Denny Weinberg, the chief executive officer of Hixme Insurance Solutions Inc., is giving interviews this week because his company is trying to change the way some medium-big employers provide health benefits.
Hixme is offering a system that employers with 500 to 5,000 employees can use to help the employees buy their own coverage through the ordinary individual health insurance market, outside the Patient Protection and Affordable Care Act (PPACA) public exchange system.
At first glance, that might sound impossible. The Employee Benefits Security Administration (EBSA) and the Internal Revenue Service (IRS) have gone out of their way to discourage use of a variety of mechanisms for giving workers cash to buy their own coverage.
Weinberg, who began setting up the core of what is now the Anthem Inc. (NYSE:ANTM) health insurance operation in California, said in an interview Monday that those Obama administration efforts have focused mainly on efforts to keep employers below the small-group size cut-off from dropping health benefits, and to keep the smaller midsize employers subject to the Patient Protection and Affordable Care Act (PPACA) employer shared responsibility provisions from evading the coverage mandate.
Regulators are comfortable with the idea of large employers with self-insured plans, and big coverage subsidies, giving the enrollees the flexibility to pick their own coverage, Weinberg said.
The company says in an answer to common questions on its website that accounting and legal experts have agreed that its system meets PPACA requirements.
The most important endorsement may be from Hixme’s biggest funding source: Kleiner Perkins Caulfield & Byers. Kleiner Perkins, a venture capital firm known for helping to start companies like Amazon and Google, recently led an effort to raise $10.14 million for Hixme.
The company started offering its platform in California last year and attracted a dozen plan sponsors, Weinberg said. A third of the sponsors began using the platform in January, and the rest should go live later this year, Weinberg said.
The company hopes to expand into Georgia and Texas in 2017, and then into Illinois and Ohio.
The company, which is licensed as an insurance broker itself throughout the United States, is not yet working with other brokers, but it intends to do so once it has gotten its system working smoothly, Weinberg said.
In the meantime, Weinberg’s role at Hixme has given him a strong interest in the state of the individual health insurance market.
For a look at how Weinberg sees that market, read on.
1. He thinks the PPACA-shaped individual market may be more resilient than it looks, and that sending big employers’ employees in could make it stronger.
One of the big risks Hixme faces is that insurers could stop selling individual commercial major medical insurance through any channel.
The same PPACA underwriting rules that now apply to the PPACA individual public exchange market also apply to the off-exchange individual market. State, federal and exchange rules require insurers that offer both on-exchange and off-exchange versions of plans to make both versions the same, to avoid antiselection.
The most important of the three big PPACA risk management programs is a risk-adjustment program that’s supposed to create a permanent mechanism for sending cash from individual plans with low-risk enrollees to plans with high-risk enrollees. PPACA calls for that program to adjust risk for the off-exchange market as well as the on-exchange market.
In spite of the similarities between on-exchange and off-exchange products, a year ago, the big, publicly traded health insurers seemed to be happier with their PPACA public exchange business than with the individual health coverage they were selling off-exchange.
Today, health insurers are saying that off-exchange distributors seem to be doing a better job of enforcing the rules for the “special enrollment period” system, a system that gives insurers some protection against antiselection, than the PPACA exchanges are. But some of these insurers seem to be vague on whether they want to cut back on 2017 exchange plan sales or 2017 sales of all types of individual coverage.
Weinberg said he sees the PPACA public exchanges as becoming the place where low-income people go to get PPACA premium tax credit subsidies, which are available only through the exchange system, and the off-exchange market as the place where other people go to get major medical coverage.
At Hixme, when executives look at the big health carriers, “we assume they’re going to continue to sell their individual products off-exchange,” Weinberg said.
Some insurers have had trouble with designing and pricing PPACA-compliant individual products, but “these things do normalize over time,” Weinberg said.
The penalties PPACA imposes on many individuals who lack minimum essential coverage (MEC) are much bigger for the 2016 coverage year than they were for the 2015 coverage year, and the penalties for 2015 are much bigger than they were for the 2014 coverage year, he said.
Once consumers begin paying the MEC penalties for 2016 in 2017, healthy people will understand that they need to get covered, and that will help stabilize the risk pool, he said.
Moreover, in spite of insurers’ concerns about the individual market, “they’re really invested in this market,” Weinberg said. “They’d like to stay in the business.”
Eventually, Weinberg said, local, provider-owned accountable care organization (ACO) plans may take charge of selling coverage to individuals. The big carriers may end up serving mainly as plan administrators and stop-loss providers for the local ACOs, he said.
2. He thinks the best alternative to the existing PPACA risk-adjustment system will have to come from some player outside the current system.
The Centers for Medicare & Medicaid Services (CMS) is still working out the complicated, controversial procedures it intends to use to run the risk-adjustment system, and it has invited health insurer representatives to what may be an emotional risk-adjustment procedure design meeting in Maryland next month.
The increase in the MEC penalties on individual taxpayers could reduce the need for a risk-adjustment mechanisms in the next few years, by getting more low-risk people into the individual health market risk pool, Weinberg said.
Supporting Hixme and other companies that help large employers send workers into the individual health market could also help, by leading to a big flow of employer-subsidized, generally healthy lives into the individual market, Weinberg said.
If issuers still need a risk-adjustment mechanism after the risk pools expands and normalizes, and CMS has a hard time running an effective risk-adjustment program, having the issuers themselves set up an alternative to the CMS program would be tricky, Weinberg said.
An international health insurer might be better-equipped to provide a replacement for the CMS PPACA risk-adjustment program, Weinberg said.
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3. He thinks that, if policymakers at HHS really want to make the PPACA World individual health insurance market viable, they have to loosen up.
In the long run, Weinberg said, the big problem facing the individual market is that the PPACA minimum medical loss ratio (MLR) provision, which requires carriers to spend 80 percent of individual premiums on health care and quality improvement efforts, is too tough.
With an 80 percent minimum MLR in the individual market, “it’s hard to imagine how you really make money over time with this,” he said.
When low compensation pushes good agents and brokers out of the market, “that’s not good,” he said.
Weinberg said that he expects to see the MLR limits to ease, and to see local agents and brokers helping individual consumers get their coverage from local ACOs that may look a little like Kaiser Permanente.
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