Reverse reinsurance for COVID-19 treatment

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The case for the federal government picking up the cost of all COVID-19 treatment for everyone, not just the uninsured, is compelling.* Benefits include:

• Eliminating inhibitions about seeking treatment, thereby helping to contain contagion as well as saving lives. 
• Avoiding a major channel of financial harm at a time when tens of millions are likely to suffer extensive financial harm.
• Establishing a unified database of treatment/results.
• Paying providers swiftly while eliminating price-gouging via balance billing (which enacted COVID-19 legislation has so far enabled at providers' behest).

At the same time, as we pile on trillions in federal debt with abandon, there's no reason that private insurers and self-funded health plans shouldn't pay their fair share.

A mechanism already exists to calibrate what constitutes such a "fair share." It's the statutory Medical Loss Ratio (MLR) that health plans are required to maintain. MLR is the percentage of premiums a plan spends on medical care for enrollees. The ACA-mandated minimum MLR is 80% for individual and small group plans and 85% for large group plans. If a plan spends below those thresholds on claims, it's required to rebate the employer (in group plans) or the enrollees (in individual market plans).

Limit Americans' out-of-pocket exposure for Coronavirus treatment

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The bill passed by the House yesterday to ease the economic impact of the coronavirus pandemic, H.R. 6201, purports to make coronavirus testing available at no cost to all Americans. That includes office visits, urgent care center visits, and emergency room visits that lead to an order for testing.* It does not, however, include treatment for those who become seriously ill.

David Anderson and Nicholas Bagley are calling for Congress to rise to the crisis by protecting Americans against balance billing -- either by passing comprehensive consumer protection that's been stalled since last fall or, at a minimum, passing a bill to limit out-of-network billing for Coronavirus treatment.

That's vital. I've worried since late February that fear of balance billing would inhibit some Americans from seeking treatment. I've also noted a closely related problem: Americans' huge exposure to out-of-pocket costs for in-network care:

Six years later: Some stuff we've learned (or think we've learned) about the ACA marketplace

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The ACA marketplace is in its seventh year -- not a baby any more. I was just musing about some things we've learned, or think we've learned. Some are well understood, some are little recognized, some are tentative hypotheses. In no particular order:

• The marketplace came of age during a period of steadily rising employment. That's good news for the country, but has constituted a steady headwind for enrollment. ACA subsidies are on standby as a shock absorber for the next recession (if the courts don't kill the law).


• Since 2018, silver loading* has partly offset factors depressing enrollment, including massive cuts to outreach and advertising, rising incomes and employment, and rising premiums (in 2017-18) and out-of-pocket costs. As of 2019 silver loading had probably boosted enrollment by about 500,000.


• Those out-of-pocket costs have risen relentlessly. That's inevitable in a system where a fixed percentage of income buys a fixed actuarial value, since healthcare costs continue to rise far faster than inflation.  In 2014, the top allowable out-of-pocket maximum for a single enrollee was $6,350.  In 2021, it will be $8,550. The average silver plan deductible (for those who don't qualify for CSR) was $2,425 in 2014 and $4,544 in 2020.

Juice it, Jersey: What silver loading anemia looks like

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I have noted before that New Jersey's implementation of an individual mandate and a reinsurance program in its ACA marketplace in 2019 illustrates the tradeoffs involved in reducing premiums in the ACA marketplace. In brief: unsubsidized premiums down, subsidized premiums up.

I have also noted that in New Jersey, silver loading is underpowered -- that is, it has produced weaker-than-average discounts in bronze plans and no discounts in gold plans, which accounted for an anemic 2% of enrollment in 2019.

Last week, David Anderson and Coleman Drake published a study indicating that the widespread availability of free bronze plans, a major byproduct of silver loading*, has had a particularly strong impact on enrollment.  The authors noted that this effect is conspicuously lacking in Jersey, and suggested a reason:

New Jersey restricts cost-sharing variation within metal levels. In 2019 New Jersey bronze plans were required to have an actuarial value of 64 percent—higher than the 58.5 percent minimum allowed by federal law. This regulation limited the financial exposure of existing enrollees by preventing them from selecting plans with higher cost sharing. However, it also limited the premium spread between the benchmark silver plan and bronze plans, which reduced the availability of zero-dollar premium plans in the state and thereby reduced enrollment. A trade-off thus exists between reducing enrollees’ financial exposure by increasing minimum actuarial value levels and increasing insurance coverage via the zero-price effect.

