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How Would State-Based Individual Mandates Affect Health Insurance Coverage and Premium Costs?
ABSTRACT
- Issue: The Tax Cuts and Jobs Act of 2017 eliminated the financial penalty of the Affordable Care Act’s individual mandate. States could reinstate a similar penalty to encourage health insurance enrollment, ensuring broad sharing of health care costs across healthy and sick populations to stabilize the marketplaces.
- Goal: To provide state-by-state estimates of the impact on insurance coverage, premiums, and mandate penalty revenues if the state were to adopt an individual mandate.
- Methods: Urban Institute’s Health Insurance Policy Simulation Model (HIPSM) is used to estimate the coverage and cost impacts of state-specific individual mandates. We assume each state adopts an individual mandate similar to the ACA’s.
- Findings and Conclusion: If all states implemented individual mandates, the number of uninsured would be lower by 3.9 million in 2019 and 7.5 million in 2022. On average, marketplace premiums would be 11.8 percent lower in 2019. State mandate penalty revenues would amount to $7.4 billion and demand for uncompensated care would be $11.4 billion lower. The impact on coverage and on premiums varies in significant ways across states. For example, in 2019, the number of people uninsured would be 19 percent lower in Colorado and 10 percent lower in California if they implemented their own mandates. With mandates in place, average premiums would be 4 percent lower in Alaska and 15 percent lower in Washington.
Background
One of the Affordable Care Act’s central aims was to reform insurance markets by sharing health care risks and costs more broadly across the healthy and sicker populations. Strategies to accomplish this goal include modified community rating, guaranteed issue, and benefit standards, with the greatest changes made to nongroup insurance markets. Spreading risks tends to decrease costs for people with medical needs and increase them for healthy people. As a consequence, financial incentives to become and remain insured regardless of health status are necessary to ensure the risk pool is large and stable. The ACA established the individual responsibility requirement — also referred to as the individual mandate — to require most people to enroll in minimum essential health care coverage or pay a tax penalty. The Tax Cut and Jobs Act of 2017 sets the ACA’s penalties for individuals who remain uninsured to $0, beginning in 2019.
The Congressional Budget Office (CBO) estimated that eliminating the individual mandate penalties would lead to an additional 3 million uninsured people in 2019.1 It also estimated that premiums in the nongroup insurance market will increase by 15 percent between 2018 and 2019. Because of the elimination of mandate penalties, fewer healthy people are estimated to enroll in nongroup insurance; thus, the average nongroup insurance enrollee will be more likely to have higher health care expenses. As a result, premiums will be higher. Other pending changes, such as expansion of short-term, limited-duration plans, are expected to worsen the nongroup risk pool and increase premiums as well. The changes, taken together, may lead to some insurers ending or limiting their participation in ACA-compliant nongroup insurance markets.2 Acting on these concerns, some states have considered or passed legislation to implement state-specific individual mandates.3 New Jersey enacted its individual mandate on May 30, 2018;4 Massachusetts did so in 2006, well before the passage of the ACA.
This analysis provides estimates of the effects of state-specific individual mandates on insurance coverage, nongroup insurance premiums, federal and state government spending (including penalty revenue to states), and demand for uncompensated care. Findings are provided nationally as if every state adopted its own individual mandate and for 48 states and the District of Columbia (but excluding Massachusetts and New Jersey because they have their own mandates under current law), assuming each state adopts a penalty structure similar to that of the ACA. We do not anticipate every state taking this approach, but present findings this way for ease of exposition and as a reference point for understanding the effects of the mandate. (A full description of our methods is available below.)
Key Findings
Our central estimates assume that state mandates are implemented in each state as soon as the federal penalties are eliminated in 2019. The effect of a mandate grows over time as health care costs grow relative to incomes; we show some of our results in 2022 to illustrate this. State mandates would have two central effects. First, more people would retain insurance coverage to avoid the penalty. Second, premiums in the nongroup market would be lower because the insurance pool will not lose healthy people that would otherwise drop their coverage without a mandate. As a result, even more people will enroll because of the lower premiums.
