Archive for February, 2017

Will premiums go down if the ACA is Replaced? Yes, let’s see how & why!

February 23, 2017

The need for this post was spawned as a result of a cable news show I watched last week. The host of the #1 cable news show for 16 years (and still counting) was interviewing a celebrity businessman billionaire. The business man was adamant that healthcare premiums will not come down if the ACA is replaced. His question was “Who’s going to take less?” That might seem like a good point to non-insurance folks, right?

However, he is flat out dead-wrong. But because he has his celebrity platform from which to speak its possible that he could misinform other folks so I felt it imperitive to explain why and how premiums can be lower once the ACA is replaced. It’s not complicated.

As we have discussed in previous posts the ACA has provisions which artificially increase premiums. Those provisions cause the formulas and expectations used by actuaries to increase the resulting premiums and there is not a thing the actuary can do about it. We’ll point out just three of these artificial cost drivers.

Three ACA provisions that artificially drive up premiums:

  • 3:1 premium requirement – this provision mandates that the premium for the highest rate bracket (age 64 usually) can be no more than 3 times the lowest rate bracket. So, since folks age 64 are obviously more likely to incur healthcare expenses than people age 26 (and their care at age 64 is typically for more expensive care) actuaries must price their plans so that older brackets are properly priced. The premiums on the younger brackets must then be increased to accommodate the 3:1 pricing restriction.
    Plus, human nature being what it is and actuaries generally being cautious people the entire rating model is bumped up a bit to cover any unexpected anomaly. That’s one.
  • MLRs – stands for Minimum Loss Ratio which mandates that health plans for smaller employers (under 100 EEs) must pay out 80% of the premium received toward claims or else rebate the balance under the artificial  plateau of 80%. Insurers get to average their plans but the cost of “rebating” funds under the 80% level is very expensive so it is something they try to avoid. This means that even if an insurer had the good fortune to have lower claims than expected which resulted in a 70% loss ratio (potential profit)the insurer can’t keep the balance as profit. This can make their actuarial calculations be skewed and they can be influenced across their other plans to increase the probability that rebates are not required. That’s two!
  • Fees & taxes – these are a no brainer. The premiums we have all been paying for the past several years have fees added in for PCORI, for Transitional Reinsurance, for state Exchanges to mention a couple. These fees can range from $2 for PCORI to $9 dollars to over $18 dollars for your local state Exchange.
    Taxes, of which there are at least 18, are another “load”  added in to premiums for the ACA. Fees & taxes, ouch! That’s three!

That’s just three provisions set into the ACA that push our premiums higher. Possibly the worst thing about these artificial cost is that they push premiums up before the first claim is incurred. Before you or I go the doctor for the first time these provisions push rates higher.

Even if a population of covered people is healthy its premiums must be pushed up over what is actuarially needed simply due to provisions added to feed the ACA and special interest groups.

I know that I sometimes make some of these ideas sound simple. I also know that as soon as they are introduced by our legislators the special interests and media will attack the messenger. That is why it is necessary to clearly describe for our citizens just how these steps will be implemented and how these steps will help. I’d like to give our citizens the benefit of any doubt concerning their ability to comprehend the changes so I believe they will support the changes if it is explained clearly.

As I said above, my concern is that celebrity “experts” will bang the drum for no change or that change won’t reduce cost which is not true.

Next week we’ll discuss another idea for reducing premium.
It’s a good one.
Let me know what you think because we are all in this together.

Mark Reynolds, RHU


The Press reports that replacing the ACA will stretch into 2018. That’s OK! Let’s identify what can be done first to achieve the best results and give relief to our citizens quickly.

February 16, 2017

Everyone understands that press reports coming out of Washington DC should be met with skepticism and that Repealing and Replacing (R&R) the ACA is always a meaty subject for which pundits often jump ahead of the facts. But, the current reports from politicians, including the President and Republican leaders, are saying that R&R of the ACA will stretch into 2018 should not be viewed as necessarily bad news.

Every Republican as well as the President have made it abundantly clear that the R&R of the ACA is the top priority on their legislative action list. So, they know that they must do something and the folks are getting restless.

But, it would be wise for the Republicans to support the timeline that replacing the “failing” ACA properly, so that no one falls through the cracks, should be accomplished step by step in a well planned and thoroughly disclosed process.

Many are properly reporting that the ACA, while destined to fail on its own, is actually hundreds of independent provisions or regulations which need to be addressed. Many of those provisions will be easily addressed as the replacement occurs but no one wants to make a mistake on the fix, right? Plus politicians know that if they move forward with R&R then the Democrats will willingly grant ownership of Healthcare Reform back to the Republicans.

