Tag Archives: Health Insurance Industry

Health insurers working the system to pad their profits

Posted on by • Posted in Uncategorized • Tagged , , , , , , , , • Leave a comment

https://www.publicintegrity.org/2015/08/17/17863/health-insurers-working-system-pad-their-profits

Image result for Health insurers working the system to pad their profits

Commentary: taking advantage of Medicare Advantage

One of the reasons the health insurance industry worked behind the scenes in 2009 and 2010 to derail Obamacare was the fear that changes mandated by the law would cut their Medicare Advantage profits. Medicare Advantage plans are federally funded but privately run alternatives to traditional fee-for-service Medicare.

Although the industry’s biggest trade group, America’s Health Insurance Plans, said repeatedly that insurers supported Obamacare, the group was secretly financing the U.S. Chamber of Commerce’s TV campaign against reform. Among the companies most concerned about the law were those benefiting from overpayments the federal government had been making to their Medicare Advantage plans since George W. Bush was in the White House.

Bush and other Republicans saw the Medicare Advantage program as a way to incrementally privatize Medicare. To entice insurers to participate in the program, the federal government devised a payment scheme that resulted in taxpayers paying far more for people enrolled in the Medicare Advantage plans than those who remained in the traditional program. The extra cash enables insurers to offer benefits traditional Medicare doesn’t, like coverage for glasses and hearing aids, and to cap enrollees’ out-of-pocket expenses.

When the Affordable Care Act became law in 2010, the payments to Medicare Advantage plans exceeded traditional Medicare payments by 14 percent. To end what they considered an unfair advantage for private insurers, and to reduce overall spending on Medicare, Democrats who wrote the reform law included language to gradually eliminate the over-payments.  So far, the 14 percent disparity has been reduced to 2 percent.  The final reductions are scheduled to be made next year.

Despite that decrease, the fears by Republicans and insurance company executives that the reductions would lead to a steady decline in Medicare Advantage enrollees have proved to be completely unfounded. In fact, the plans have continued to grow at a fast clip.

In March 2010, the month Obamacare became law, 11.1 million people were enrolled in Medicare Advantage plans—one of every four people eligible for Medicare. That was an increase from the 10.5 million Medicare Advantage enrollees in March 2009. Since then, Medicare Advantage membership has grown by more than 8 percent annually. Now 17.3 million—one in three people eligible for Medicare—are enrolled in private plans.

As Center for Public Integrity senior reporter Fred Schulte has written over the past year, many insurers have discovered that even though the overpayments are being reduced, they can boost profits another way: by manipulating a provision of a 2003 law that allows them to get additional cash for enrollees deemed to be sicker than average.

A risk-coding program was put in place by the government primarily because insurers were targeting their marketing efforts to attract younger and healthier—and thus cheaper— beneficiaries. Under the risk-coding program, insurers are paid more to cover patients who are older and sicker; the idea was to encourage the firms to cover those folks by offering a financial incentive. They get more money, for example, to cover someone with a history of heart disease than they do for someone with no such risk.  Last week Schulte uncovered whistleblower accusations that a medical consulting firm and more than two dozen Medicare Advantage plans have been ripping taxpayers off by conducting in-home patient exams that allegedly overstated how much the plans should be paid.

The Center for Medicare and Medicaid Services has refused to provide information that would enable taxpayers to know just how widespread fraud and abuse in the Medicare Advantage program might be. But CMS announced earlier this year that it will implement plans designed to make it harder for insurers to manipulate the risk scores. As you can imagine, insurers have howled and have put on a full court press to get CMS to scuttle those plans, but so far the agency says it intends to go forward. We’ll see.

This all matters to insurers because more and more of their revenue and profits are coming from the Medicare and Medicaid programs. When Aetna announced a few weeks ago that it planned to buy Humana, which has more than three million Medicare Advantage members—second only to UnitedHealthcare—Aetna and Humana executives said 56 percent of revenues from the combined company would come from the government programs.

Indeed, some of the firms would not be growing at all if it weren’t for their government business. When Aetna announced second quarter earnings earlier this month, the company noted that its membership in Medicare and Medicaid programs was up 8 percent over the same period last year. By contrast, its commercial membership was down from last year.

Despite that dip in commercial membership, Aetna surprised Wall Street with stronger profits than financial analysts had expected.

So don’t expect the Medicare Advantage program to wither on the vine because of Obamacare. If anything, it will continue to grow—as will the profits of the private insurers that participate in the program.

The Real Reason the U.S. Has Employer-Sponsored Health Insurance

Posted on by • Posted in Uncategorized • Tagged , , , , , , , , , • Leave a comment

Image result for The Real Reason the U.S. Has Employer-Sponsored Health Insurance

The basic structure of the American health care system, in which most people have private insurance through their jobs, might seem historically inevitable, consistent with the capitalistic, individualist ethos of the nation.

