State Exchange Adding Insurers, Limiting Rate Increases

Covered California, the Golden State’s public health insurance exchange, announced its rates for 2016 last week. It also unveiled new insurers that will be taking part in the state’s health insurance marketplace when Affordable Care Act (ACA) open enrollment begins November 1, 2015, for coverage in 2016.

The statewide weighted average premium increase for 2016 will be four percent, which is slightly lower than last year’s increase. It represents a dramatic change from the trends individuals faced in the years before the ACA was enacted in 2010. Two new insurers, UnitedHealth Group and New York start-up Oscar, will be joining the state health exchange, too, although in limited markets.

“This is another year of good news for California’s consumers and further evidence that the Affordable Care Act is working,” said Covered California Executive Director Peter V. Lee. “Covered California is holding the line on rates and keeping coverage within reach of hundreds of thousands of consumers, while giving them more choices than ever before.”

The majority of buyers through Covered California will either see a decrease in their health insurance premiums or an increase of less than five percent, if they choose to keep their current plan. The new pricing gives consumers the opportunity to reduce their premiums by an average of 4.5 percent, and more than 10 percent in some regions, if they shop around and change to a lower-cost plan within the same ACA metal tier.

Last week’s announcement continues a downward trend of rate increases in California. Prior to the ACA, annual double-digit rate increases were common in the state’s individual health insurance market. Negotiated rates for the state health insurance marketplace for 2014 were significantly lower than many experts predicted, and the weighted average increase last year was a fraction of historical trends. Because Covered California requires health insurance carriers to offer the same products at the same prices both inside and outside the state marketplace, all individuals seeking to buy health insurance benefit from the new rates.

New Data Shows Number of 5-Star Hospitals Doubles

New information was posted this month by the Centers for Medicare & Medicaid Services (CMS) updating the database of hospital “star” ratings. The news was good for many hospitals, with the number of five-star facilities doubling from previously available data. 

For the reporting period of October 2013 through September 2014, 548 hospitals earned a top ranking – more than twice the number reported three months ago. In the new rankings, 102 hospitals earned just one star (up one from April).

The hospital ratings website makes it easier for consumers to find information and select a facility based on the quality of care being delivered. The star ratings are based on patient experiences at more than 3,500 Medicare-certified acute care hospitals. Information comes from data in the Hospital Consumer Assessment of Healthcare Providers and Systems Survey (HCAHPS). The survey has been in use since 2006 to measure patient perspectives of hospital care, nurse and doctor communications with patients, hospital staff responsiveness to patient needs, facility cleanliness and quiet, and how well patients were prepared for what follows their discharge from treatment.

In order to receive HCAHPS Star Ratings, hospitals must have at least 100 completed surveys over a given four-quarter period. In addition, hospitals must be eligible for public reporting of HCAHPS measures. Hospitals with fewer than 100 completed HCAHPS surveys do not receive Star Ratings; however their scores are publicly reported on the hospital comparison site.  

CMS also offers a Nursing Home Compare website, which gives a numeric rating to nursing homes based on health inspections, staffing (number of hours of care provided, on average, daily to residents), and 11 different physical and clinical quality measures.

Hospital rating and ranking information has become increasingly important to consumers shopping for treatment or facing a change in health plans (and their provider network). A variety of scoring systems have cropped up in recent years, including Healthgrades (which ranks physicians and hospitals). U.S. News & World Reports, which released its 2015-2016 Best Hospitals report this month, has been ranking hospitals since 1990. The latest Honor Roll includes three California hospitals in the top 15: UCLA Medical Center, UCSF Medical Center, and Stanford Health-Stanford Hospital. 

Millions Pay Penalty for Having No Health Insurance in 2014

The Internal Revenue Service (IRS) announced last week that an estimated 7.5 million Americans paid a penalty for not having health insurance in 2014. The average penalty was around $200.

Under the Affordable Care Act (ACA), if a taxpayer can afford health insurance but chooses not to buy it, he or she must have a health coverage exemption or pay a fee. For 2014, the individual penalty was the higher of one percent of annual household income or $95 per person for the year ($47.50 per child under age 18). Only the amount above the tax-filing threshold of $10,150 for an individual is used to calculate the penalty. The maximum individual penalty is the national average premium for a Bronze tier health plan or $285 for a family.

Penalties increase for 2015 to the higher of two percent of annual household income or $325 per person ($162.50 per child under 18). The maximum individual penalty is, again, the national average premium for a Bronze tier health plan, while the family maximum increases to $975.

On tax returns processed through the end of April, the IRS says the average ACA Premium Tax Credit claimed per return was about $3,000. About 40 percent claimed less than $2,000, 40 percent claimed $2,000 to $5,000, and 20 percent claimed $5,000 or more.

