Much of the large-scale implementation of Obamacare's insurance reform plan rests with organizations which, by and large, are the stuff of myth: state health insurance exchanges. This should give us pause.
Any health care nerd you know can tell you what a health insurance exchange is supposed to do: exchanges are statewide electronic marketplaces which will enable small businesses and individuals to shop for, purchase, and manage health plans in a secure on-line environment. The exchange will handle marketing, at least some sales, and presumably renewals, as well as administer whatever tax credits or subsidies each eligible exchange customer will receive. And it will perform other administrative duties as may be required.
Tall order. Good thing the exchange model is based on a solid foundation of experience and good results produced by "role model" organizations.
Except that's not true, either. While there are a few large Chamber or association health plans which have done a good job for their members, these plans (which have problems of their own) generally offer a variety of plans from a single health insurer, not a...tasteful buffet...of plans from multiple carriers.
The only real working example is the Massachusetts Connector, the exchange established by state government leaders in that state (proposed, you may recall, by Republican Governor Mitt Romney). So I thought I'd take a quick look at The Connector, to see how such mythical beasts might affect the small group market in the world post-2014.
The Massachusetts Connector was established in 2007, and its start-up subsidized at the level of over $40 million, according to independent sources. Its operation is financed by a "fee" charged to insurers that look for all the world like commissions.
A key to the establishment of the Connector was an individual mandate; individuals have to purchase insurance or pay a modest fine. Subsidies are available to underwrite premium costs for the working poor.
By the end of 2010, the Connector had enrolled just shy of 200,000 Massachusetts residents. An estimated 150,000 of them are individuals whose coverage is subsidized in some way. The remainder...the unsubsidized participants, are employees of small businesses, or are self-employed. The state estimates that the Connector currently covers less than five percent of the small group and individual market in Massachusetts.
From a systems standpoint, the Connector seems pretty transparent and easy to use. Individuals and/or small business owners are guided through a pretty easy process of shopping for and comparing among plans, which are organized simply as "bronze," "silver," and "gold" plans. Because Massachusetts is a community-rating state, premiums are higher for young people, and still pretty high for the 50+ age group. But with no significant health underwriting, application and enrollment look pretty easy
So far, so good.
But what the wonks generally don't talk about is that the cost of operating the Connector, and of maintaining the current level of subsidies, at a consistent level of coverage for everyone, is very expensive . There have already been attempts to reduce or eliminate Connector coverage for certain groups (like illegal immigrants). And because 4 out of 5 Connector participants are receiving come level of subsidy for their premiums, their coverage is highly dependent on the willingness of their fellow citizens to tax themselves to maintain those subsidies for a growing population of exchange participants.
So...flash forward to 2018...Health exchanges will be in operation in every state, and will have three years of track record. Four out of five participants in those exchanges are receiving subsidized care, but the federal subsidies, which are assured for the first three years, are set to expire, leaving a big unfunded mandate on state governments. We can have those discussions, right along with the ones about freedom and liberty.
But my point is to think about market penetration, and its implications. Because it is a relatively compact, relatively homogeneous state with a liberal political tradition, one can assume that the "take-up rate" there might be higher than average. But let's assume that they're right on target, and after three years of operation, exchanges cover about five percent of the small group and individual markets.
It's still a huge number. Collectively, it could represent $120 billion in premiums; the administrative cost portion, even if it's half the federally-mandated loss ratio (because there are supposed to be some efficiencies in operating exchanges on a large scale) could run $12 billion or more per year.
But it's still five percent of the market. And not a particularly attractive piece of it.
So who's going to be taking care of the other ninety-five percent?...
I've been giving some thought to what tools and capabilities will be necessary for brokers, insurers, small business owners, and self-employed individuals to compete with these mythical beasts. I'll share some in an upcoming post.
Meantime, we've had some...lively conversation...in the past on the politics of health insurance reform. How about a conversation about business strategy? Instead of being afraid of how insurance reform, and especially health exchanges, might threaten your business, let's think about what stakeholders are going to need to do for their piece of the other 90-95% of the market...
Saturday, February 26, 2011
Friday, February 4, 2011
Repeal Or Invalidation Of Obamacare: Beyond The Crowing, Where Are The Better Ideas?
I don't know that I have much to add to the commentary regarding the recent decision by a Federal judge in Florida which ruled last year's PPACA unconstitutional...Except this:
I think the crowing among other stakeholders regarding the court decision is a little unseemly. It takes some effort to separate the majority of comments...which seem to emanate from partisan haters...from substantive criticisms of the law's constitutionality.
There are plenty of flaws in the legislation, beginning with the partisan arrogance which characterized much of the debate leading up to the law's passage. But I don't recall much credible debate from the then-minority Republicans regarding the merits or demerits of the bill, beyond a lot of posturing about liberty.