In truth, it was hardly preordained. In fact, the system is largely a result of one event, World War II, and the wage freezes and tax policy that emerged because of it. Unfortunately, what made sense then may not make as much right now.

Well into the 20th century, there just wasn’t much need for health insurance. There wasn’t much health care to buy. But as doctors and hospitals learned how to do more, there was real money to be made. In 1929, a bunch of hospitals in Texas joined up and formed an insurance plan called Blue Cross to help people buy their services. Doctors didn’t like the idea of hospitals being in charge, so some in California created their own plan in 1939, which they called Blue Shield. As the plans spread, many would purchase Blue Cross for hospital services, and Blue Shield for physician services, until they merged to form Blue Cross and Blue Shield in 1982.

Most insurance in the first half of the 20th century was bought privately, but few people wanted it. Things changed during World War II.

In 1942, with so many eligible workers diverted to military service, the nation was facing a severe labor shortage. Economists feared that businesses would keep raising salaries to compete for workers, and that inflation would spiral out of control as the country came out of the Depression. To prevent this, President Roosevelt signed Executive Order 9250, establishing the Office of Economic Stabilization.

This froze wages. Businesses were not allowed to raise pay to attract workers.

Businesses were smart, though, and instead they began to use benefits to compete. Specifically, to offer more, and more generous, health care insurance.

Then, in 1943, the Internal Revenue Service decided that employer-based health insurance should be exempt from taxation. This made it cheaper to get health insurance through a job than by other means.

After World War II, Europe was devastated. As countries began to regroup and decide how they might provide health care to their citizens, often government was the only entity capable of doing so, with businesses and economies in ruin. The United States was in a completely different situation. Its economy was booming, and industry was more than happy to provide health care.

This didn’t stop President Truman from considering and promoting a national health care system in 1945. This idea had a fair amount of public support, but business, in the form of the Chamber of Commerce, opposed it. So did the American Hospital Association and American Medical Association. Even many unions did, having spent so much political capital fighting for insurance benefits for their members. Confronted by such opposition from all sides, national health insurance failed — for not the first or last time.

In 1940, about 9 percent of Americans had some form of health insurance. By 1950, more than 50 percent did. By 1960, more than two-thirds did.

One effect of this system is job lock. People become dependent on their employment for their health insurance, and they are loath to leave their jobs, even when doing so might make their lives better. They are afraid that market exchange coverage might not be as good as what they have (and they’re most likely right). They’re afraid if they retire, Medicare won’t be as good (they’re right, too). They’re afraid that if the Affordable Care Act is repealed, they might not be able to find affordable insurance at all.

This system is expensive. The single largest tax expenditure in the United States is for employer-based health insurance. It’s even more than the mortgage interest deduction. In 2017, this exclusion cost the federal government about $260 billion in lost income and payroll taxes. This is significantly more than the cost of the Affordable Care Act each year.

This system is regressive. The tax break for employer-sponsored health insurance is worth more to people making a lot of money than people making little. Let’s take a hypothetical married pediatrician with a couple of children living in Indiana who makes $125,000 (which is below average). Let’s also assume his family insurance plan costs $15,000 (which is below average as well).

The tax break the family would get for insurance is worth over $6,200. That’s far more than a similar-earning family would get in terms of a subsidy on the exchanges. The tax break alone could fund about two people on Medicaid. Moreover, the more one makes, the more one saves at the expense of more spending by the government. The less one makes, the less of a benefit one receives.

The system also induces people to spend more money on health insurance than other things, most likely increasing overall health care spending. This includes less employer spending on wages, and as health insurance premiums have increased sharply in the last 15 years or so, wages have been rather flat. Many economists believe that employer-sponsored health insurance is hurting Americans’ paychecks.

There are other countries with private insurance systems, but none that rely so heavily on employer-sponsored insurance. There are almost no economists I can think of who wouldn’t favor decoupling insurance from employment. There are any number of ways to do so. One, beloved by wonks, was a bipartisan plan proposed by Senators Ron Wyden, a Democrat, and Robert Bennett, a Republican, in 2007. Known as the Healthy Americans Act, it would have transitioned everyone from employer-sponsored health insurance to insurance exchanges modeled on the Federal Employees Health Benefits Program.

Employers would not have provided insurance. They would have collected taxes from employees and passed these onto the government to pay for plans. Everyone, regardless of employment, would have qualified for standard deductions to help pay for insurance. Employers would have been required to increases wages over two years equal to what had been shunted into insurance. Those at the low end of the socio-economic spectrum would have qualified for further premium help.