Among taxpayers who claimed a 2014 ACA subsidy, about half had to pay money back to the government because their actual income was higher than expected when they applied for the subsidy. The average amount repaid was about $800.

The IRS says it collected $1.5 billion in penalties under the ACA through April. 

Anthem and Cigna Agree to a Merger

The health insurance industry was abuzz last week as news spread of a renewed effort by Anthem to acquire Cigna. On Friday, it was announced Anthem and Cigna have agreed to a merger. The proposed $54 billion deal, the largest ever in the health insurance industry, is still subject to regulatory approval.

“We are very pleased to announce an agreement that will deliver meaningful value to consumers and shareholders through expanded provider collaboration, enhanced affordability and cost of care management capabilities, and superior innovations that deliver a high quality health care experience for consumers,” said Anthem President and Chief Executive Officer Joseph Swedish.

“We believe this transaction will allow us to enhance our competitive position and be better positioned to apply the insights and access of a broad network and dedicated local presence to the health care challenges of the increasingly diverse markets, membership, and communities we serve,” he continued. “The Cigna team has built a set of capabilities that greatly complement our own offerings and the combined company will have a competitive presence across commercial, government, international and specialty segments. These expanded capabilities will enable us to better serve our customers as their health care needs evolve.”

If the proposed Anthem-Cigna deal goes through, the top three health insurers, as measured by membership will be Anthem (with 53 million members), UnitedHealth Group Inc. (with 46 million), and Aetna-Humana (with 33 million). Final approval of the Aetna-Humana merger, which was announced early this month, is expected to close in early 2016. Anthem is anticipating approval of its merger with Cigna in the second half of next year.

The combination of Anthem’s Blue Cross and Blue Shield footprint in 14 states, a Medicaid foothold via its Amerigroup brand in 19 states, and Cigna’s broad portfolio of health and protection services means the combined organization will offer a comprehensive range of products and services to a full spectrum of customers – individuals, employers, and State and Federal governments.

However, some are critical of the proposal. “The Anthem-Cigna merger sets off numerous regulatory issues for state insurance regulators and the Federal Trade Commission,” said Paula Wade, an analyst at Decision Resource Group. “Anthem already dominates the employer-based insurance markets in 10 of the 14 states where it owns Blue Cross Blue Shield plans, and the addition of Cigna leaves employers in those states with even less choice than they have now,” she noted.

New Lobbying Group Pushing Back on ACA “Cadillac Tax”

A new coalition of employers, business groups, and unions – the Alliance to Fight the Forty – is working to repeal the planned “Cadillac tax” that is part of the Affordable Care Act (ACA). Set to kick in beginning in 2018, the 40 percent excise tax applies to health benefits that are valued at more than $10,200 for singles and $27,500 for families.

The new tax opposition organization formally registered last week as a lobbying group. Its participating members include the American Benefits Council, the Blue Cross Blue Shield Association, Cigna Corp., Laborers International Union of North America, and pharmaceutical corporation Pfizer.

According to the Kaiser Family Foundation, the average individual health plan cost $6,000 in 2014, while the average family health plan cost was $16,800. If an employer were to offer a family a benefit package valued at $30,000 beginning in 2018, the 40 percent excise tax would apply to the $2,500 above the family benefit threshold of $27,500.

While some economists support the so-called Cadillac tax as a way to manage the effects of the employer health insurance tax exemption, business and labor groups have criticized the tax as costly, burdensome, and unfair. As reported by Politico, the tax has also become an issue for union groups like the United Auto Workers.

If the lobbying group is able to persuade Congress to make a change to the ACA, it’s not clear how it would make up the $87 billion in lost revenue through 2025, a figure that is comprised of both employer taxes and a tax on employee wages. Two bills to repeal the health plan tax have been introduced in the U.S. House of Representatives this year. H.R. 2050 was proposed in April and has garnered bi-partisan support, with 120 co-sponsors. Heavy lobbying of members is expected during the upcoming August congressional recess.

Writing in an opinion piece for the Washington Post last week, Jared Bernstein, a former chief economist for Vice President Joe Biden and a senior fellow at the Center on Budget and Policy Priorities, suggested the tax won’t affect that many Americans “because most people don’t drive Caddies.” He went on to say, “According to some numbers I cobbled together from various sources, and making assumptions about the growth of health care costs in coming years, when the tax kicks in, it will hit a grand total of one or two percent of premium costs.” 