HHS proposes allowing some drug importation, but impact would be limited
HHS proposes allowing some drug importation, but impact would be limited
Nevertheless, the proposed policy could take Martin Shkreli-like practices “out of the ballgame,” expert says.
Regulators could allow importation of certain drugs in an effort to keep prices down, under a proposal from the Department of Health and Human Services.
On Thursday, HHS Secretary Alex Azar requested that Food and Drug Administration Commissioner Scott Gottlieb create a working group to find how to safely import drugs from abroad in cases when their US-made marketed equivalents undergo dramatic price increases.
However, experts said the effect of such a policy on prices – if it passes – will be limited.
Azar pointed to the now infamous example of the toxoplasmosis drug Daraprim, whose price manufacturer Turing Pharmaceuticals increased from $13.50 per pill to $750 in 2015, drawing nationwide scorn for Turing and its CEO, Martin Shkreli. Shkreli was sentenced to seven years in prison in April following his August 2017 conviction on charges of securities fraud and conspiracy. Turing, which has since changed its name to Vyera Pharmaceuticals, is currently losing money, STAT reported, and shareholders will vote Friday on a proposal to change the name again, to Phoenixus.
Several political leaders have proposed allowing importation of drugs. In May, Republican Vermont Gov. Phil Scott signed a bill that would allow importation of drugs from Canada, though HHS must still certify the law. Independent Vermont Sen. Bernie Sanders also introduced a bill in the Senate, S. 469, The Affordable and Safe Prescription Drug Importation Act, that would allow the same, with cosponsorship from several Senate Democrats. The bill would wholesalers, pharmacies and individuals to import a range of medications.
However, the HHS proposal is more narrow, focusing specifically on drugs that have seen significant price increases. Gerard Anderson, professor of health policy and management at Johns Hopkins University, and several colleagues made a similar proposal in a paper published in JAMA in February 2016. Under their proposal, GlaxoSmithKline – the original manufacturer of Daraprim – would be able to import the drug from the United Kingdom, where it sells for less than $1 per tablet. The paper compared the proposal to FDA allowances for importation during shortages of critical medications.
Still, Anderson said in a phone interview that the HHS proposal will not likely have a broader spillover effect on drug prices, but will only affect the specific drugs that are included. “For a very narrow subset of medications, it could take the Martin Shkrelis out of the ballgame because these drugs are very inexpensive in other countries,” he said.
In addition to Turing, other companies that have become notorious for raising drug prices include Shkreli’s prior company, Retrophin, and Valeant Pharmaceuticals. Questcor Pharmaceuticals raised the price of Acthar Gel from $1,650 per vial to $23,269 in 2007, and the price has risen to $38,892 since Questcor’s 2014 acquisition by Mallinckrodt Pharmaceuticals. More recently, larger drug companies have also taken heat for smaller price increases. Pfizer backed down from a plan to raise the prices of about 100 of its medications after criticism from the Trump administration, while Novartis and Merck & Co. have pledged to limit price increases as well.
The government stipulating what constitutes a “dramatic price increase” could create a de facto price ceiling that drugmakers would stay under when changing their prices, said Lev Gerlovin, vice president at Boston-based consultancy Charles River Associates, in a phone interview. It’s hard to assess whether that would have a material effect on the industry, given that the ceiling may be greater than what most manufacturers already tend to do as a matter of course. However, while cautioning that he is not a Washington observer, Gerlovin said likely industry pushback citing patient safety concerns makes the proposal appear unlikely to pass.
Can A Community Hospital Stick To Its Mission When It Goes For-Profit?
http://radio.wpsu.org/post/can-community-hospital-stick-its-mission-when-it-goes-profit
Mission Health, the largest hospital system in western North Carolina, provided $100 million in free charity care last year. This year, it has partnered with 17 civic organizations to deliver care for substance abuse by people who are low-income.
