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Friday April 18th 2014

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Many Consumers Will Pay Too Much for An Exchange Plan


HEALTHCARE

• Many Consumers Will Pay Too Much for an Exchange Plan
• Exchange Plans are Considerably Different
• TPAs Are Ready For the ACA
• Branded Mental Health Meds Under the Exchanges
• Insurers Face Challenges in Attracting Consumers to Exchanges
• HHS Shuts Down Programs Amid Budget Standoff
• Canadians Face Financial Hardship Due to Healthcare Costs
• More People Are Becoming Insured
• Medicare Advantage Premiums Stable in 2014
NEW PRODUCTS
• Dental Benefits for Public Exchanges
• Tool To Navigate The Affordable Care Act
• Tool For Cancer Patients in the Exchanges
• Tool for Arthritis Patients in the Exchanges
IN CALIFORNIA
• The Evolution of ACO Partnerships in California
• Covered California is Open for Business

HEALTHCARE

Many Consumers Will Pay Too Much for An Exchange Plan

moneyburden

More than 80% of consumers may not be able to make a clear estimate of their health insurance needs, and many will choose a higher cost plan than what they need, according to an analysis by Columbia Business School. For the analysis, Columbia looked at simulated exchanges modeled on the design of the actual exchanges.

Researchers asked people of varying education levels to choose the most cost-effective policy using websites modeled on the exchanges. The following results lead to some startling conclusions:
· The average consumer stands to lose an average of $611 by failing to choose the most cost-effective option.
· Because the federal government will subsidize many policies, American taxpayers could pay an additional $9 billion for consumer’s mistakes in choosing more costly plans.
· Providing monetary incentives did not improve outcomes. Participants were offered $1 for every correct answer and entrance into a lottery that pays one winner $200, yet 79% of participants still chose the wrong plan, adding $419 to the cost of their health insurance.

Columbia’s Professor Eric Johnson said, “If consumers can’t identify the most cost-efficient plan for their needs, the exchanges will fail to produce competitive pressures on healthcare providers and [fail to] bring down costs across the board, [which is] one of the main advantages of relying upon choice and markets.”
However, he cautioned against misusing the research. “Amid the political heat around the healthcare law, there’s going to be a great propensity for some politicians to jump on this study and misinterpret these results. This research presents no…argument for or against the Affordable Care Act. Instead, this is research about the difficulties and complexities in creating the actual delivery systems, which is being done in blue and red states.”

Researchers say that consumers should estimate their medical services before choosing a plan. Having access to tutorial links and pop-ups that explain basic terms like “deductibles” increases the chances of choosing the best plan. Adding a calculator to the process also improves the consumer’s chances of choosing the right plan and reduces the size of errors by over $216. In addition, using a tool that defaults to the most cost-effective plan drastically improves a participant’s chances at selecting the most appropriate plan by 20%. Together, calculators and defaults reduce the average mistake saving consumers and the government $453.

Exchanges that limit the number of health plan choices will reduce confusion among consumers (Utah offers 99 healthcare options for participants). Exchanges can significantly improve consumer performance by implementing tools, such as just-in-time education, smart defaults, and cost calculators. To download the full report, visit www.gsb.columbia.edu.

Exchange Plans Are Considerably Different

Health plans offered on the exchange are considerably different than what has been offered on the market, according to an analysis by HealthPocket. The new Affordable Care Act plans have considerably broader benefit coverage than do existing plans in the individual and family health insurance market. They all have coverage for 10 Essential Health Benefits. Additionally, not all Affordable Care Act health plans are available on exchanges. Some of the new health plans will only be offered off-exchange.

For the 36 states that are using some form of the federal health insurance exchange, there were records of 1,483 different Affordable Care Act health plans. This amount translated into an average of 41 health plans per state. In comparison, HealthPocket’s study found the 2013 individual and family health insurance market had 4,208 plans for the same 36 states, averaging 117 plans per state. For more information, visit
www.HealthPocket.com.

TPAs Are Ready For the ACA

Nearly 80% of third-party administrator (TPA) executives say their companies are ready to process healthcare benefit exchange transactions or are close to being ready, according to a recent poll by KPMG LLP. TPAs largely view exchanges as offering a necessary change in the business landscape and believe that exchanges can improve their business and increase their membership. While 35% of respondents say healthcare benefit exchanges offer a necessary change in America’s healthcare system.