Blue Cross Blue Shield Plans to Offer Free ID Protection

The Blue Cross Blue Shield Association (BCBSA) will make identity protection services available to members nationwide beginning on or before January 1, 2016. The national federation of 36 independent Blue Cross and Blue Shield companies, which serve one in three Americans with health insurance,  says the new service will provide heightened safeguards in the event of fraudulent use of members’ personal and financial information.

The offering will be made available on an opt-in basis to eligible members for as long as they have a Blue Cross and Blue Shield health insurance policy in effect. Services will be administered by leading identity protection companies and will include credit monitoring, fraud detection services, and resolution support to assist members in addressing issues resulting from identity theft.

“For more than 85 years, the Blue Cross and Blue Shield brand has meant security and stability for the members we serve, and we are dedicated to putting our customers’ privacy at the forefront of our efforts,” said BCBSA President and CEO Scott P. Serota. “This effort is part of our focus on applying cutting-edge security practices and protocols for Blue companies.”

Data security has been in the news this year as several insurers have reported breaches. Premera Blue Cross, a health insurance plan serving the Pacific Northwest, acknowledged in March that it was hit by a cyberattack in May 2014, and the breach affected more than 11 million customers. 

Premera learned of the attack in late January, the same day that Anthem Blue Cross and Blue Shield discovered its own data breach that could affect nearly 80 million customers. Anthem operates health plans in a dozen states, stretching from California to New England. CareFirst, which operates in the District of Columbia, Maryland, and Virginia, reported a 2015 breach of its network affecting more 1.1 million members. Last Friday, UCLA Health said cyber criminals hit its network last year, affecting as many as 4.5 million people.

BCBSA says its member companies are in the process of finalizing plans to offer the identity theft and fraud protection services. Each company will be contacting its customers directly in the next few months with instructions on how they can take advantage of the offering.

Former CMS Administrator Joining Industry Group

Marilyn Tavenner, the former head of the Centers for Medicare & Medicaid Services (CMS), is joining the country’s leading health insurance trade group, America’s Health Insurance Plans.  The Board of AHIP named Tavenner as the incoming president and CEO last week. She replaces Karen Ignani, who announced in May that she was leaving AHIP after more than two decades. Ignani is now the president and CEO of EmblemHealth, a 3.3 million-member health plan based in New York.

“There is no better individual than Marilyn to lead our industry through the increasingly complex health care transformation that is underway,” said AHIP Board Chair Mark Ganz, in a prepared statement. “She has the respect and trust of policymakers and stakeholders from all sides, and a personal commitment to advance meaningful solutions for improving access to quality, affordable care for all Americans.”

Tavenner is a former nurse and was an executive at Hospital Corporation of America before entering the federal workforce. She took over as CMS administrator in 2011 and was formally confirmed in 2013. In her new role, Tavenner will be working on behalf of some of the country's largest health insurers – the same firms regulated by her former employer. Modern Healthcare reported she will be unable to lobby the Obama administration health agencies for a period of time. According to Kip Piper, a former CMS official who serves as a health insurance consultant in Washington, D.C., “AHIP already has a large, Beltway-savvy lobbying team, and this will allow her to get acquainted with AHIP and with member needs.”

“I am honored to join this association and to lead this industry that is deeply committed to improving care delivery and affordability for individuals and families,” Tavenner said.

Health care industry observers believe it’s a sensible move by AHIP. “With exchanges and Medicare Advantage being a growth driver for plans, the managed-care industry needs someone to navigate Washington, and that includes Tavenner's alma mater, CMS,” said Ipsita Smolinski from the consulting firm Capitol Street.

Another former CMS official who consults with insurers was quoted as saying it’s a “very smart hire,” although John Gorman who worked at the federal agency during the Clinton administration, cautioned, “This is no picnic. I think running AHIP is one of the toughest jobs in D.C., period.”

Broker Tells Congress SHOP Is Failing Small Businesses

Appearing before a meeting of the U.S. Senate’s Health, Education, Labor, and Pensions Committee last week, a health insurance broker from New Hampshire told senators the Affordable Care Act (ACA) Small Business Health Options Program (also known as SHOP) is not working.

“Small employers are paying premiums that are way too high,” said Tom Harte, president of Hampstead, New Hampshire-based Landmark Benefits, which provides benefits to more than 300 mostly small- and mid-sized businesses. The SHOP exchanges are “a dismal failure,” he said, with an enrollment process that “is riddled with difficulties.”

Speaking on behalf of the National Association of Health Underwriters (NAHU), a trade group representing 100,000 professional health insurance agents and brokers across the country,

Harte went on to criticize SHOP as offering an insufficient number of plans, including many with limited provider networks. He said the tax credit available to eligible businesses is so limited and difficult to qualify for that he is not aware of any of his clients who have received it.