Michael Bloomberg's healthcare plan eats its own tail

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Michael Bloomberg's just-released health coverage plan would do some good if enacted. It's introduced, however, with a false premise.

Deeming "a Medicare-like public option" the "first step," the plan outline pronounces:

A public insurance option would improve consumer choice and increase competition in the private insurance market, pushing down everyone’s premiums. People of modest means who buy the public option would be eligible for the same subsidies that would apply on the health insurance exchanges.

As students of the ACA marketplace know, however, within the marketplace structure, when base (pre-subsidy) premiums shrink, the premiums paid by subsidized enrollees tend to go up. That's because the subsidies are designed so that the enrollee pays a fixed percentage of income (rising with income) for the benchmark (second cheapest silver) plan. If you buy a plan that's cheaper than the benchmark, your subsidy goes further (and these days, thanks to silver loading*, may cover the whole premium). When premiums go down, price spreads between the benchmark and cheaper plans tend to shrink, reducing discounts for the cheapest silver plan and for bronze plans. If a public option reduces premiums, as Bloomberg promises, it will increase them more often than otherwise for subsidized buyers. Ditto for reinsurance, proposed to reduce premiums another 10%.

Hey blue states: How about offering a public option off-exchange only?

Louise Norris, clearest of expositors, has some mildly ambiguous wording here that set off a lightbulb:

Colorado enacted legislation in 2019 that directed the state to explore ways to create a public option health insurance program that could offer a lower-cost alternative for people who buy their own health insurance.

Eureka: Why doesn't a state offer a public option off-exchange only? That would solve the dilemma caused by the ACA's underfunded subsidies: measures that reduce ACA marketplace premiums for unsubsidized  buyers tend to raise them for subsidized buyers.  (Colorado is not moving toward this option.) N.B. in most states, ACA-compliant plans are offered off-exchange as well as on-exchange. This public option would be ACA compliant.

How would a 20% drop in base ACA marketplace premiums affect enrollment?

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My last post delved into the paradox of reinsurance in the ACA marketplace: lower base premiums tend to produce higher premiums for subsidized buyers who select plans that cost less than the benchmark (second cheapest silver) plan. Lower premiums also tend to reduce bronze plan discounts generated by silver loading* -- though potentially increasing gold plan discounts.

Just how much do premiums reductions reduce discounts in below-benchmark plans? The effects can be sampled with reference to the average premium nationwide for the lowest cost plan (LCP) at each metal level in 2020, courtesy of the Kaiser Family Foundation.

Below, I compare net-of-subsidy premiums for those averages to net-of-subsidy premiums when those base premiums are cut by 20%. That's the average reduction effected by the seven state reinsurance programs already in operation, according to Avalere. The 20% reduction is compared to what premiums would have been absent the reinsurance, not what they were in the previous year.  In New Jersey, for example, reinsurance cut premiums by 15% in 2019, and a state individual mandate by an additional 7% -- but premiums were 9% below 2018 levels. Still, let's stick with 20% to make the effect easily visible.

Should states pursue reinsurance for their ACA marketplaces?

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While sabotaging the ACA marketplace on multiple fronts, the Trump administration has from the beginning supported one means of keeping premiums down: encouraging states to submit waiver proposals seeking federal funding for reinsurance programs.

These programs partially reimburse insurers for costs incurred by individual enrollees that cross a certain threshold. In New Jersey for example, the program pays 60% of an enrollee's costs exceeding $40,000 per year, up to a threshold of $250,000. To date, CMS has approved 12 state reinsurance waiver proposals, 7 of them implemented by 2019.

The ACA marketplace began life with a national federally funded reinsurance program, but it sunset after three years (2014-2016). Not coincidentally, premiums nationwide rose by about 25% in that year -- a year of correction, in which insurers also recognized that they had significantly underpriced coverage in the ACA's first three years. They recovered profitability in 2017.

By reducing premiums, reinsurance also reduces premium subsidies. Trump's HHS has proved willing to pass much of the savings through to the states, providing tens-to-hundreds of millions of dollars annually to the approved programs.

The case against reinsurance

Some progressives, however, have concluded that reinsurance is a poor use of state resources. The ACA benefit structure subjects these programs to a Catch-22: Reducing base premiums tends to raise premiums for subsidized enrollees.

