xpostfactoid: December 2024

Tuesday, December 31, 2024

Gateway to a dark age: 2024 in review

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Carnival for Muskovites; Lent for the rest of us

All bloggers (excuse the archaism…) get a free end-of-year post reviewing their year’s work, right? Here goes.

First I have to confess that it feels a bit odd to review themes in the relatively mundane world of ACA administration and performance in a year that in the 11th month shaped up as an annus horribilis, with Trump’s reelection. On the healthcare front, the parade of cranks and perverse contrarians nominated by Trump threaten disaster at the CDC, NIH and FDA, while a Republican Congress readies a fresh run at the kind of catastrophic spending cuts that Republicans have fantasized about for decades. My hope is that with the smallest possible majority in the House, Republicans will fail or (to be fair to some chunk of their members) balk at major cuts to Medicaid or major legislative changes to the ACA. I even retain a sliver of hope that the boosts to ACA subsidies enacted in the American Rescue Plan Act, currently funded only through 2025, will be extended, at least in part. But I expect deep wounds to our institutions, in healthcare as everywhere. If damage stops short of outright catastrophe, we can count ourselves lucky.

One major thread in this year’s posting is the concentration of enrollment growth in the ACA marketplace in the post-ARPA years in states that refused to enact the ACA Medicaid expansion. This is not primarily a result of enrollment fraud, as alleged by the Project 2025-adjacent Paragon Institute under the leadership of Trumpist health economist Brian Blase, who is laying the groundwork for major cuts to public health insurance programs. In July I countered Blase’s charges at some length, while acknowledging valid points — e.g. the obvious need for a crackdown on broker fraud (a crackdown begun this summer, per below) and for some regulatory tightening (eliminating the ability of low-income enrollees to make monthly enrollment changes, an option exploited by unscrupulous brokers). Marketplace enrollment growth in OEP 2024 and, it’s now emerging, in 2025, was driven in large part by the Medicaid unwinding (a fact that Blase acknowledges but casts in a nefarious light).

As we brace for Trump 2.0, I hope my 3-part review of Trump 1.0’s administration of the ACA marketplace (along with a more recent parsing of Trump and Vance’s claims that Trump “strengthened” the ACA) may prove useful. Surprise: it wasn’t all bad — although it seems that Trump’s “heroism was quite inadvertent” (to paraphrase Woody Allen’s antagonist in Love and Death) on the main count (see: silver loading).

A rising tide of broker fraud in the ACA marketplace burst into view this year, via excellent reporting from KFFs Julie Appleby, underpinned by a lawsuit alleging fraud perpetrated by a major EDE web-broker and a pair of agencies deploying dozens of downline agencies. In several posts, I delved into the evidence and CMS’s response. Posts included a look at gray-area fraud and sloppy agency practice; a close look at the expanded allegations in an amended complaint from the plaintiffs alleging large-scale fraud; and red flags in a past CMS celebration of rapidly expanding broker participation in the marketplace.

The Biden years were a heady time for ACA watchers — though always shadowed by the threat of a Trump resurgence. Medicaid enrollment, including among those made eligible by the ACA expansion, swelled, a a three-year pandemic-induced moratorium on disenrollment played out — then shrank back in an “unwinding” of that moratorium kicked off in May 2023, leaving a net increase since the eve of the pandemic of about 11%, or 8 million, as of August 2024. The enhanced marketplace premium subsidies implemented with ARPA in March 2021 triggered a near-doubling of enrollment, from 12 million in OEP 2021 to a likely 24-odd million by the end of OEP 2025. The unemployment rate has hovered near 4% for the entirety of Biden’s term, a full employment level not sustained since the 1960s. Not surprisingly, the uninsured rate dropped to an all-time low of 7.9% nationally in 2023 (the last year tracked).