Based in bucolic Asheville, the six-hospital system also screens residents for food insecurity; provides free dental care to children in rural areas via the “ToothBus” mobile clinic; helps the homeless find permanent housing and encourages its 12,000 employees to volunteer at schools, churches and nonprofit groups.
Asheville residents say the hospital is an essential resource.
“Mission Health helped saved my life,” says Susan ReMine, a 68-year-old Asheville resident for 30 years who now lives in nearby Fletcher, N.C. She was in Mission Health’s main hospital in Asheville for three weeks last fall with kidney failure. And, from 2006 to 2008, a Mission Health-supported program called Project Access provided ReMine with free care after she lost her job because of illness.
After 130 years as a nonprofit with deep roots in the community, Mission Health announced in March that it was seeking to be bought by HCA Healthcare, the nation’s largest for-profit hospital chain. HCA owns 178 hospitals in 20 states and the United Kingdom.
The pending sale reflects a controversial national trend in the U.S. as hospitals consolidate at an accelerating pace and the cost of health care continues to rise.
“We understand the business reasons [for the deal], but our overwhelming concern is the price of health care,” says Ron Freeman, chief financial officer at Ingles Markets, a supermarket chain headquartered in Asheville with 200 stores in six states.
“Will HCA after a few years start to press the hospital to make more profit by raising prices? We don’t know,” Freeman says.
And the local newspaper, the Citizen Times, editorialized in March: “How does it help to join a corporation where nearly $3 billion that could have gone to health care instead was recorded as profit? … We would feel better were Western North Carolina’s leading health-care provider to remain master of its own fate.”
Across the U.S., the acquisition of nonprofit hospitals by corporations is raising concern among some advocates for patients and communities.
“The main motivation of for-profit companies is to grow so they can cut costs, get paid more and maximize profits,” says Suzanne Delbanco, executive director of the Catalyst for Payment Reform, an employer-led health care think tank and advocacy group. “They are not as focused on improving access to care or the community’s overall health.”
Merger mania across the U.S.
From 2013 to 2017, nearly 1 in 5 of the nation’s 5,500-plus hospitals were acquired or merged with another hospital, according to Irving Levin Associates, a health care analytics firm in Norwalk, Conn. Industry analysts say for-profit hospital companies are poised to grow more rapidly as they buy up both for-profits and nonprofits — potentially altering the character and role of public health-oriented nonprofits.
Nonprofit hospitals are exempt from state and local taxes. In return, they must provide community services and care to poor and uninsured patients — a commitment that is honored to varying degrees nationwide.
Of the nation’s 4,840 general hospitals that aren’t run by the federal government, 2,849 are nonprofit, 1,035 are for-profit and 956 are owned by state or local governments, according to the American Hospital Association.
In 2017, 29 for-profit companies bought 18 for-profit hospitals and 11 not-for-profits, according to an analysis for Kaiser Health News by Irving Levin Associates.
Sales can go the other way, too: 53 nonprofit hospital companies bought 18 for-profits as well as 35 nonprofits in 2017.
A recent report by Moody’s Investors Service predicted stable growth for for-profit hospital companies, saying they are well-positioned to demand higher rates from insurers and have less exposure to the lower rates paid by government insurance programs such as Medicare and Medicaid. In contrast, a second Moody’s report downgraded — from stable to negative — its 2018 forecast for the not-for-profit hospital sector.
‘We wanted to thrive, and not just survive’
Ron Paulus, Mission Health’s president and CEO, says he and the hospital’s 19-member board concluded last year that the future of Mission Health was iffy at best without a merger.
HCA declined to make anyone available for an interview but provided this written statement: “We are excited about the prospect of a transaction that would allow us to support the caliber of care they [Mission Health hospitals] have been providing.”
Driving Mission Health’s decision, Paulus says, were strained finances and the board’s strong feeling that the hospital needed to invest in new technology, modern data management tools and top clinical talent.