This isn’t too different from the insurance exchanges we see now, writ large, for everyone. One can imagine that such a program could have also eventually replaced Medicaid and Medicare.

There was a time when such a plan, being universal, would have pleased progressives. Because it could potentially phase out government programs like Medicaid and Medicare, it would have pleased conservatives. When first introduced in 2007, it had the sponsorship of nine Republican senators, seven Democrats and one independent. Such bipartisan efforts seem a thing of the past.

We could also shift away from an employer-sponsored system by allowing people to buy into our single-payer system, Medicare. That comes with its own problems, as The Upshot’s Margot Sanger-Katz has written. She also has covered the issues of shifting to a single-payer system more quickly.

It’s important to point out that neither of these options has anything even close to bipartisan support.

Without much pressure for change, it’s likely the American employer-based system is here to stay. Even the Affordable Care Act did its best not to disrupt that market. While the system is far from ideal, Americans seem to prefer the devil they know to pretty much anything else.

Despite jitters, some health insurers start to prosper

Posted on by • Posted in Uncategorized • Tagged , , , , , , , , , , • Leave a comment

http://www.tampabay.com/news/business/1-inch-1-inch-of-body-type-1-inch-1-inch-of/2335280

Image result for health insurance company profits

 

It has not been a market for the faint of heart.

Supporters of the Affordable Care Act achieved a major victory this past week when, thanks to cajoling and arm-twisting by state regulators, the last “bare” county in the United States — in rural Ohio — found an insurer willing to sell health coverage through the law’s marketplace there. So despite earlier indications that insurance companies would stop offering coverage under the law in large parts of the country, insurers have now agreed to sell policies everywhere.

But a moment of truth still looms for the industry in the coming weeks under the law known as Obamacare. Companies must set their final plans and premiums by late September, even as the Trump administration continues to threaten to cut off billions of dollars in government subsidies promised by the legislation. Insurers are also awaiting Senate hearings set to start Sept. 6 for a hint of what steps, if any, lawmakers may take to stabilize the market.

With congressional Republicans’ yearslong quest to dismantle the Affordable Care Act dead for now, the fate of the landmark law depends in large part on the health of the insurance marketplaces and the ability of insurers to make a viable business out of selling coverage to individuals. When the law passed seven years ago, insurers saw a potential bonanza: tens of millions of brand-new paying customers, many backed by generous government subsidies and required by the new law to have health coverage. Now, about four years after the law’s marketplaces opened for business, most of the industry’s biggest players have pulled out.

Yet the continuing churn among insurers and the anxiety pervading the industry have obscured an encouraging fact: Many of the remaining companies have sharply narrowed their losses, analysts say, and some are even beginning to prosper.

“Outside of the noise,” the surviving companies “are seeing a path forward in this marketplace,” said Deep Banerjee, an analyst with Standard & Poor’s who has examined the financial results of more than two dozen Blue Cross insurers.

“It is still a new market,” he added, “and everyone is adjusting to it.”

The healthier business outlook has been achieved at a big cost to consumers. To stanch their losses, many companies raised their prices substantially for this year while narrowing their networks of providers to hold down costs.

In some cases, companies will seek even higher rates for 2018; the lone insurer left in Iowa is asking for a nearly 60 percent increase, on average.

Among the insurers now making money in the individual market and expanding is Centene, a for-profit company. Some of the Blue Cross insurers, including Health Care Service Corp., which operates plans in multiple states, including Texas and Illinois, and Independence Blue Cross, which has 300,000 customers in Pennsylvania and New Jersey, began to turn a profit in the market this year.

Oscar Health, a venture capital-backed insurance startup, lost roughly $200 million last year but, sensing a more promising future, plans to enter three more states and expand in California and Texas.

Centene made use of its experience, including setting up networks of hospitals and doctors that care for Medicaid patients, to sell coverage. The company now insures about 1.1 million people in the individual market.

“For 2018, we intend to grow this profitable segment of our business,” Michael Neidorff, the company’s chief executive, told investors last month.

Death spiral? Obamacare insurers may be having ‘best year’ yet under ACA

Posted on by • Posted in Uncategorized • Tagged , , , , , , • Leave a comment

http://www.charlotteobserver.com/news/politics-government/article160601814.html

Image result for death spiral

New data on the improving finances of the nation’s individual insurers are calling into question repeated Republican claims that Obamacare marketplaces are collapsing under the Affordable Care Act.

For months, Republican leaders from President Donald Trump and Health and Human Services Secretary Tom Price to House Speaker Paul Ryan have said Obamacare was crumbling under its own weight and could not be saved. And this week, when HHS announced a 38 percent decline in the number of insurers that want to offer coverage next year in states that use the federal marketplace, Price said, “The situation has never been more dire.”

