The policy players now trying to improve or replace the current Affordable Care Act system are facing a familiar enemy: anti-selection.
An insurance market is a little like a plate spinning in the air. Infusions of premium dollars, fee revenue, investment income and any government subsidies help balance the effects of claim payments and keep the plate spinning.
Anti-selection, which is also known as “adverse selection,” is the risk that the bad risks will roll to the side of the plate with the kinder, more generous insurers, like hot potatoes of insurance risk doom, and the good risks will end up on the side of the plate with the tougher, cheaper insurers, or roll off the plate altogether, until the spinning stops and the plate falls down.
One challenge for policymaker is that almost any provision that an ordinary consumer or health care provider thinks of as a nice little feature to add to a health finance program, such as a ban on medical underwriting, or a temporary loosening of enrollment rules to cope with consumer confusion problems, can increase anti-selection and cause the spinning plate to fall down.
Efforts to fight anti-selection helped create some of the longest, most complicated, most controversial provisions in the Affordable Care Act, such as the provision requiring many people to own what the law classified as solid major medical coverage for most of the year or else pay a penalty. Today, some of the provisions in the law, such as weak provisions for getting healthy people to pay for coverage, appear to be close to shoving the healthier patients out of the market and making the spinning plate fall down.
Drafters of the House American Health Care Act bill, which passed by a 217-213 vote in the House on May 4, tried to make the individual commercial health insurance market simpler, cheaper and less dependent on government involvement. Analysts at the Congressional Budget Office predicted the changes would make individual health coverage cheaper and easier to get for some people, but that it would destabilize the market for people with health problems in about one-third of the United States.
Now, the backers of the Senate’s Better Care Reconciliation Act bill, an alternative to the House bill, are doing what they can to address commercial health market stability concerns as well as concerns about access to Medicaid and other government health programs.
Here’s a look at five ways the Senate’s BCRA bill could possibly make commercial health risk roll in unhelpful or surprising directions, if lawmakers, regulators, insurers and others fail to make adjustments, based on a review of social media chatter and other sources.
1. An interstate small business health plan provision could push states to bid for interstate small-group plan business by weakening their essential health benefits standards and other small-group standards.
One provision in the BCRA would let a state waive the current Affordable Care Act coverage standards, such as the standards for the essential health benefits package, or list of services a solid individual or small-group major medical policy should cover.
Another provision, a small business health plan provision, would let a bona fide association offer small employer members access to an interstate health plan. The interstate health plan would be governed by the state insurance regulators in the state where the plan was based.
Some states collect taxes on health insurance premiums.
The BCRA small business health insurance plan provision might give a state that wanted to maximize small-group health insurance premium tax revenue an incentive to get as many interstate plans as possible to make it their state of domicile.
Even if a state of domicile could collect premium taxes only for the interstate plan employers in its jurisdiction, a state might still want to attract many interstate plan headquarters, to increase the number of health plan administration jobs in the state.
One simple way for a state to make itself an attractive state of domicile would be for it to narrow the scope of its essential health benefits package as much as the BCRA waiver program would allow.
The current BCRA waiver provision sets no minimum essential health benefits standards.
Federal regulators might let states use BCRA waivers only to make modest tweaks to essential health benefits standards, such as adding caps on access to some types of inpatient mental health care. In theory, however, federal regulators could let a state use a waiver to cut all coverage requirements for physician office sick care, or all coverage for hospital care, out of its essential health benefits package.
That change could push the healthiest small employers into interstate plans with weak benefits, and leave single-state plans that still meet Affordable Care Act quality standards with the employers with older, sicker employees. Because health care providers might have a hard time getting much cash from the health plans of the patients with interstate plan coverage, providers might fight to increase the reimbursement rates they get from traditional, single-state health plans, further increasing the pressure on the single-state plans.
2. Essential health benefits changes in some states could push sick residents in those states to move to states with richer essential health benefits packages.
If some states loosen essential health benefits package requirements, that could lead to migration-related anti-selection pressure between states.
States with looser essential health benefits packages might end up exporting residents who need care for autism, hemophilia or other health problems to states with strong essential health benefits package requirements.
Over time, states with richer benefits rules might look for ways to shut newcomers with serious health problems out of their health insurance markets.
3. The Affordable Care Act public exchange system could end up providing heavily subsidized catastrophic coverage for healthy people, and for sick people with health care providers who adapted quickly to the new BCRA rules.
The Senate’s BCRA bill would leave the Affordable Care Act public exchange system in place.