All that enrollment growth is under threat from a new Trump administration and majority-Republican Congress. Medicaid enrollment will be cut by, at the very least, work requirements being readied now in red states. The Republican Congress will try for truly catastrophic further cuts — e.g., reducing the federal match rate for the ACA expansion population; further reducing match rates for “rich” states; and imposing block grant funding or per capita caps on federal Medicaid funding. In the ACA marketplace, the odds are against renewal of the ARPA subsidy boosts. While there is allegedly little appetite among House Republicans to allow the subsidies to revert to pre-ARPA levels, it’s hard to imagine them taking positive action to extend subsidies scheduled to sunset in 2026. Perhaps Democrats will manage to slip extensions into must-past omnibus spending bills.

As Republicans at least gesture toward major cuts, progressives will dust off and update their analyses of the major cuts threatened in 2017 — as the Center for Budget and Policy Priorities, Georgetown’s Center on Health Insurance Reforms and Center for Children and Families, the Center for American Progress, and Charles Gaba are already doing. It will be a weary rematch. As in 2017, fending off catastrophic defunding and major repeal will be the best outcome to be hoped for. Perhaps the more intense danger is on the public health/disease management front, as Trump appointees gear up to disarm our already-inadequate defenses before the next pandemic and roll back decades of progress in vaccination and infectious disease control. Happy New Year!

Thursday, December 26, 2024

Passive auto re-enrollment spikes in the ACA marketplace

Don't put your health insurance renewal on autopilot

Until late this morning, the narrative for the ACA marketplace’s Open Enrollment Period (OEP) for 2025 appeared to be that enrollment was down from 2024 highs. The December 4 enrollment snapshot showed 5,364,197 “active” plan selections nationally, compared to 7,299,900 as of December 6, 2023. That’s an apparent 26.5% drop, which should be discounted by about 5% to account for the two extra enrollment days in last year’s early December snapshot.

The “losses” appeared to be concentrated in HealthCare.gov, the federal marketplace (FFM), as active enrollment in the 20 state-based marketplaces was actually up a bit year-over-year as of early December, even discounting Georgia, which newly launched an SBM for OEP 2025. Taking all states together, new enrollees were down from 1,476,658 on December 6, 2023 to 987,689 on Dec. 4 this year (again, discount for two days).

But mid-OEP year-over-year comparisons are always dicey, and Charles Gaba, for one, has been skeptical as each snapshot since Nov. 1 indicated lagging “active” enrollment — which includes new enrollment and re-enrollment by those who logged on and actively chose a plan, as opposed to those who passively allow auto re-enrollment. Gaba put forward two reasons to doubt that enrollment this year would lag.

First, it seemed likely that much of last year’s large pool of new enrollees (4.2 million in the 32 FFM states) would passively allow auto re-enrollment. New enrollment last year was heavily concentrated at low incomes, and attributable in large part to the Medicaid “unwinding” — that is, the process of re-determining Medicaid enrollees’ eligibility after a three year pandemic-induced paused. Redeterminations began in May 2023 and continued into this summer. Most low-income enrollees pay no premium and may not be fully engaged in the enrollment process.

Second, some half dozen state-based marketplaces have been reporting strong enrollment growth in their own news releases. Also, CMS’s Dec. 4 report showed 11% year-over-year auto re-enrollment growth in the SBMs — up from 3,49,956 last December to 3,785,626 this year, again excluding Georgia’s total.* (The December reports show auto re-enrollment in the SBMs but not in the FFM because SBMs effectuate auto re-enrollment early in OEP or even prior to it, whereas the FFM books re-enrollments in mid-December. More on that below.)

Well, today CMS released new top-line figures, inclusive of auto re-enrollment in the FFM, and the new numbers vindicate Gaba’s prediction. Auto re-enrollment in the FFM almost doubled, from 3,624,950 as of the end of OEP 2024 to 7.4 million as of now for 2025 (auto re-enrollment happens all at once). That increase drove 2025 enrollment in the FFM to 16.6 million, already surpassing last year’s total FFM enrollment of 16.4 million, which included 1.3 million in Georgia (now included in the SBM total, which was not provided in today’s release). As of this time last year, FFM enrollment had reached 15.3 million. Strip out Georgia’s 1.2 million total from the tally for this time last year, and as Gaba points out, FFM enrollment is up by about 18%. Six SBMs that Gaba has tracked show a 23% year-over-year increase.