So, let’s assume that the Leadership agrees that something needs to be done quickly but that slow and steady wins the race.  They should create a public game plan with a step by step timeline for the changes and processes. The public can then have realistic expectations and not fall victim to dishonest reporting about the replacement plans. We all know that the scare tacticians will declare that tens of millions will be losing their plans, and pre-existing conditions will not be covered, that our kids will not get their teeth cleaned, and so forth.

Remember, the R&R plan will be better received if the folks are told up front and ahead of implementation what benefits or provisions are safe and how the timeline will unfold.

 Let’s identify 12 issues or actions that could be quickly addressed and immediately improve the results. Some of these may sound too simplistic but please note that your humble author is in the unique position to see just what it takes to deliver a good plan as well as using a great plan.

The first five are easy and will eliminate fodder for the scare tacticians:

*Kids to 26 – immediately explain that this provision is safe. Insurers have priced for it,   these members are the best risk, generally, to include in a pool, and important at least until the economy improves so these kids can get jobs with benefits.

*EHBs – maintain the provision for the 10 Essential Health Benefits except that the extra burdensome portions, added by special interests, can be omitted.

*GI – for IFPs(Individual Family Plans) which as we said in an earlier post was a mistake omitted from being a part of the HSA/HRA bills in 2002. GI already existed for group plans.

*No Pre-ex – until the legislature address the “failed” individual mandate we must provide for Pre-ex. Leaving Pre-ex as is initially won’t gain us as much rate relief as desired but it will help citizens with serious ailments from worry. That’s good!

*Medicare expansion – leave this up to the states for now to avoid the outcry from the scare tacticians. However, the funding of this expansion certainly needs addressed quickly. It did give the ACA proponents talking points about the millions added to the rolls of coverage even though no one explained that these members pay nothing to get the coverage. Medicare expansion is a single payer plan for the poor which while help is needed it also drives dependence.

The next seven will help gain rate stability and actually lower member costs:

*Metallic Levels – Immediately eliminate all restraints that prohibit insurers from offering plans designed to be competitive and appealing. This means no restrictive actuarial value structure so insurers can actually provide more choice.

*MLRs – we mentioned this one before but we should not require insurers to price to an artificial actuarial line or rebate to members should the carrier have the good fortune to be profitable.

*3:1 pricing – this was a pricing mandate that caused premiums to increase simply because of its ill conceived structure. Allow insurers to price their plans based on the risk or lower risk inherit in younger ages.

*Waiting periods –  allow employers to select a waiting period for eligibility that best suits the employer’s needs.

*Language-English – this may seem simplistic but the folks should know that it is costly for plans to make plan materials available in an almost countless number of languages.
This language requirement is mandated and wasteful. if an insurer chooses to make materials available in multiple languages, for competitive reasons, then go for it. For the record, citizens should also be outraged that their local, state, and federal government make materials, such a driver’s test, available in languages other than English.

*Lifetime limit –  historically lifetime limits were set at various levels determined by insurers. Insurers would determine their plan’s lifetime level based on costs, competition, and reasonableness. Setting the lifetime limit at $10 million would be a suitable and defendable level. It won’t impact premiums initially but over time it will. Mandating unlimited lifetime limits become a target more than a limit.

*Eliminate any ACA Fees or Tax  included in or charged to plans – the benefit of eliminating these costs would be hard to actually see because they have been “baked” into the plans actuarially. But, if eliminated, it would take away another excuse for actuaries and over the next couple rating cycles would deliver lower increases on premiums.

That’s twelve simple steps which will help citizens understand that they will lose nothing and give them the peace of mind to know that rational realistic steps can be taken to increase access to providers, lower cost for member’s out of pocket as well as stabilize and lower premium costs. Our citizens will see that it can be done quickly without loss of benefit.
Finally, it is an easy way to start and it will show folks that they have nothing to fear.

Let me know what you think.

We’re all in this together.

Mark Reynolds, RHU


When are Healthcare Exchanges a good idea?

February 9, 2017

Politicians and bureaucrats seem to love them but the product the ACA delivered failed universally across the country. So, let’s take a look at how Exchanges could be a solution.

The basic idea behind the notion of a healthcare exchange can be summarized in the name often used to describe them;  “healthcare marketplace”. But, it’s as though the ACA  believed that if you named something a “marketplace” that by definition it would become an open, free-market competitive solution delivering more choice and less cost. Using that logic if I called a duck a swan it would make it so? Doesn’t work that way, does it?

The concept of a marketplace for healthcare is not new and one can point to numerous success stories around the country. Is it by coincidence that none of the healthcare exchange success stories are government run? Nope!

The purpose of this post is not to criticize the failed government run exchanges. Anyone can do that. Government run exchanges have a disadvantage. For one, they don’t start by considering what the market (consumer) wants and for which they would be willing to pay premium.