Looks like New Jersey's reinsurance trade-off paid off

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New Jersey's Department of Banking and Insurance has published second quarter enrollment numbers for the state's individual market for health insurance. Some upside surprises:

New Jersey Individual Market Enrollment, Second Quarter 2018 to Second Quarter 2019

Venue	Q2 2019	Q2 2018	# change	% change
On-exchange	220,217	222,696	(2,479)	-1.1%
Off-exchange	92,798	85,361	7,437	+8.7%
Total	313,015	308,057	4,958	+1.6%

• Off-exchange enrollment is up from the first quarter -- unusual, because anyone enrolling after December 15, 2018 would have to qualify for a Special Enrollment Period. In Q1, off-exchange enrollment was up 2.98% year-over-year. In Q2, it's up 8.7% over Q2  2018, to 92,798. 


• On-exchange enrollment, which was down a disappointing 7.1% as of the end of Open Enrollment, has had much lighter attrition than in previous years. It's down just 1.6% since Q1, compared to an average Q1-to-Q2 drop of  6.8% in the three previous years. Accordingly, it's down just 1.1% from Q2 2018.


• Total individual market enrollment is up 1.6% compared to Q2 2018.  That's all in ACA-compliant plans, as New Jersey bans the lightly regulated, medically underwritten short-term plans promoted by the Trump administration.

New Jersey's 2019 experience is something of a case study for what you might call the reinsurance tradeoff.

Surprise! New Jersey ACA marketplace outperforms the national market

When CMS reported enrollment totals in the ACA marketplace at the end of Open Enrollment last December, the news for New Jersey was disappointing.

Despite (or per below, partly because of) a 9% average reduction in premiums last year, fruit of a new reinsurance program and a state-enacted individual mandate, on-exchange enrollment dropped 7.1% -- a performance that lagged the national marketplace (down 2.7%) and the 39 states that rely on the federal HealthCare.gov platform (down 3.8%) -- though right at the median for HealthCare.gov states that have expanded Medicaid (and so get less juice from silver loading)*.

When the state released off-exchange numbers in June, the results provided a measure of consolation. Off-exchange enrollment was up 3%, shrinking the total individual market enrollment loss to 4% from Q1 2018 to Q1 2019.

The main cause of the contrary results is not hard to find. Three quarters of on-exchange enrollment in New Jersey is subsidized.  In David Anderson's pithy formulation, "Reinsurance, all else being equal, helps the unsubsidized and hurts the subsidized." That's true of any measure or market force that reduces average premiums. When the benchmark (second cheapest silver) plan premium goes down, subsidies are reduced accordingly, and price spreads between the benchmark and cheaper plans tend to shrink, reducing discounts.

Blue states willing to invest in ACA marketplace: Help those over 400% FPL or under?

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From the beginning, the ACA's apparent Achilles heel has been the plight of those who must look to the individual market for coverage but earn too much to qualify for subsidies.

I say "apparent" because the marketplace is not exactly a roaring success among those eligible for subsidies. But bear with me through a short history of the highly visible plight of the unsubsidized.

In New Jersey's 2019 ACA marketplace, fruits of reinsurance, individual mandate, and silver loading

New Jersey's Dept. of Banking and Insurance has posted individual market health plan prices for 2019. Thanks to the state's new reinsurance program, state-based individual mandate, and silver loading (actively encouraged by DOBI), unsubsidized enrollees will see price drops from 2018. According to DOBI, premiums are down 9% on average, and 22% below where they would be if not for the reinsurance program and the state individual mandate enacted this year. For the subsidized, it looks pretty much like status quo ante -- although network changes and plan design changes could alter that picture.

As was the case last year, AmeriHealth has sewn up all the lowest price points. AmeriHealth and Oscar are offering discounted silver plans off-exchange -- presumably because of silver loading (Cost Sharing Reduction, available only with silver plans and only on-exchange, is not priced into off-exchange silver).  Horizon is not offering any off-exchange discounts, but it has dropped prices about 7% from last year. A few salient year-to-year comparisons below. Quoted premiums are for a 46 year-old -- where they're a clean 1.5 times the base rate posted by DOBI.

• The cheapest silver plan for a 46 year-old was $468 per month in 2018. This year, cheapest silver is $359, offered off-exchange only. They're both AmeriHealth, but they're not the same plan. The off-ex 2019 cheapest is a "Select Silver EPO", a new designation for AmeriHealth, and it's an HSA plan, which means that all services except mandatory free preventive care are subject to the deductible. The cheapest non-HSA silver is an AmeriHealth HMO ("Local Value"), for $381 per month. That plan may have a better network than the "Advantage" network, which in some areas at least is quite limited.