Massive auto re-enrollment in the federal marketplace is not an unmixed blessing. As I outlined in a prior post focused on differences in auto re-enrollment between the FFM and the SBMs:

Auto re-enrollment can be dangerous, because 1) enrollees’ personal circumstances that affect subsidies — their income and the family members seeking coverage in the exchange — may change; 2) an enrollee’s current plan’s premium may rise in the coming year; and 3) most unpredictably, the benchmark (second cheapest silver) plan against which subsidies are set can change. If the coming year’s benchmark plan has a lower premium than the current year’s, subsidies shrink, since enrollees pay a fixed percentage of income for the benchmark plan. If the enrollee’s premium rises and the benchmark falls, it’s a double whammy.

The problem is particularly acute in the FFM, because HealthCare.gov

sends out a renewal letter, but with no specific information as to subsidy and premium in the coming year for the enrollee’s current plan. Instead, the FFM requires insurers to send renewal letters prior to November 1 (first day of OEP), with an estimate of premium in the current year. But the insurer’s letter, while it provides the plan’s new premium (before subsidy) in the current year and an estimate of what it will cost net of subsidy, bases the subsidy estimate on the prior year’s benchmark.

Auto re-enrollment is less problematic in the SBMs, because the SBMs ensure that enrollees and their agents or brokers have better information as of the start of OEP: generally, an estimate of what their current plan will cost them in the coming year based on the next year’s premiums and benchmarks and assuming no change in the enrollee’s income. Accordingly, auto re-enrollment rates have historically been much higher in the SBMs than in the FFM. In the FFM in 2024, just 30% of renewals were auto re-enrollments, compared to 72% in the SBMs.

So far, about 51% of 2025 re-enrollments in the FFM are passive auto re-enrollments, up from 30% last year. (That percentage may drop a bit, as some auto re-enrollees may change plans before the Jan. 15 end of OEP, with the plan switch effective on Feb. 1).

In the FFM in 2024, 55% of enrollees had income below 150% FPL, entitling most of them** to free benchmark silver coverage, compared to just 16% of enrollees in the SBMs (all of the 2024 SBM states have expanded Medicaid, which cuts out the large pool of marketplace enrollees found in the nonexpansion states). Moreover, enrollment since spring 2022 has been available year-round to enrollees with income below that threshold, and the Medicaid unwinding continued through this summer. In short, there is a huge cohort of low-income enrollees in the FFM, most of whom probably paid no premium in 2024.

Lower income enrollees tend to be lower-information, often with limited English proficiency and/or limited access to or comfort with computers. Since early 2021, when enhanced ACA subsidies made high-AV coverage free for enrollees with income up to 150% FPL, the ranks of agents targeting this population has swelled. A large if hard-to-determine portion of agent-assisted enrollments are now executed by high-volume call centers, which in some cases have engaged in outright fraud and in perhaps a larger number of cases provide cursory service. (There are lots of good agents, but the soaring number of agents registered with HealthCare.gov — 83,000 in 2024, up from 49,000 in 2018, suggests a hypercompetitive market, and allegations of large-scale fraud, by CMS as well as by litigants, suggests entry of a significant number of bad actors). In the high-volume call centers, an enrollee may not have an ongoing relationship with a single agent, but rather connect with a new one at each contact, as in a customer service center.

Seven million-plus auto re-enrollments in the FFM marketplace may portend some rate shock in coming months.

- - -

* The newly launched Georgia Access, Georgia’s SBM, appears to have auto re-enrolled essentially all existing enrollees, as the Dec. 4 snapshot lists 1.2 million auto re-enrollees for state. Georgia enrollment as of the end of OEP 2024 was 1.3 million.

** A small percentage of enrollees with income below 150% FPL may be ineligible for subsidies, e.g., because of an offer of “affordable” insurance from an employer. A somewhat larger percentage of the nearly 400,000 enrollees with income below 100% FPL are ineligible for subsidies. Subsidy eligibility begins at 100% FPL for all except lawfully present noncitizens subject to the federal 5-year bar to Medicaid eligibility (or to longer waiting periods in a few states).