As reported by the Washington bureau of American City Business Journals, Harte suggested the small group market should not be expanded in 2016, as it will under the ACA when the ceiling for small group expands from 50 to 100. He forecasts “an administrative nightmare” for business owners and benefits managers as they could be facing 75 different rates for 75 different employees. That’s because insurers are unable to offer a composite rate for all workers, regardless of age, as they did before the ACA was enacted.

At one of his clients, single coverage for a 21-year-old is already $4,579 and $13,726 for a 64-year-old. “The end result,” Harte told the committee, “is many employers are struggling with the financial impact of hiring more experienced employees.”

An analysis by Oliver Wyman, a global management-consulting firm, predicts 64 percent of businesses with 51 to 100 employees will see a sizable increase in their group health premium next year. Harte expects employers with a relatively healthy work force will leave the small group marketplace and move to self-insurance to avoid the premium increase. A study by the Employee Benefit Research Institute found only 12 percent of small businesses were self-insured through 2013, in contrast to 58 percent of large employers who self-insure.

Employers Shifting to Wellness to Counter Health Cost Increases

As health care costs continue to rise, more employers are turning toward employee wellness programs to counter some of the financial strain, according to the 2015 Society of Human Resource Management (SHRM) Employee Benefits Survey.

“Wellness benefits provide employers with a preventive approach that can reduce health care expenses for organizations over the long haul,” explained Evren Esen, director of SHRM’s survey programs. “Rising health care costs also remain a primary driver for how other benefit costs are allocated, as employers are still evaluating the impact of the Affordable Care Act.”

The top wellness benefits offered to manage chronic diseases and other health-related issues include wellness resources and information (80 percent of respondents) and wellness programs (70 percent). Wellness benefits such as health and lifestyle coaching, smoking cessation programs, and premium discounts for getting an annual risk assessment have risen in the past five years, according to SHRM’s survey.

The survey of more than 460 human resources professionals found 35 percent of employers said they increased their employer-sponsored benefits last year. That figure was up from 28 percent who reported a change in benefits last year. The most common benefits offered include paid holidays (98 percent of respondents), dental insurance and prescription drug programs (both 96 percent), mental health coverage (91 percent), traditional 401(k) or similar defined contribution retirement savings plan (90 percent), and organization-provided break room/kitchenette (90 percent).

Sixty percent of employers offer some form of telecommuting; 56 percent reported offering it on an ad-hoc basis, with 36 percent offering it part of the time and 22 percent offering it full time. New benefit reported by survey participants this year are egg freezing for nonmedical reasons (two percent of respondents), paid surrogacy leave (five percent), company-provided fitness bands/activity trackers (13 percent), company-owned fitness competitions (34 percent), and company-provided student loan repayment (three percent).

Flexible Benefit Services Corp. (FLEX) reported their 2015 survey of employers found nine in 10 companies now offer Flexible Spending Accounts (FSAs). Health Savings Accounts (HSAs) are offered at 44 percent of employers and just one in five offer Health Reimbursement Arrangements (HRAs). 

Rate Increases for Health Insurers Mixed for 2016

In spite of some scary headlines in traditional and online media in recent weeks, rates increase requests from health insurers across the country are mixed for 2016. While some health insurance companies are asking state regulators for premium boosts of 20 to 43, others are seeking more moderate rates increases of two to five percent.

Companies seeking larger increases say their experience with Affordable Care Act (ACA) enrollees has been worse than expected; that’s because customers turned out to be sicker than anticipated when rates were set for 2015. This includes market-leading plans from Blue Cross and Blue Shield, which are seeking an average rate increase of 23 percent in Illinois, 25 percent in North Carolina, 31 percent in Oklahoma, 36 percent in Tennessee, and 54 percent in Minnesota. Covered California, the Golden State’s health insurance exchange has not yet released rate increase information for 2016, although rate info is expected this month.

The national data posted by the Centers for Medicare & Medicaid Services (CMS) was only for companies that proposed rates increases of 10 percent or more for 2016. It was released last month as part of the CMS commitment to transparency and robust rate review. The filed rates are subject to final approval by October, as noted by CMS Acting Administrator Andy Slavitt. “These specific rates will be subject to vigorous rate review and revision and the final rates consumers will see this Fall will reflect the breadth of choice and competition in the marketplace,” he said in a public statement accompanying the public release.

A study of 10 states and the District of Columbia by the Kaiser Family Foundation found modest increases for 2016. Focusing on Silver tier plans in 11 cities, the foundation says the average premium is 4.4 percent higher than it was for 2015. The foundation focused on Silver tier plans because they are the basis for the federal premium subsidies offered under the ACA as well as the plans chosen by 68 percent of marketplace enrollees.