Sabotage triage: New Jersey's instructions to individual market health insurers

It's hard to keep up with Trump administration sabotage of the ACA marketplace. Credit New Jersey's Dept. of Banking and Insurance (DOBI) with doing what it can to help health insurers cope.

In light of CMS's abrupt and capricious suspension of risk adjustment payments* to marketplace insurers in response to what should have been a minor legal glitch, DOBI has moved the deadline for individual market insurers to file rate requests from tomorrow (July 11) to July 18. DOBI has also instructed insurers to take two contingencies into account: the possibility that risk adjustment payments will remain suspended, and the likelihood that CMS (yes, the same CMS that planted the risk adjustment IED late last week) will approve the state's waiver application for federal funding for a reinsurance program, submitted on July 2.

The guidance issued today instructs insurers to file rate requests that a) assume risk adjustment payments will continue for 2019, and b) do not take the possibility of reinsurance into account. But insurers are also instructed to a)  discuss the potential impact on rates if risk adjustment payments were to be discontinued for 2019, and b) file alternative rates that assume the reinsurance program will be in place in 2019, under the terms proposed in the state's waiver application.

New Jersey takes strong action against ACA sabotage: A look-back

As Republican repeal of the ACA's individual mandate loomed last fall, potential remedies for states became self-evident, notwithstanding many political roadblocks. No one had ever challenged a state's authority to impose an individual mandate. And state reinsurance programs had already proved their worth and obtained federal funding.

New Jersey, with strong Democratic majorities in both houses of the legislature and a newly elected progressive governor, was one likely proving ground -- notwithstanding the mandate's unpopularity and the state's fiscal woes. Progressives committed to a working individual market and resumed progress expanding healthcare access were eager to see these remedies tried -- under the tight schedule imposed by insurers' June 20 deadline to file rate requests. The legislature came through, passing mandate and reinsurance bills on April 12. After a long and rather conspicuous silence, Governor Murphy signed them yesterday.

Below is a compendium of my posts and articles on this front, as well as outside efforts with BlueWaveNJ and the NJ for Health Care Coalition that I've been involved in. They address the fiscal challenges as well as the case for the bills.

Sabotage judo: States can turn individual mandate repeal to their advantage (12/14/18)
Impose a mandate and use the revenue to help fund reinsurance

How Gov. Murphy can protect NJ from Obamacare sabotage (NJ Spotlight, 1/17/18)
Specifics for New Jersey -- e.g. death spirals past

NJ for Health Care Coalition urges Gov. Murphy: Protect our care. Sign these bills

Update: Murphy signed both bills today!  The Star-Ledger' Susan Livio cites the Coalition letter linked to below.
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New Jersey Governor Phil Murphy has been notably quiet about two ACA-defense bills awaiting his signature -- one creating a state individual mandate, the other directing the Dept. of Banking and Insurance to seek federal funding for a reinsurance program for the individual market.

The bills passed both houses of the legislature on April 12; the Governor has until June 7 to act. His hesitation, if there's more to it than due diligence, may stem from fiscal worries about the reinsurance program, as I've noted before.

Today the NJ Coalition for Health Care, an umbrella group of advocacy groups, trade groups, and unions led by New Jersey Citizen Action, sent a letter to Governor Murphy urging him to sign the bills. 17 organizations signed, including BlueWaveNJ, a group I volunteer for. The text is available here.

Four ways states can leverage ACA sabotage

Sabotage of the ACA by the Trump administration and the Republican Congress will partially reverse the ACA's coverage gains, causing hardship to millions. But it differs from Republicans' failed legislative repeal in a fundamental way: The ACA's funding streams and mechanisms remain in place.

Not only can states that retain the will to make the ACA work continue to tap federal funding -- if they're willing to be creative, they can tap revenue streams created and inflated by the sabotage. Each form of sabotage has created new opportunities. There are at least four ways that states can not only fight off sabotage, but leverage funding opportunities that sabotage has created.

"New Jersey is poised to fight off ACA sabotage. Is Gov. Murphy on board?"