Government exchanges begin with the attitude of control. That attitude thinks the public will be forced to like what the government exchange produces because it has no choice. Honestly, if the shirt you need to buy comes in only four colors then you will learn to love the color you select. At least that appears to be the attitude since the ACA gave us only four colors.

Government run Exchanges are laden down with fees and expenses that drive prices up before the first person even uses the plan. They also force rules and controls on the market that also drive out competition and choices while driving up premium. Government run Exchanges have too many obstacles to overcome to be successful.
That is  without forced internment, of course.
So they mandated Pay or Play.

But in a free market and certainly in the United States, where people have gotten use to the idea of many choices, if a vendor does not deliver a good product to compete for your business then that vendor will fail. It will fail because other vendors will fill the void and give the market the choices it demands and for which it is willing to pay hard earned dollars. That is also known as providing “value”.

The new version of healthcare reform should include more room for Healthcare Exchanges but they must be private. The government needs only set a few rules for everyone to follow then American business will deliver solutions. Not all private Exchanges will work but when one does not, there will be another to replace it and the new Exchange will have learned from the mistakes made by others. Or it may simply analyze the market more correctly and will see a specific desire from the public. Our recent Presidential election demonstrated how easy it can be to misjudge your customers.

One idea that may come is the vision of an exchange consisting only of high deductible plans in which the employer can implement an HRA to take advantage of the premium savings and the appeal of various carriers and plan options. Or the employer may select a single HDHP then implement HRAs with various reimbursement options. It’s available today, in fact, and being administered by a TPA in California.

But let’s return to the basics of why the concept of an Exchange makes sense. What do we know about our citizens and healthcare:

*One size does not fit all
*Needs are different based on age, gender and even location
*Risk tolerance varies among people
*Out of Pocket tolerance varies among people
*Sicker folks want richer benefits
*Healthier folks don’t want to pay for richer benefits
*Young people think they’re bulletproof
*Financial means & goals vary among people
*Attention to details (understanding) varies
*Value is always appreciated
*We’re Americans so of course we want more choices.

A Healthcare Exchange created with the goal of being market driven or Employer Driven will begin with flexibility in mind. Not only flexible with many choices but also for continually monitoring the product and making modifications as the public makes it choices known. These Exchanges will be created in a market driven by competition so plans too expensive fail, plans with dopey benefit designs fail, and as time goes on the right mixture of benefit and price is created. Again, that’s called value and that’s what people are willing to buy!

Have you seen a private exchange in your state that has proven itself and stood the test that “time” delivers to every health plan? Of course you have and you will see more if the next effort at Healthcare Reform does not stand in the way of innovation driven by a market free to deliver thoughtful properly priced benefit designs.

If the new administration frees up the insurance markets and America’s entrepreneurs then we will see many new options to consider. We will watch as benefits increase again and we’ll see premiums stabilize, and be lower with better overall value. Americans will demand value.

I am confident in this and I know that if we give the small employer a chance she/he will present benefits to employees that are richer, encourage good health, and cost less.

What do you think?

Remember, we are all in this together!

Mark Reynolds, RHU


To debate Healthcare Reform, folks should understand terminology: Access vs. Affordability & Healthcare vs. Healthcare Financing.

February 2, 2017

Unless one listens closely to the current discussions about the repeal and replacement of the Affordable Care Act it is easy to be misinformed. By some pundits it may be intentional to mislead, to others it may simply be picking up on the mainstream statements made by others and regurgitating those as fact, but even the serious proponents of replacing the ACA don’t always define their intentions and terminology clearly. We’ll clarify.

Affordable and Access can be really misunderstood as can the terms healthcare and healthcare reform which are often used too broadly  when discussing repeal & replacement of the ACA.

So let’s break these down a bit. We’ll start with why it is critically important to understand the difference in the meaning of Affordable and Access, then we’ll tackle Healthcare, Healthcare Reform  and Healthcare Financing. When experts clump these terms together it can skew their meaning.

Affordable and Access are terms bantered about too freely in the public discussions about reform. Let’s separate them.

Affordable or Affordability can refer to either the price you pay for your health plan premium (the financing) or the out of pocket cost of a plan to members, or it can mean the amount charged by providers (the healthcare costs). The truth is that both the cost of the care and the cost of the financing that care have grown out of reach for many. Plus, affordability is now being affected by access or lack of access in many areas.

Access is possibly the most misunderstood or misused term in the entire discussion. One can be covered by a Platinum heath plan and still not have access to care.  Someone  covered by a Bronze plan in an urban area may have far better access to care than a Platinum plan member in a rural or non-urban area.  Access to care is of critical concern and magnified by insurer’s development of the so-called “skinny” PPO networks. If you have not enrolled in a plan using a “skinny” network then you don’t/can’t fully appreciate the dramatic impact on access and affordability.