I've already written about the mandate issue. I think it's politically foolish for both proponents and opponents to state and restate positions which cannot be substantiated with real numbers. I think the proponents' argument that the mandate is a lynchpin of the entire strategy, and that without a mandate the entire house of cards falls apart, is a recipe for political disaster. Most of the substantive information regarding the effect of mandates on health insurance coverage seems to support the assertion that mandates lead to increased costs and negligible effects on quality.
But the opponents have not made this argument. They'd prefer to harp about individual freedom and liberty, which scores points with their base but doesn't advance the discussion. It's much easier to say "no" over and over than to advance a constructive counter-argument...ask any 2-year-old.
Here's a better counterargument: aside from the obvious effect that mandating coverage creates...making cost containment irrelevant...it's based on the notion that people are dumb and, given the opportunity, will not act in their self-interest.
I'm sure there are rugged individualists out there who simply do not believe in health insurance, and probably even some who are unprincipled enough to avoid purchasing coverage till they get sick and need it. But it's been my experience over many years that most people recognize the value of health care coverage, and want to buy it, voluntarily, if they can afford the cost.
The problem is that marketplace factors, especially the aggressive and exclusionary underwriting practices in the individual health insurance market, preclude people with even minor health conditions from finding affordable coverage.
Last time I applied for individual health coverage as an experiment, the underwritten rate for the coverage I was seeking tripled from the original age-adjusted rate I was quoted. The reason? I have three very minor health conditions. I've had no trouble from any of them in the last ten years, and my monthly medication tab for all three is less than $20 per month.
For folks with any sort of serious health concern, coverage outside the group market is impossible to get at any price. And even in the group environment. older workers, or those with health conditions, are often the objects of unstated discrimination if their employment might raise their (usually small) employer's health insurance bill substantially.
I don't see how invalidating PPACA takes any steps toward addressing those issues. Just takes us back to the status quo ante, which for too many people is an impossible situation.
It seems to me that before we get all exercised about mandates, we could agree to take steps necessary to assure that everyone who'd like to purchase health coverage in the voluntary marketplace is able to do so. And certainly the Republicans had more than a decade of political majority in which to take some steps to reform the market. Don't recall any more than half-hearted measures to do it, though...
Beyond the individual mandate, opponents may have a good argument that Obamacare foists a huge mandate upon taxpayers at the state level with its significant expansion of Medicaid eligibility. With state governments across the country facing budgetary crises, the prospect of seeing their Medicaid matching fund requirements raised 25-30% in a few years is a frightening prospect..especially as many states are wrestling with how to maintain Medicaid at today's levels in the face of multi-billion dollar deficits.
It's one thing to provide states with an incentive, in the form of additional federal matching funds, to states which want to expand their Medicaid plans. It's quite another to require that states expand their Medicaid eligibility standards, and leave the problem of how to raise matching funds to them.
It's also another gesture of political arrogance and disingenuousness to "handle" that issue by providing a short-term subsidy to states (out of Federal taxpayer dollars), and push the actual day of reckoning off into the future...when the current crop of elected officials is long gone.
I'm not a Barack Obama fan; I think he's a charismatic and articulate empty suit. I certainly didn't vote for him.
I do believe that PPACA is a political document first. The law is maddeningly complex...and it's my experience that complex initiatives are generally complex for a reason...usually because someone has something to hide.
It did not address the health care cost part of the equation, by political calculation; The White House made deals with hospitals, physicians, pharmaceuticals manufacturers, and others to keep that from happening.
The law did seek to address some of the more egregious behavior of insurers in the private markets...changes that the industry could have made voluntarily, but chose not to.
But a finding that the law is unconstitutional, while it might satisfy ideological opponents, does nothing to address the problems existing in the marketplace which led to the enactment of the law in the first place.
And we have yet to hear what the counterproposal is.
I'm not sure that trying to make an admittedly imperfect law work is worse that maintaining an environment of continuing uncertainty which leaves all stakeholders wondering what's going to happen next.
If I were a smart insurer, or a brilliant broker, I'd be using the time to develop more effective means to compete in the marketplace, to make health coverage more efficient and less expensive for everyone who wants to buy it.
Instead, my fear for many millions of small employers, and the self-employed, is that they will continue to face dramatically escalating costs and difficulties in obtaining coverage, from insurers who are perfectly comfortable...and making a lot of money...hiding behind that status quo.
Because absent any outside political pressure to change their behavior, that's just what they're going to do. And I don't see how that helps the people who pay...or would like to pay...the bill.
I think the crowing among other stakeholders regarding the court decision is a little unseemly. It takes some effort to separate the majority of comments...which seem to emanate from partisan haters...from substantive criticisms of the law's constitutionality.