As Ive noted before, while the New Jersey legislature has passed bills establishing a state individual mandate and a reinsurance program, Gov. Murphy has not committed to signing them. I have an op-ed up on NJ Spotlight arguing that the need is urgent.:

The Congressional Budget Office forecast that mandate repeal in itself would generate premium increases of 10 percent per year throughout the next decade. An analysis of the impact on states commissioned by Covered California the state's ACA marketplace, put New Jersey in the highest risk category, where premiums are forecast to rise as much as 90 percent over three years if action is not taken to strengthen the markets. Early insurer rate requests filed in Virginia and Maryland are showing sky-high increases. Maryland's insurance commissioner is warning of a death spiral and placing hope on the state's reinsurance waiver proposal.

If there's any sticking point, it's probably related to cost. Here is an outtake with someone more detail than I had space for:

New Jersey can sabotage-proof its ACA marketplace next week

Update, 4/12/18: All three bills discussed below passed in both houses of the New Jersey legislature today (info below via the legislature's bill lookup feature). On to Governor Murphy!

1. Individual mandate bill

A3380 Aca (1R) "New Jersey Health Insurance Market Preservation Act." 
Passed both Houses  

2. Reinsurance bill

S1878 ScaScaScs (SCS) "New Jersey Health Insurance Premium Security Act;" establishes health insurance reinsurance plan. 
Passed both Houses  

3. Out-of-network bill

A2039 Aca (1R) "Out-of-network Consumer Protection, Transparency, Cost Containment and Accountability Act." Passed both Houses 

Original post, 4/6:
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Amid all the worry about the effects on the ACA marketplace of individual mandate repeal and administrative rules fostering an ACA-noncompliant market, some really good news is pending in New Jersey.

Bills to establish a state individual mandate (S1877/A3380) and to start the process of seeking a waiver to obtain federal funding for a reinsurance program have passed through committee and are scheduled for floor votes on Thursday, April 12.  The mandate bill would dedicate the revenue collected to the reinsurance program.

While both bills are expected to pass, it's not a sure thing. All Republicans are opposed to the mandate. Governor Murphy has been quiet about it. Mandates are a heavy lift even in blue states. But New Jersey is close, and that's very good news.

How Phil Murphy can counteract ACA sabotage in New Jersey

I've suggested before that states can protect their individual markets for health insurance by passing their own individual mandates -- and using the revenue to further shore up their individual markets. In NJ Spotlight, I make the case specifically for New Jersey.

Revenue from the mandate

could be dedicated to strengthening the state’s individual health insurance market. One possibility would be direct financial help for people who don’t qualify for ACA premium subsidies — a group hit particularly hard by the premium hikes of the past two years. Another option is to spend the money on enrollment assistance and outreach, which the federal government radically cut in 2017. A third option is to dedicate the funds to a state-based reinsurance program.

Mandate revenue would not fully fund a reinsurance program, and New Jersey is in terrible fiscal shape.

But the state can also seek federal reinsurance funding via an ACA “innovation waiver”, as HHS specifically suggested last spring. Funding may be granted as a “pass-through” of savings derived from lower premiums — since lower premiums mean lower subsidies, which are paid by the federal government.

The rest, once more, is here.

Sabotage judo: States can turn individual mandate repeal to their advantage

With repeal of the ACA's individual mandate apparently imminent, health law scholar Nicholas Bagley urges states to mitigate the damage by...getting their own damn mandate:

Adopting mandates at the state level would help stabilize insurance markets, thereby keeping premiums in check and forestalling coverage losses. It would also provide a welcome source of revenue: Some people will still prefer to pay a penalty than buy insurance. Plus, the states don’t need to stick with the precise terms of the federal mandate, which has been reviled (from different quarters) both for heavy-handedness and its ineffectuality. Stiffer state-level penalties would still be unpopular, but at least they’d work better.

I'd like to suggest that states take this a step further. Why not use the revenue collected from the state mandate to partially fund a reinsurance program?  Reinsurance has repeatedly proven  to sharply reduce premiums  (leading Susan Collins to propose an underfunded federal program to offset the effects of mandate repeal).

CBO projects that mandate repeal will cost the federal government $5 billion per year in forgone penalty payments by 2020 and $6 billion per year by 2025 (while saving the government more than 10 times as much in premium subsidies). States can capture that revenue for themselves by implementing their own mandates. California, with 12% of the nation's population, might collect $600 million per year in 2020 (to the extent that mandate revenue is proportionate to population). New York, with 6% of the population, might pull in $300 million. Jersey might manage $135 million; Minnesota, $85 million. These are crude calculations, but they give some idea of scope.