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Mercer

John Larew is the leader of the Office of Reform for Oliver Wyman, a leading strategy consulting firm and a sister company to Mercer. John’s guest commentary here provides a broader glimpse into the health insurance market and the forces affecting product pricing.

 

Have the public exchanges put downward pressure on individual health insurance premiums? The architects of the Affordable Care Act (ACA) made a bet that managed competition among issuers could tame the growth of premiums even as millions of previously uninsured individuals were welcomed into the risk pool. The public exchanges, or “marketplaces,” were a central pillar of the managed competition strategy. In a transparent marketplace, so the theory goes, health insurers would start to behave like airlines matching the lowest fares available on Expedia or Travelocity. But is that happening in reality?

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On Monday, the Congressional Budget Office reduced its estimate of how many people would get health insurance this year through the public exchanges from 21 million to 13 million -- with 11 million people a month, on average, receiving subsidies, down from its prior estimate of 15 million. As a New York Times article by Robert Pear points out, this is at least partly because employers are not dropping health insurance plans at the rate that CBO analysts initially expected.

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The latest analyses predicts that 2015 public insurance exchange plan premiums may widely vary from their 2014 rates. Changes for the second-lowest cost silver plan – the one which the IRS uses to determine the amount of premium subsidy for eligible enrollees – range from a 15.6% decrease in Denver to an 8.7% increase in Nashville. Across the 15 cities Kaiser Family Foundation examined, the premium for that silver plan level is expected to decrease by an average of -0.8%.

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2016 will see fewer PPO plans available on the public exchanges according to a recent analysis by the Robert Wood Johnson Foundation (RWJF). Not only will there be fewer PPOs available due to certain insurers dropping the plan(s) or, in some cases, leaving the marketplace altogether, more of the remaining PPOs will have no cap on out-of-network care.  The RWJF analysis finds that 45% of silver level PPOs will not have a limit on out-of-network services. This may catch many consumers unaware, as their reason for choosing a PPO may be to utilize out-of-network care for certain services (or at least have the option).  When a cap is in place, the average individual limit for a silver level PPO is $16,700, much higher than a typical PPO plan offered through an employer; according to Mercer’s National Survey of Employer-Sponsored Health Plans the median out-of-pocket limit placed on individual out-of-network care was $6,000 in 2015. Inside the article, find out which plan sponsors have dropped or reduced their offerings and how out-of-network costs can sneak up on even the informed consumer.

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Robert Pear wrote a piece in The New York Times that has been widely carried by many news sources. He reported that insurance companies are seeking 20-40% rate increases in the public exchanges, saying the new customers are sicker than they expected. Of course, federal officials are pushing for lower increases. They could probably learn a lesson or two from employers who have become very skilled at negotiating with insurance companies over the years.  

 

A few days before Pear’s article appeared, the Centers for Medicare and Medicaid Services disclosed a report on the revenue and pay outs from the first year of the Transitional Reinsurance Fee Program. Funding for this program comes from plan sponsors over a three-year period. In 2104, plan sponsors paid $63 per plan participant for an estimated $9.7 billion in first-year fees. That amount decreases to $44 per participant in 2015, and then to an estimated $27 in 2016. The program reimburses insurance companies participating in the public exchange for individual claims between a $45,000 attachment point up to a maximum of $250,000. The target reimbursement is 80% of the actual expense. However, the first-year claims experience is reported to have been better than expected and the program reimbursed 100% of the eligible claims in 2014, leaving a $1.7 billion surplus in the fund to be carried forward for the 2015 benefit year.


Hard to tell which players are making out the best here!

 

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This is an interesting piece on the potential for some retirees to take advantage of subsidies in the public exchange even after they turn 65. Most won’t qualify for subsidies after becoming eligible for Medicare, however, which could cause problems for a pre-Medicare-eligible retiree who has been receiving a subsidy and doesn’t realize their status changes at age 65. The government doesn’t provide much warning, so this might be a good topic to address in retiree medical communications.

 

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Thousands of people were anxiously watching the SCOTUS blog this morning in anticipation of the King vs. Burwell decision. We are still waiting. With seven decisions still to deliver by the end of the month, the Court did add this Thursday, June 25 and Friday, June 26 to their calendar to issue rulings. After Friday, the next possible decision day is Monday, July 29. It is also possible the Court could add an extra decision day on Tuesday, June 30th. Typically the Court does not issue more than three or four decisions in one day. In a city notorious for leaks, timing for Supreme Court decisions are the best kept secret. 