Twenty-six percent say that having healthcare benefit exchanges is a risk management issue that needed to be managed carefully while 12% thought it provided a way to improve their business. Twenty-seven percent are still unsure. TPAs cited a mix of issues that may pose the greatest operational challenges to the exchanges including eligibility, customer service, enrollment and payment processing, and potential financial effects. One quarter singled out new patient eligibility as the biggest obstacle.

Joseph Parente of KPMG said, “With the potential of more than 30 million Americans being added to our healthcare infrastructure, determining who is eligible and what they are eligible for presents a significant short term burden to the new system. Companies must get the set up right or make quick adjustments in order to prevent future bottlenecks…when enrollment and payment processing starts to take shape.”

Forty-two percent say they will be ready for enrollment by 2014. Those who outsource their customer service say that their service partners are ready for open enrollment and will continue to work with them (26%). One quarter say they are not as prepared as they would like to be. Thirty-one percent are not sure how the exchanges will perform over the next 12 months. TPAs who expressed confidence in the exchanges say that these new marketplaces will lead to more efficient and effective cost structures, more standardized products and services, more data integration, more customers, and more upselling possibilities. For more
information, visit http://www.distilnfo.com.

Branded Mental Health Meds Under the Exchanges

There may be lower use of branded prescriptions for schizophrenia, bipolar disorder, and depression on the health insurance exchange plans that are set to launch in January 2014, according to an analysis by Decision Resources. “For their patients on exchange-based plans, physicians would like to follow the same treatment pattern they have for their commercial patients. However, formulary design may constrain this behavior as managed care organizations push for generics. This tension will become more pronounced with the launch of newer premium-priced agents over the next few years that will be competing against entrenched therapies,” said Decision Resources senior director, Roy Moore.

More than a third of managed care organizations (MCOs) with a plan on the exchange expect to have a different formulary than the one used in their largest commercial product. The exchange formulary may feature fewer branded therapies, less preferred coverage of brands, and greater restrictions as MCOs seek to reduce costs by favoring generics.

Primary-care providers and psychiatrists expect a 19% to 34% increase in the number of patients they treat for schizophrenia, bipolar disorder, and depression since Medicaid eligibility will expand under the ACA.  Exchange-based plans will account for 17% of their patients in 12 months, highlighting the opportunity for the drug industry in exchanges. Expanded Medicaid eligibility will also present an opportunity for the drug industry, but more restrictive formularies in Medicaid will again favor generics. For more information, visit www.decisionresources.com.

Insurers Face Challenges in Attracting Consumers to Exchanges

Carriers will face significant challenges and new competition in attracting and retaining customers in the exchanges, according to a study by PwC’s Health Research Institute. “Large national insurers and new players, some from other industries, are jockeying for position in the new exchange market,” said Ceci Connolly, managing director, PwC’s Health. New exchange entrants will include Medicaid managed care companies, new health plans run by large provider systems, healthcare start-ups, and non-insurer players, such as web brokers and tax preparers. Their participation won’t come without challenges, as many will need to learn how to operate in the new exchange market and manage the needs of a largely unknown population.

It will be crucial for insurers to invest in retention programs to gain the loyalty of a new crop of technologically savvy buyers. Companies should think beyond initial implementation challenges and focus on building a meaningful customer experience, with an eye on cost reduction and personalized communication, said Connolly.

For the study HRI interviewed insurance executives, consumer experts, and health policy leaders about exchange strategies. The following are some key results:

  • 69% plan to offer coverage on the exchanges, reflecting the rising significance of this new business opportunity
  • Ten of 18 national health insurer executives say their companies won’t offer exchange coverage in all the states where they have business, and 50% expect to enter additional states after 2014.
  •  63% say technology integration is a major barrier to implementation; and 61% cite coordination of subsidies.
  • Only 34% say understanding newly eligible customers is a major barrier to implementation, suggesting they may not thoroughly understand the challenges.
  • 91% expect premium costs and total out-of-pocket costs to be what consumers care about most. Yet, industry and consumer experts expect the ultimate differentiators to be factors, such as personalized communication, tangible rewards and health management programs, and brand recognition.

Sandra Hunt, principal with PwC’s Health Industries practice said, “Organizations that are planning to offer coverage on the exchanges should prepare to compete in new ways to earn consumers’ business and loyalty. Transparency around pricing, quality, and customer satisfaction should be foremost in their minds as consumers become much more aware of the cost of healthcare and how to access it.” For more information, visit www.pwc.com/us/hix.