On TV and in News, pundits often use the term affordability to highlight the higher deductible plans available with their higher out of pocket costs. But they usually don’t explain that most people, who were covered before the ACA, are also experiencing reduction in the number of providers they can see in-network. Many PPO networks offered by insurers have reduced providers from 40% to 80% in their PPOs affecting Access.

For perspective, if your Pre-ACA PPO plan had 1,000 providers in your town or county, your new ACA plan may now make only 500 providers available for in-network benefits. The impact is a dramatic increase in a member’s out of pocket exposure if the member’s desired provider is now out of network. Plus, one can assume that the provider you wish to see has become an out of network provider.

Two categories of our citizens experiencing this phenomenon of the “skinny” network are employees leaving their employer’s group plan and our kids ,turning age 26, and being  forced off Mom & Dad’s group PPO plan. If you have had a child turn age 26, without a job with group benefits available, then you have felt the shock of the “skinny” network as you or your child shopped the market for a suitable individual plan.

This shock is again magnified if the person seeking that individual plan has ongoing treatment with particular providers. If Vegas placed odds on your “preferred” doctor being in your new PPO the smart money would bet on NOT. Sorry to sound too synical but it is the reality of the “skinny” network.

Healthcare is a good place to start our clarifying the other important terms. If one uses the term Healthcare to describe the access to providers, delivery of care from providers and receipt of care by member then it is easier to identify the specific changes needed to make improvements. But the term healthcare, used by itself, does not include the payment(financing) for those services delivered and received. Frankly, we all can add our thoughts on the specific aspects of receiving care that we would like improved.

Here are a few things we all want improved:
*Waiting 3 months to see a doctor
*Visit where we wait 45 minutes followed by a 5 minute consultation
*Information about the effectiveness of alternative treatments
*Prescription alternatives
*We could go on and on, couldn’t we?

So the term healthcare should be expanded to mean healthcare delivery because that is really what we want and pay for, isn’t it. Remember, we are paying through premium to a plan, our out of pocket cost of the plan, and our tax dollars.

Healthcare financing is a term which sounds awkward when one hears it for the first time. We are all use to financing cars and houses but what does it mean to finance healthcare. If you pay premium to a health plan then you expect that health plan to finance (pay) for all or part of the cost for treatments you may need at some future time. These days folks may likely be unable to afford most services. Here’s what I mean.

When I entered the health insurance business in 1985 I remember more mature agents regaling us with stories about how inexpensive healthcare was in the 1950s and 60s. They would site examples of maternity costs under $500 or even bartering with providers for lower costs on services. Can you imagine bartering with a provider today. We should but of course we don’t! That discussion is for another day, however.

But time and “progress” changed healthcare and its costs. History shows us that the implementation of Medicare, in the late 1960s, was a major cause for the cost of healthcare to increase. That increase cost due to Medicare and other factors was the natural result of innovation in healthcare and the  human nature affect of somebody else was paying the bill. Who among us has not heard the phrase “I want the best healthcare available”. Of course, that phrase could be correctly extended to add “as long as someone else is paying the bill”.

Therefore, the need to finance healthcare changed because the cost to access care became more expensive than anyone’s personal budget could afford. So, a means to finance our future need for care had to be developed. Hence the rise and necessity for health insurers and HMOs to provide that financing. The system is still reliable and fixable if done wisely.

Healthcare Reform as a term can be used interchangeably but when doing so it can lead to misunderstanding. If one uses this term with the intent to include both access to and treatment by providers as well as the financing of that care, meaning who pays for it, then it is a broad inclusive term for general reform. It would include rules and regs for insurers, providers, individual members, employer sponsors and every other entity in the food chain of health care. But, we believe that if the replacement of the ACA is done in one large legislative action, such as with the ACA, then we will end up with a huge one size must fit all behemoth, as we did with the ACA.

Now, when you hear pundits and experts talk about access and affordability you can listen for the specifics. Affordability is affected by access and access affects affordability.

Employer group plans are also being affected by the “skinny” network issue. But employers can implement HRAs as a tool to help their employees deal with accessing the provider of choice and the extra out of pocket cost associated with out of network providers.

Replacing the ACA seems to be coming so we need to be tuned in to the terminology the experts throw at us. Access, Affordable, Healthcare, Healthcare reform, Healthcare delivery, and Healthcare Financing are all critical terms when discussing the replacement of the ACA. They must be understood appropriately.

This Post may seem basic or rudimentary considering that replacing the ACA is such a huge endeavor. But, unless we want to be surprised like we were last time then we need to make the experts and legislators be specific. We don’t want to wait until it’s replaced to read what’s in it, do we?

I look forward to your feedback and remember; we’re all in this together!

Mark Reynolds, RHU