“We wanted to thrive and not just survive,” he says. “I had a healthy dose of skepticism about HCA at first. But I think we made the right decision.”
During the past four years, Paulus says, the company has had to cut costs — from between $50 million and $80 million a year — to preserve an “acceptable operating margin.” The forecast for 2019 and 2020, he says, saw the gap between revenue and expenses rising to $150 million a year.
Miriam Schwarz, executive director of the Western Carolina Medical Society, says many physicians in the area were surprised by the move and “are trying to grapple with the shift.”
“There’s concern about the community benefits, but also job loss,” Schwarz says. Still, she adds, the doctors in her region “do recognize that the hospital must become more financially secure.”
Weighed against community concerns is the prospect of a large nonprofit foundation created by the deal. Depending on the final price, the foundation could have close to $2 billion in assets.
Creation of such foundations is common when for-profit companies buy nonprofit hospitals or insurance companies. Paulus says the foundation created from Mission Health could generate $50 million or more a year to — among other initiatives — “test new care models such as home-based care … and address the causes of poor health in the community in the first place.”
In addition, HCA will have to pay upward of $10 million in state and local taxes.
Mixed results
Industry analysts say the hospital merger and consolidation trend nationwide is inevitable given the powerful forces afoot in health care.
That includes pressure to lower prices and costs and improve quality, safety and efficiency; to modernize information technology systems and equipment; and to do more to improve overall health.
But academics and consumer advocates say hospital consolidation yields mixed results. While mergers — especially purchases by for-profit companies — provide much-needed capital and financial stability, competition is stifled, and that’s often led to higher prices.
Martin Gaynor, a professor of economics and health policy at Carnegie Mellon University, and colleagues examined 366 hospital mergers from 2007 to 2011 and found that prices were, on average, 12 percent higher in areas where one hospital dominated the market versus areas with at least four rivals. Another recent study found that 90 percent of U.S. cities today have a “highly concentrated” hospital market. Asheville is one, and Mission Health is dominant there.
“The evidence is overwhelming at this point,” Gaynor says. “Mergers solve some problems for hospitals, but they don’t make health care less expensive or better. In fact, prices usually go up.”
Mission Health CEO Paulus says he believes HCA is committed to restraining price increases and the growth in costs.
If no obstacles arise, Paulus says, HCA’s purchase of Mission Health would be formalized in August and finalized in November or December, pending state regulatory approval.
CALIFORNIA’S ACA RATES TO RISE 8.7% NEXT YEAR
https://www.healthleadersmedia.com/finance/californias-aca-rates-rise-87-next-year
About 10% of individual policyholders in and outside the exchange are expected to drop their coverage next year because the ACA fines were eliminated.
Premiums in California’s health insurance exchange will rise by an average of 8.7 percent next year, marking a return to more modest increases despite ongoing threats to the Affordable Care Act.
The state marketplace, Covered California, said the rate increase for 2019 would have been closer to 5 percent if the federal penalty for going without health coverage had not been repealed in last year’s Republican tax bill.
The average increase in California is smaller than the double-digit hikes expected around the nation, due largely to a healthier mix of enrollees and more competition in its marketplace. Still, health insurance prices keep growing faster than wages and general inflation as a result of rising medical costs overall, squeezing many middle-class families who are struggling to pay their household bills.
The 8.7 percent increase in California ends two consecutive years of double-digit rate increases for the state marketplace.
“It’s not great that health care costs are still increasing that much, but the individual market is not sticking out like a sore thumb like it has in other years,” said Kathy Hempstead, senior adviser at the Robert Wood Johnson Foundation. “It’s falling back to earth.”
The future may be less bright. An estimated 262,000 Californians, or about 10 percent of individual policyholders in and outside the exchange, are expected to drop their coverage next year because the ACA fines were eliminated, according to the state. Peter Lee, executive director of Covered California, warned that the exodus of healthier consumers will drive up insurance costs beyond 2019 — not just for individual policyholders but for California employers and their workers.