HHS Shuts Down Programs Amid Budget Standoff

The Department of Health and Human Services (HHS) issued a memo announcing which programs will shut down during the standoff over the Affordable Care Act between President Barack Obama and congressional Republicans. Up to one million federal workers have been furloughed.

Indian Health Services will be unable to provide funding to tribes and Urban Indian health programs, and will not perform national policy development and issuance, oversight, and other functions, except those necessary to meet the immediate needs of the patients, medical staff, and medical facilities.

• The Health Resources and Services Administration will be unable make payments for the Children’s Hospital GME Program and vaccine injury compensation claims. The federal government will not have the funds to monitor Ryan White Grants, particularly AIDS drug assistance program grants, emergency relief grants and comprehensive care to ensure that states, cities and communities are complying with statutory guidance and necessary performance.
• The Administration for Children and Families will not continue quarterly formula grants for temporary assistance for needy families, child care, social services block grant, refugee programs, child welfare services and the community service block Grant programs. Additionally new discretionary grants, including Head Start and social services programs, will not be made.
• The Administration for Community Living will not be able to fund the senior nutrition programs, Native American Nutrition and supportive services, prevention of elder abuse and neglect, the long-term care ombudsman program, and protection and advocacy for persons with developmental disabilities.
• The National Institutes of Health will not admit new patients (unless deemed medically necessary by the NIH director), or initiate new protocols, and will discontinue some veterinary services. NIH will not take any actions on grant applications or awards.
• The Centers for Disease Control and Prevention will be unable to support the annual seasonal influenza program, outbreak detection and disease treatment and prevention recommendations (e.g., HIV, TB, STDs, hepatitis).

Canadians Face Financial Hardship Due to Healthcare Costs

Forty Percent of Canadians face financial hardship after a serious health event. In addition, 53% of 45 to 54 year olds are struggling to make ends meet after a major health incident, according to the fourth annual Sun Life Canadian Health Index conducted by Ipsos Reid. The survey found the following for those affected by a personal health crisis:
· 22% turned to credit cards or personal lines of credit.
· 22% tapped into personal savings.
· 12% borrowed from a loved one.
· 5% were forced to remortgage or sell their home.

While 82% of Canadians realize that a serious health event could affect their personal finances, only 13% have money set aside for uncovered healthcare costs. These health events are dire and include heart attack, stroke, cancer, coronary bypass, chronic diseases, degenerative disorders, terminal illnesses and serious accidents. Twenty-percent have no group insurance, personal insurance or health expense savings to help absorb the shock. For more information, visit www.sunlife.ca/CanadianHealthIndex.

More People Are Becoming Insured

As many as 82.3% of people under 65 had health insurance in 2012 compared to 81.5% in 2010. This small increase is notable because increases in health insurance coverage have been recorded in only six years since 1994. The uninsured rate for the non-elderly population was 17.7% last year, down from 18% in 2011, according to a study by the Employee Benefits Research Institute.

Employment-based health benefits remain the most common form of health coverage in the United States. In 2012, 58.5% of the non-elderly population had employment-based health benefits, down from the peak of 69.3% in 2000. However, the 2012 level was essentially the same as in 2011 (58.4%). In fact, the number of non-elderly people with employment-based coverage has declined every year since 2000 except, for 2012.

The percrentage of the non-elderly population with public-program health coverage was unchanged in 2012 at 22.6%. Enrollment in Medicaid and the State Children’s Health Insurance program also increased to a combined 47.3 million in 2012, covering 17.7% of the non-elderly population. That’s significantly above the 10.2% level of 1999. The percentage with individually purchased health coverage was slightly higher in 2012 but has basically hovered around 7% since 1994.

Medicare Advantage Premiums Stable in 2014

Medicare Advantage premiums are stable going into 2014. The key to growth in Medicare Advantage plans has been their ability to provide a reasonably stable offering, allowing retirees to predict their health coverage expenses. Also, one third of plans offer a zero premium, which is popular with many cost-conscious and low-income seniors, according to an analysis of CMS date by HealthPocket. This year, over 14.4 million Medicare beneficiaries have Medicare Advantage plans, a million more than in 2012.