The bill would replace the current public exchange plan premium tax credit subsidy program with a new program, with tax credits that would depend on the enrollee’s age and less on income.
Today, many individual health insurance policies have a high deductible but pay for a significant amount of physician services before people reach their deductibles.
Under the BCRA rules, the plans available with the richest premium tax credit subsidies would cover just 58% of the actuarial value of the standard essential health benefits package. Today, the most heavily subsidized plans cover 70% of the actuarial value of the essential health benefits package.
The shift would mean that, in practice, the plans with the lowest net premiums for premium tax credit subsidy users would cover little care before patients reached their deductibles, according to analysts at the Congressional Budget Office.
The design of the plans would mean that most purchasers would be thoughtful, relatively healthy low-income people who wanted the cheapest possible coverage that could protect them against health catastrophes leading to medical bills over a deductible of about $6,000 for an individual, or about $12,000 for a family.
Typical, reasonably healthy low-income people who wanted help with paying ordinary bills for sore throats and ankle sprains would probably go bare, or go outside the major medical insurance market for ways to pay for care.
Primary care providers might re-invent the old-fashioned closed-provider-panel health maintenance organization system, by charging patients monthly, quarterly or annual fees for access to basic care. Problems could occur when flu epidemics flooded the clinics with patients, or the doctors running the clinics fell ill and were unable to provide the promised care.
In other cases, sophisticated health care systems run by hospitals or large group practices might find ways to take in large numbers of high-deductible patients, charge the patients low prices for minor pre-deductible sick care and injury care, and count on getting significant amounts of insurance money only when some of the patients exceeded their deductibles.
If primary care providers find ways to game deductible rules and other out-of-pocket cost rules, coverage out-of-pocket cost provisions may not work as well as insurers expect at limiting claim costs. Insurers that are tougher about writing and policing out-of-pocket cost rules might have an edge over insurers that take a more lenient approach.
4. Relatively narrow “Goldilocks zones” between the thresholds where coverage kicks in and the caps where coverage ends could kill off providers that stick to traditional billing strategies.
Today, a typical individual major medical plan covers the preventive services in the basic Affordable Care Act preventive services package with no out-of-pocket charges for the patients; some pre-deductible physician office sick care with low out-of-pocket charges; and any covered bills that come in once the patient meets the Affordable Care Act out-of-pocket spending limit. From the patient’s perspective, under the Affordable Care Act rules, individual major medical policies provide what amounts to unlimited catastrophic care.
Under the BCRA rules, a state might be able to eliminate the Affordable Care Act ban on annual and lifetime benefits limits.
That would mean that, in effect, an individual policy might cover only preventive care, along with sick care and injury care for a zone between the deductible and the plan’s annual benefits limit.
If, for example, a policy had a $7,000 deductible and a $100,000 annual benefits limit, the plan might have what amounts to a Goldilocks medical bill coverage zone from $7,000 to $100,000, with little coverage below the $7,000 limit and no coverage over the $100,000 limit.
That system might give hospital-run health care systems set up to maximize Goldilocks zone billing a strong edge over other providers.
Insurers working with slow-moving health care providers that still use traditional billing strategies might have a temporary edge over insurers that work with providers that shift quickly to a Goldilocks zone strategies. Patients with doctors and hospitals with clever administrators could suddenly be much riskier for the insurers than patients with providers with sluggish administrators.
5. The short-term medical insurance market could look even more appealing.
The Affordable Care Act already exempts short-term medical insurance from the ACA restrictions that govern matters such as essential health benefits, benefits caps, and medical underwriting.
In most states, an issuer of short-term medical insurance can shut out people with cancer; exclude coverage for mental health care, organ transplants or appendectomies; and cap benefits at $100,000 per year, or $5,000 per year.
Under the administration of former President Barack Obama, the federal government completed final regulations that limit an insurer to selling an individual a short-medical health insurance policy with a duration of three months. Before, an issuer could provide up to 364 days of coverage through a short-term medical policy.
The Obama administration regulations say nothing about what individuals can do. If four insurers provide short-medical health insurance in a market, a consumer there can use four separate short-term medical insurance policies to provide a year of coverage.
Today, consumer groups say the Affordable Care Act major medical coverage quality standards make major medical coverage a much better value, overall, than short-term medical insurance.
If the current version of the BCRA rules took effect, some states could use waivers to loosen Affordable Care Act major medical quality standards significantly, while the current ban on medical underwriting would stay in place. In those states, consumers healthy enough to buy short-term medical insurance might find that they could get coverage that was clearly richer, as well as cheaper, than the coverage available from major medical insurance issuers.
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