“We are paying, in essence, a surcharge for federal policies that are making coverage more expensive than it should be,” Lee said in an interview. “There will be more of the uninsured and more uncompensated costs passed along to all of us.”
Critics of the Affordable Care Act say it has failed to contain medical costs and left consumers and taxpayers with heavy tabs . Nearly 90 percent of Covered California’s 1.4 million enrollees qualify for federal subsidies to help them afford coverage.
Foiled in its attempt to repeal Obamacare outright, the Trump administration has taken to rolling back key parts of the law and has slashed federal marketing dollars intended to boost enrollment. Instead, the administration backs cheaper alternatives, such as short-term coverage or association health plans, which don’t comply fully with ACA rules and tend to offer skimpier benefits with fewer consumer protections.
Taken together, those moves are likely to draw healthier, less expensive customers out of the ACA exchanges and leave sicker ones behind.
Nationally, 2019 premiums for silver plans — the second-cheapest and most popular plans offered — are expected to jump by 15 percent, on average, according to an analysis of 10 states and the District of Columbia by the Avalere consulting firm. Prices vary widely across the country, however. Decreases are expected in Minnesota while insurers in Maryland are seeking 30 percentincreases.
In California, exchange officials emphasized, consumers who shop around could pay the same rate as this year, or even a little less.
Christy McConville of Arcadia already spends about $1,800 a month on a Blue Shield plan for her family of four, opting for “platinum” coverage, the most expensive type. Her family doesn’t qualify for federal subsidies in Covered California.
She’s worried about further increases and doesn’t want to switch plans and risk losing access to the doctors she trusts. “We’re getting right up to the limit,” McConville said.
Amanda Malachesky, a nutrition coach in the Northern California town of Petrolia, said the elimination of the penalty for being uninsured makes dropping coverage more palatable. Her family of four pays almost $400 a month for a highly subsidized Anthem Blue Cross plan that has a $5,000 deductible.
“I’ve wanted to opt out of the insurance model forever just because they provide so little value for the exorbitant amount of money that we pay,” said Malachesky, who recently paid several hundred dollars out-of-pocket for a mammogram. “I’m probably going to disenroll … and not give any more money to these big bad insurance companies.”
Covered California is aiming to stem any enrollment losses by spending more than $100 million on advertising and outreach in the coming year. In contrast, the Trump administration spent only $10 million last year for advertising the federal exchange across the 34 states that use it.
Also, California lawmakers are looking at ways to fortify the state exchange. State legislators are considering bills that would limit the sale of short-term insurance and prevent people from joining association health plans that don’t have robust consumer protections.
However, California hasn’t pursued an insurance mandate and penalty at the state level, which both health plans and consumer advocates support. New Jersey and Vermont have enacted such measures.
Lee said it’s up to lawmakers to decide whether a state mandate makes sense.
David Panush, a Sacramento health care consultant and a former Covered California official, said some lawmakers may be reluctant to push the idea, even in deep-blue California.
“The individual mandate has always been the least popular piece of the Affordable Care Act,” he said.
Despite the constant uncertainty surrounding the health law, many insurers nationally are posting profits from their ACA business and some plans are looking to expand further on the exchanges.
In California, the same 11 insurers are returning, led by Kaiser Permanente and Blue Shield of California. Together, those two insurers control two-thirds of exchange enrollment. (Kaiser Health News, which publishes California Healthline, is not affiliated with Kaiser Permanente.)
The Covered California rate increases are fairly uniform across the state. Premiums are climbing 9 percent across most of Southern California as well as in San Francisco. Monterey, San Benito and Santa Cruz counties faced the highest increase at 16 percent, on average.
The rates are subject to state regulatory review but are unlikely to change significantly. Open enrollment on the exchange starts Oct. 15.
The ACA’s expansion of coverage has dramatically cut the number of uninsured Californians. The proportion of Californians lacking health insurance fell to 6.8 percent at the end of last year, down from 17 percent in 2013, federal data show.
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HENRY KOTULA 