Photo by JESHOOTS

Saturday, December 21, 2024

Paul Krugman asks whether health insurance is purely parasitical; doesn't quite answer

Paul Krugman, noting that most U.S. healthcare spending is filtered through private insurers, takes aim (in his new post-NYT retirement Substack) at private health insurance in the U.S.:

Let me offer a somewhat, but only somewhat, caricatured view of U.S. health care: It’s a system in which taxpayers bear the cost of major medical care, but this taxpayer money flows through private companies that take a cut, spend a lot on administration, and do their best to deny care to people who need it.

His argument as to whether private insurers add value is sketched in lightly, and focused entirely on Medicare Advantage:

What service do private insurers provide in return for the tolls they in effect collect on a largely taxpayer-financed system? Medicare Advantage plans generally offer more extensive coverage than traditional Medicare. But there doesn’t seem to be any clear evidence that this is because private insurers provide efficiency gains the public sector doesn’t. What happens instead is that Medicare Advantage plans appear to be able to game the system sufficiently that they receive more taxpayer funding per enrollee than traditional Medicare spends on recipients in equivalent health…So you could make the case that at this point private health insurance is, in large part, a parasitical racket.

You could make that case, but leading with “you could” is a pretty equivocal way to make it. My take on the evidence (adapted from my comment on Krugman’s post) is below. The first point is a footnote to Krugman’s overview of private insurance’s share of U.S. healthcare spending.

1) Most Medicaid coverage is now also administered through private insurance companies (MCOs). Per KFF, 74% of Medicaid enrollees are in MCOs.

2) According to a KFF literature review, including a review of enrollee satisfaction surveys, Medicare Advantage enrollees are about as satisfied as traditional Medicare enrollees. By all accounts, problems in MA tend to come when you need serious care (especially post-acute care) — and denials appear to be on the increase. According to a Senate investigative report (inspired by reporting from STAT’s Bob Herman and Casey Ross), coverage denials from UnitedHealthcare MA plans for acute care more than doubled between 2020 and 2022 after the company adopted an AI tool (owned by UHC subsidiary NaviHealth, and also used by Humana and CVS Aetna) to assess claims.

3) Insurers "save" healthcare spending by denying not only needed but unneeded care -- and it's difficult to parse out the proportions of each. Surveys indicate that MA plans do encourage people to get screenings and so may prevent more acute care down the road. According to the KFF literature review, “The analyses consistently found that Medicare Advantage enrollees had higher utilization of preventive services and lower utilization of post-acute care and home health services.”

4) Some healthcare economists (e.g., Austin Frakt) find evidence that Medicare Advantage treatment protocols "spill over' into traditional Medicare and so save money there.

5) Private companies (MACs) also administer traditional Medicare, but with a very broad coverage grant and few coverage denials. MACs have no incentive to deny coverage.

6) In countries that deliver universal healthcare through private insurers, such as Germany and Japan, major medical insurers must be nonprofit. Germans can opt out of the nonprofit Statutory Health Insurance system into private plans, as 11% of the population did in 2019. But the government sets provider payment rates for private plans and limits premium increases. In Japan, as in many countries that deliver universal coverage through private plans, supplemental insurance can be for-profit.

7) In the U.S. whatever money insurers save by managing (denying) care is swamped by overpaying providers, which happens because we have no uniform payment rates, so providers divide and conquer. In the case of Medicare Advantage, where providers are paid Medicare rates or less, the savings are negated by payment formulas that overpay MA plans on a capitated basis, via a) a ridiculous risk adjustment system that incentivizes massive gaming, b) over-generous payment benchmarks, and c) bonus payments based on quality ratings that don't measure quality effectively.

8) Private insurers probably do have the capacity or potential to add administrative and care management value. But in the U.S., profit skews the incentives. In fact, it skews incentives for providers as much as for insurers. Almost all participants (e.g., those owned by giant insurers or private equity) are geared toward revenue maximization ("nonprofit" or not).

P.S. My own two-part assessment of Medicare Advantage (from 2022) starts here.

Photo by Arthur Uzoagba