In 2013, more than half of all Medicare Advantage enrollees chose a zero premium plan. In 2014, 11,725 zero premium plans will be available in counties nationally. Fifty-one percent are HMOs; 41% are PPOs; 7% are private fee-for-service plans; and 1% are Medicare cost plans.

Steve Zaleznick of HealthPocket.com said, “The good news for consumers is that most will continue to have zero premium options available to them in 2014. The Medicare annual enrollment period will run from October 15 through December 7. Consumers can already check 2014 premiums for their Medicare Advantage plan options by visiting www.HealthPocket.com.

NEW PRODUCTS

Dental Benefits for Public Exchanges

Guardian Life is offering a comprehensive suite of dental benefits to meet requirements of the Affordable Care Act (ACA). Guardian’s dental product will be available on 48 small business exchanges. Guardian products are also available on private exchanges. In most states, employers and employees can choose Guardian plans that cover the required pediatric dental benefit or cover the whole family. For more information on dental coverage and health care reform, visit www.AboutEmployeeBenefits.com/hcr.

Tool To Navigate The Affordable Care Act

Consumer Reports launched HealthLawHelper.org, a web-based tool that offers personalized guidance to help consumers understand how they may be affected by the Affordable Care Act. The Health Law Helper is available at www.HealthLawHelper.org. The tool will also launch in Spanish at
www.AseguraTuSalud.org and across a variety of platforms, including mobile and tablet, in October.

Tool For Cancer Patients in the Exchanges

The Patient Advocate Foundation is offering an updated “User’s Guide to the Health Insurance Marketplaces.” The organization is also offering the Cancer Insurance Checklist to help cancer patients choose a plan under the exchange in 2014. For more information, visit www.patientadvocate.org/marketplaceguide.

Tool for Arthritis Patients in the Exchanges

The Arthritis Foundation launched its online Health Insurance Marketplace Toolkit. The online guide aims to help consumers, especially those with arthritis, understand the new health insurance marketplace and make informed decisions about their health care coverage and benefit needs. For more information, visit www.arthritis.org/marketplace.

IN CALIFORNIA

The Evolution of ACO Partnerships in California

Unique market factors in California are driving interest in commercial accountable care organizations (ACO), according to a study by the Center for Studying Health System Change (HSC) on behalf of the California HealthCare Foundation. (ACOs are groups of providers that take responsibility for the cost and quality of care of a defined patient population.)

In California, large physician organizations are experienced in managing financial risk for patient care. Also, the growing dominance of Kaiser Permanente Health Plans has put more competitive pressure on insurers and providers.

Hospitals, physicians, and other providers are collaborating with public and private TPAs on reforming delivery and payment systems to slow health care spending growth and improve the quality of care. Medicare initiatives to develop ACOs have spurred interest in commercial ACO contracting arrangements among private insurers and providers.

On a national basis, most commercial ACO initiatives focus primarily on new provider payment approaches with existing insurance products. In contrast, California ACO collaborations have combined payment changes with new limited-network ACO insurance products. These limited-network products include financial incentives for enrollees to use ACO providers. They are usually structured as health HMO products that provide access only to ACO providers. Also, PPO products provide reduced patient cost sharing for using ACO providers.

Initial experiences reveals that some significant savings are possible. But ACO efforts require intensive collaboration and investment to support care management and exchange of sensitive performance data. These commitments present challenges even in California communities where market conditions are more favorable for ACOs. For more information, visit www.hschange.org/CONTENT/1383.

Covered California is Open for Business

Covered California, California’s marketplace for health care coverage, opened for business on October 1 as promised. Executive Director Peter V. Lee said, “Our phone lines are humming; our website is live; and we stand with thousands of Californians across the state as we kick off our effort to help educate and enroll millions of currently uninsured Californians,” said Covered California.

During the initial six-month open-enrollment period (ending March 31, 2014), Covered California expects to enroll 500,000 to 700,000 Californians who are eligible for premium assistance. By the end of 2014, Covered California aims to have insured about 1,050,000 Californians newly enrolled in Medi-Cal. The state expects to have 840,000 to 1.2 million who qualify for premium assistance.

Toby Douglas, director of the California Department of Health Care Services, said, “Today marks the beginning of a reform of California’s health care system, in which many of our most vulnerable and needy residents will have the opportunity to enroll in Medi-Cal.” For more information, visit www.CoveredCA.com.