisors with the appropriate knowledge and expertise may have a clear and compelling opportunity to expand their financial practices to offer at least some guidance about voluntary benefits.”
Thirty-three percent of firms with fewer than 25 employees say such assistance is extremely or very valuable compared to 55% of firms with 1,000 employees or more. Seventy-five percent of the smallest employers and 80% of larger firms say that such advice as at least somewhat valuable. Fifty-three percent of employers that work with a voluntary advisor say they got excellent or very good advice and 77% say that got good advice.
Sixty-one percent of employers that have an advisor encourage employees to take advantage of retirement savings and other voluntary benefits compared to 49% of employers that don’t have an advisor. Also, 48% of firms with an advisor promote financial well-being for employees compared to 33% of firms without an advisor. Employers that participated in the survey offer the following insurance benefits in order of popularity: healthcare (92%), dental (73%), life (72%), vision (60%), short-term disability (52%), long-term disability (51%), accident (32%), employee assistance program (21%), wellness program (20%), critical illness (17%), cancer (16%), and long-term care (13%). For more information, visit massmutual.com.
Small Business Benefit Tools
Aflac launched its Small Business Hub and results from its 2016 Small Business Happiness Report. The Hub aggregates insights and resources to help small-business owners with their benefit decisions. This includes references and tools to understand the ACA, the benefits of choosing the right insurance partner, how to keep and retain top talent, and more. The hub is available at aflac.com/smallbusiness.
According to the Aflac survey, small-business employees may be among the happiest people in the workforce. Eighty-five percent are happy in their job. Half say that they are happy because the small business owner understands their needs. Respondents said that the best parts of working for a small business include having flexible scheduling, being able to see the fruits of their labor, and feeling that their input really matters. Also, small businesses provide an environment where employees feel like they are part of a family and working toward a shared goal. But some areas can be improved. Twenty-two percent say that the selection of benefits is one thing they like the least about working for a small business. Sixty-four percent say that better benefit offerings would make them a happier employee. For more information, visit aflac.com/smallbusiness.
Guardian Expands Investment Flexibility
Twenty-one investment options have been added to The Guardian Choice and 26 and The Guardian Advantage lineup of retirement products. The additional options increase the number of asset classes for plan sponsors to fund their qualified retirement plans. The additions include the American Funds Target Date Retirement Series, and offerings from other fund families including American Century and T. Rowe Price. Natural resources, utilities, and sector funds from Dreyfus and Franklin Templeton have also been added. These offerings increase the total number of funds available in The Guardian Choice to 150 and in The Guardian Advantage to 129. For more information, visit MyRetirementWalk.com.
Individual and Group Health Plan Formulary Data
Vericred is offering formulary data sets for health insurance markets covering individuals under 65, small group, and large group. The data sets include formularies for all individual and small group health plans in all 50 states, on- and off-marketplace, and most large group health plans. For more information, visit vericred.com.
New Voluntary Product—Medical Co-Diagnosis & Second Opinion
MORE Health introduced Collaborative Diagnosis (Co-Diagnosis) and Second Opinion as a voluntary or employer-paid benefit. A cloud-based platform connects the employee’s doctor with specialists who develop a co-diagnosis with an optimum treatment plan. Specialists help avoid misdiagnosis as well as the cost and complications of over treatment. The services, which integrate with any plan, can help with concerns about narrowing healthcare networks since they offer access to expert specialists from highly regarded institutions. For more information, visit morehealth.com, call 888-908-6673, or email info@morehealth.com.
Fixed Indexed Annuities
Nationwide introduced two fixed-indexed Annuities (FIAs) for risk-averse clients who are approaching retirement. They offer some growth potential with the comfort of a principal guarantee. The FIAs, Nationwide Summit and Nationwide Peak, allow advisors and clients to choose their own index allocation mix by percentage. They can choose one or multiple indices for their individualized index allocation strategy. Clients also can allocate some of their investment to the guaranteed fixed account. For more information, visit nationwide.com or call 800-321-6064.