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Health insurance story of the year: The shoe that dropped

By Allison Bell

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Plenty of U.S. health insurance market stories could be the biggest health insurance story of 2014 — but most haven’t really changed anything all that drastically.

Health insurance agents and brokers have been anticipating drastic changes in the market since around the 1970s, when doctors got a reputation for owning yachts. “The other shoe” was always about to drop, but never quite dropped.

The health maintenance organization movement roared in, then ran into the trial lawyers.

The health savings accounts gave insured patients incentives to be better health care shoppers, but it did nothing to help uninsured patients.

Now the Patient Protection and Affordable Care Act (PPACA) has started to take full effect — but not really.

Many of the changes that PPACA was supposed to make in 2014, such as requiring large employers to provide a minimum level of health benefits or face the possibility of having to pay a fine, won’t apply until 2015, at the earliest.

In 2015, the Republicans will control the Senate as well as the House.

It’s not clear what they can do about PPACA, or what they will actually want to do, if and when they have the ability to do more than talk, but the results of the elections make making confident statements about “how PPACA has changed the health insurance market” almost as risky as trying to predict “how PPACA will change the market” in 2015.

Maybe the Republicans will rescind PPACA entirely, and blot it out as if it had never existed in the first place.

Or maybe they will change the PPACA “three R’s” risk-management programs — the programs that are supposed to help major medical insurers adjust for PPACA-related swings in medical claim risk — in a way that will put the satisfactory results health insurers have reported this year in a depressing new light.

But here are our early thoughts about what seemed to be the biggest health insurance story of 2014, and about the four runners-up.

Ebola virus

5. Ebola.

For a few weeks in October, the Ebola story seemed as if it might be the only 2014 news story that really mattered.

Ebola was certainly the news story of the year in West Africa, where, as of Nov. 28, public health authorities had recorded about 16,000 known Ebola infections and about 5,700 Ebola deaths.

Ebola, and the fear of Ebola, led U.S. public health authorities to impose controversial quarantine and isolation orders, and to organize major contact tracing efforts. The Ebola outbreak threat may have sparked the first wave of quarantine benefits news articles to come along since insurance companies developed modern medical insurance and disability insurance policies.

At press time, however, Ebola had caused just four infections in the United States and two deaths.

This is a story that could fade from the U.S. health insurance market forever, or return and turn everything upside down.

Shopping cart

4.  The private exchange movement.

Brokers, insurers, technology firms, and established Web-based insurance brokers and quote services firms have been starting and expanding dozens of what are now called “private exchanges.” As opposed to “Web-based insurance shopping sites.” Or “Web-based insurance stores.” Or Martha.

The private exchange programs have many advantages over the PPACA public exchange programs, including a chance to escape from crippling bureaucracy and utopian expectations. 

But it’s still not clear how big they really are, how they are performing, or what exactly they’re doing. Analysts at the Henry J. Kaiser Family Foundation have suggested that the private exchanges may be serving about 1.7 million group plan enrollees, and 2.5 million enrollees of all kinds. Accenture suggested in June that the number could be closer to 3 million.

The current total could be higher yet; two large private exchange organizers, Mercer and Aon, say their exchanges now serve a total of about 1.5 million people, up from 800,000 a year earlier.

HealthCare.gov

3. The PPACA public exchange system.

Some 2014 health insurance stories could reasonably be compared with shoes, flying in the air, that eventually will drop.

The PPACA public exchange system could be compared with a piano that crashes down on the sidewalk in front of you, with the possibility that more pianos could roll out of more windows along your path at any time.

Qualified health plans (QHPs) sold through the public exchange system probably covered about 6.7 million this fall.

Applicants with incomes under about 250 percent of the federal poverty level qualified for generous subsidies, and applicants with incomes from 250 percent to 400 percent of the federal poverty level qualified for modest subsidies. Because of the PPACA premium subsidy system, the average amount of an exchange user was actually paying for coverage out of pocket was only about $80 per month according to analysts at the U.S. Department of Health and Human Services (HHS).

But the public exchange system story is clearly a shoe that’s still in the air.

The Obama administration faces major suits filed by PPACA opponents who question whether the exchanges operated by HHS (rather than by states) have the authority to offer PPACA premium subsidy tax credits, and whether HHS has the authority to operate the PPACA “risk corridors” program — a program that’s supposed to use money from health insurers with good underwriting results to help individual insurers with poor underwriting results.

Information on how well the exchange QHPs are paying claims and whether the QHP holders are getting good access to care is still sparse.

PPACA plan metal levels -- bronze, silver, gold, platinum

2. The commercial health insurance market reforms.

PPACA has required health insurers to classify all new major medical policies sold since Jan. 1, 2014, according to bronze, silver, gold or platinum “metal levels,” and to issue the policies without using applicants’ personal health information. The issuers are supposed to price the coverage sold without considering personal health information other than age and tobacco use.

Young, healthy applicants in states that previously allowed medical underwriting have been shocked to see what the new rules did to coverage costs.

But, at this point, the new product rules look as if they may stay on the books for a while.

Opponents of PPACA have talked about the effects of the new rules on product costs, but there have been no major, high-profile proposals to bring back medical underwriting.

Purple hot air balloon over a field of lavender

1. Medicaid expansion.

The PPACA Medicaid expansion subsidy program received much less attention than the start of the PPACA public exchange system, and, in some ways, it may be more fragile.

A popular state-based public exchange may be able to survive in some self-sustaining form even if PPACA opponents succeed at killing PPACA. The Medicaid expansion program depends heavily on the federal government providing cash states can use to make Medicaid available to adults with incomes up to 138 percent of the federal poverty level.

But, at this point, Medicaid expansion looks strong, because hospitals like it.

Twenty-seven states and the District of Columbia have now accepted PPACA expansion money. In those states, enrollment in Medicaid and the Children’s Health Insurance Program (CHIP) has increased about 21 percent, to 44 million.

In the other states, publicity about PPACA helped increase Medicaid enrollment 6 percent, to 23 million

About 67 million — more than one-fifth of all U.S. residents — now have either Medicaid coverage or CHIP coverage.

Hospital companies love Medicaid expansion. At HCA, a big hospital company, executives say PPACA has cut the number of self-pay patients by 15 percent. At LifePoint, another hospital company, executives said PPACA was responsible for $12 million of the company’s $156 million in third-quarter operating earnings.

The growth of Medicaid plan enrollment has had a big effect on how many big health insurers think about their market. In the past, executives at the companies might have spent some time during quarterly earnings calls boasting about the strength of their broker networks. Today, during a typical call, the executives spend a little time talking about the performance of their public exchange plans, no time talking about brokers — and a lot of time talking about negotiations with Medicaid and CHIP program managers. For insurers in the government plan market, the core customers may be the state Medicaid and CHIP procurement teams.