There are plenty of flaws in the legislation, beginning with the partisan arrogance which characterized much of the debate leading up to the law's passage. But I don't recall much credible debate from the then-minority Republicans regarding the merits or demerits of the bill, beyond a lot of posturing about liberty.
I've already written about the mandate issue. I think it's politically foolish for both proponents and opponents to state and restate positions which cannot be substantiated with real numbers. I think the proponents' argument that the mandate is a lynchpin of the entire strategy, and that without a mandate the entire house of cards falls apart, is a recipe for political disaster. Most of the substantive information regarding the effect of mandates on health insurance coverage seems to support the assertion that mandates lead to increased costs and negligible effects on quality.
But the opponents have not made this argument. They'd prefer to harp about individual freedom and liberty, which scores points with their base but doesn't advance the discussion. It's much easier to say "no" over and over than to advance a constructive counter-argument...ask any 2-year-old.
Here's a better counterargument: aside from the obvious effect that mandating coverage creates...making cost containment irrelevant...it's based on the notion that people are dumb and, given the opportunity, will not act in their self-interest.
I'm sure there are rugged individualists out there who simply do not believe in health insurance, and probably even some who are unprincipled enough to avoid purchasing coverage till they get sick and need it. But it's been my experience over many years that most people recognize the value of health care coverage, and want to buy it, voluntarily, if they can afford the cost.
The problem is that marketplace factors, especially the aggressive and exclusionary underwriting practices in the individual health insurance market, preclude people with even minor health conditions from finding affordable coverage.
Last time I applied for individual health coverage as an experiment, the underwritten rate for the coverage I was seeking tripled from the original age-adjusted rate I was quoted. The reason? I have three very minor health conditions. I've had no trouble from any of them in the last ten years, and my monthly medication tab for all three is less than $20 per month.
For folks with any sort of serious health concern, coverage outside the group market is impossible to get at any price. And even in the group environment. older workers, or those with health conditions, are often the objects of unstated discrimination if their employment might raise their (usually small) employer's health insurance bill substantially.
I don't see how invalidating PPACA takes any steps toward addressing those issues. Just takes us back to the status quo ante, which for too many people is an impossible situation.
It seems to me that before we get all exercised about mandates, we could agree to take steps necessary to assure that everyone who'd like to purchase health coverage in the voluntary marketplace is able to do so. And certainly the Republicans had more than a decade of political majority in which to take some steps to reform the market. Don't recall any more than half-hearted measures to do it, though...
Beyond the individual mandate, opponents may have a good argument that Obamacare foists a huge mandate upon taxpayers at the state level with its significant expansion of Medicaid eligibility. With state governments across the country facing budgetary crises, the prospect of seeing their Medicaid matching fund requirements raised 25-30% in a few years is a frightening prospect..especially as many states are wrestling with how to maintain Medicaid at today's levels in the face of multi-billion dollar deficits.
It's one thing to provide states with an incentive, in the form of additional federal matching funds, to states which want to expand their Medicaid plans. It's quite another to require that states expand their Medicaid eligibility standards, and leave the problem of how to raise matching funds to them.
It's also another gesture of political arrogance and disingenuousness to "handle" that issue by providing a short-term subsidy to states (out of Federal taxpayer dollars), and push the actual day of reckoning off into the future...when the current crop of elected officials is long gone.
I'm not a Barack Obama fan; I think he's a charismatic and articulate empty suit. I certainly didn't vote for him.
I do believe that PPACA is a political document first. The law is maddeningly complex...and it's my experience that complex initiatives are generally complex for a reason...usually because someone has something to hide.
It did not address the health care cost part of the equation, by political calculation; The White House made deals with hospitals, physicians, pharmaceuticals manufacturers, and others to keep that from happening.
The law did seek to address some of the more egregious behavior of insurers in the private markets...changes that the industry could have made voluntarily, but chose not to.
But a finding that the law is unconstitutional, while it might satisfy ideological opponents, does nothing to address the problems existing in the marketplace which led to the enactment of the law in the first place.
And we have yet to hear what the counterproposal is.
I'm not sure that trying to make an admittedly imperfect law work is worse that maintaining an environment of continuing uncertainty which leaves all stakeholders wondering what's going to happen next.
If I were a smart insurer, or a brilliant broker, I'd be using the time to develop more effective means to compete in the marketplace, to make health coverage more efficient and less expensive for everyone who wants to buy it.
Instead, my fear for many millions of small employers, and the self-employed, is that they will continue to face dramatically escalating costs and difficulties in obtaining coverage, from insurers who are perfectly comfortable...and making a lot of money...hiding behind that status quo.
Because absent any outside political pressure to change their behavior, that's just what they're going to do. And I don't see how that helps the people who pay...or would like to pay...the bill.
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