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The Obama administration is working to address two of the most common consumer complaints about the ACA: out-of-pocket costs and inaccurate provider directories. Federal health officials hope to provide a calculator that will estimate the annual out-of-pocket costs under a health plan so that consumers are not relying on premium costs alone when they select a health plan. In addition, insurers will now be required to update and correct provider directories at least once per month. Inaccurate directories could result in consumers using out-of-network providers and incurring higher costs. And, if providers aren’t participating in the network or taking new patients, consumers may not have access to covered services. Inaccuracies with provider directories aren’t limited to plans offered through public exchanges, so the Obama Administration is working to increase the accuracy of Medicare directories as well. Employers may want to discuss timeliness of network provider updates with carrier partners. If providing hard-copy directories, they may want to request “as needed” rather than keeping a supply of network directories or request monthly updates like those being required of insurers participating in the public exchanges.

 

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According to this report in The Washington Post, almost half of the 17 state-based health insurance marketplaces are struggling financially. For many, the financial pressure is attributed to high technology and call center costs and disappointing enrollment numbers. During the recent open enrollment period, state enrollments rose only 12% while the federal exchange enrollment increased 61%. States with the greatest financial problems are among those with the lowest enrollment numbers. States are weighing many options, including increased fees on insurers, partnering with other state exchanges, and the federal exchange. But until the US Supreme Court decides if premium subsidies are limited to state-run exchanges in King vs. Burwell, partnering with the federal exchange is a risky proposition.

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In a recent AP-GfK poll, only 1 in 10 respondents are highly confident that the US Supreme Court Justices will rule objectively in King vs. Burwell. At issue is whether an IRS rule correctly permits all public insurance exchanges to provide premium subsidies or instead should limit subsidies to state-run exchanges. Surprisingly, those least confident in the court are conservatives who oppose the law. The poll also found that 56% of respondents thought the Court should uphold the subsidies and 51% want Congress to amend the law to allow subsidies to continue in states that have selected the federally-facilitated exchange. In a Mercer survey conducted earlier this year, we asked employers if subsidies should be limited to state-run exchanges — 27% were in favor, 31% opposed such a limit, and 42% had no opinion.

 

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The importance of health exchange subsidies – under attack in a case before the Supreme Court – is highlighted by data from a new HHS report on the federal exchange, discussed in this Business Insurance article. Individuals who enrolled in the public exchange during the 2015 open enrollment period –and were eligible for subsidies –paid an average of $105 monthly. Without subsidies, their average premium would have been $375. The great majority (87%) of the nearly 7.5 million people who enrolled for coverage in the federal exchange through Jan. 30 received a subsidy. With these subsidies, the monthly cost of coverage for exchange enrollees is similar to the cost for employees in plans offered by large employers (500 or more employees). In 2014, Mercer’s survey found the average monthly employee contribution was $111 for employee-only coverage, ranging from $73 in a consumer-directed health plan with an HSA to $126 for coverage in a traditional PPO. Small employers (10-499 employees) require higher employee contributions; on average, $169 monthly

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The public exchange open enrollment period is going much more smoothly this year—and generating less media attention as a result. Still, there was a flurry of articles about the end-of-year enrollment numbers released by HHS last month. By December 26, at least 7.1 million individuals had enrolled in a plan through either the HealthCare.gov enrollment platform or a state-run exchange. The government expects to hit its own goal of 9.1 million by February 15, the end of the enrollment period, though this is less than the 13 million originally projected by the Congressional Budget Office. One surprising finding, discussed in this New York Times article, is that many of those who enrolled last year actively shopped for a plan for 2015, rather than being automatically reenrolled in their same plan. HHS officials said more than 30 percent of federal marketplace customers who re-enrolled for 2015 did so by returning to Healthcare.gov and picking a plan. That’s much higher that what you might expect based on consumer behavior in other health coverage marketplaces, and presumably this will help keep insurance companies on their toes when setting prices. On that front, a new report from the Commonwealth Fund finds that overall, premiums on the public exchange were flat from 2014 to 2015, although average premium cost rose in some states and declined in others. The report includes a chart with results by state. Interestingly, deductibles in exchange plans rose by just one percent on average.

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