But new research released Monday by the Kaiser Family Foundation shows that profitability and other financial measures for individual insurers have dramatically improved over the last year.

“Now it looks like they’re on track to be profitable and that they’re actually having the best year that they’ve had since the ACA began,” said Cynthia Cox, associate director of health reform at Kaiser.

The share of premiums paid out as medical claims by individual insurers fell to 75 percent in the first quarter of 2017, down from 86 percent in the first three months of 2016 and 88 percent in the first quarter of 2015.

In addition, average monthly premium income exceeded monthly per-enrollee medical claims by roughly $100 in the first quarter of 2017, Kaiser reported. That’s up from about $48 in the first quarter of 2016 and just over $36 in the first quarter of 2015.

Throughout their push to repeal the Affordable Care Act, Republicans have said the market troubles in some areas were proof that Obamacare was unraveling and legislative change was needed. In a pair of tweets on May 4, Trump declared that ObamaCare was “dead” and the individual market was in a “Death spiral!,” in which insurance offerings disappear as premium hikes force all but the sickest to drop coverage.

Cox disputed that assessment: “There’s not really signs of a death spiral here,” she said.

The report, based on insurers’ first-quarter financial reports filed with the National Association of Insurance Commissioners and compiled by Mark Farrah Associates, comes as Senate Majority Leader Mitch McConnell struggles to find 50 votes to pass his Obamacare repeal legislation. Facing opposition from some conservatives, he has expressed a willingness to negotiate with Democrats on a legislative fix of the ACA as Republicans try to re-draft their legislation and move forward next week.

But Monday’s report could make across-the-aisle appeals more difficult, as the data indicates insurers could be on the verge of righting their financial ship.

In a letter to McConnell on Monday, four Democratic senators — Charles Schumer of New York, Debbie Stabenow of Michigan, Richard Durbin of Illinois and Patty Murray of Washington — urged McConnell make “common sense reforms” such as guaranteeing the cost-sharing payments, creating a permanent reinsurance program and finding solutions for areas without insurers.

Certainly, some marketplaces remain under enormous pressure. Far fewer people than originally expected enrolled into marketplace coverage and those who did were sicker, older and more costly than insurers expected. As losses mounted, insurers sharply increased premiums in 2017, making coverage unaffordable for many as enrollment slipped. Some insurers exited unprofitable markets altogether, leaving 38 rural counties in Ohio, Indiana and Nevada with the possibility of no coverage options next year, according to Kaiser. Five states — Alabama, Alaska, Oklahoma, South Carolina and Wyoming — have only one insurer offering marketplace coverage this year.

The Trump administration added to insurers’ problems by relaxing enforcement of Obamacare’s individual mandate and refusing to reimburse insurers for billions of dollars of financial assistance, known as cost-saving reductions, that go to low-income plan members.

An analysis by the Oliver Wyman consulting firm estimated that up to two-thirds of insurer rate increases for 2018 “will be due to the uncertainty surrounding these two market influences” and the Congressional Budget Office estimates premiums will increase 20 percent next year if the individual mandate is not enforced.

Blue Cross Blue Shield of North Carolina, which has more than 500,000 individual policy holders, wants to increase rates on their Obamacare plans by an average of 23 percent next year.

Speaking in Washington, DC at a recent Bipartisan Policy Center panel discussion, J. Brad Wilson, President and CEO of BCBS North Carolina said, “Over 50 percent of that increase is attributable to the uncertainty of CSRs.”

The industry trade group America’s Health Insurance Plans would not comment on the report.

 

Obamacare’s exchanges face their moment of truth

Posted on by • Posted in Uncategorized • Tagged , , , , , , , • Leave a comment

https://www.washingtonpost.com/news/wonk/wp/2017/06/21/obamacares-exchanges-face-their-moment-of-truth/?_hsenc=p2ANqtz-8F5Et7EX-urS45blQiAgeOiovYIB4wXwv7AdGl1uVqRN78tI5gRCLl9EBfi-9z5qrbDTnToj2wGgiL5MWgwa6otTMFYA&_hsmi=53440118&utm_campaign=KHN%3A%20First%20Edition&utm_content=53440118&utm_medium=email&utm_source=hs_email&utm_term=.3252edd9c52b

Insurers hit a major deadline Wednesday: They must inform regulators in 39 states whether they will sell insurance on many Affordable Care Act marketplaces and, if so, how much they would like to charge.

It’s something of a moment of truth for the Affordable Care Act’s marketplaces, whose health depends in large part on the participation of private insurers. And so far, states are seeing mixed results: One major insurer has made a big pullout, while a different one announced it would expand into new states.

Insurance giant Anthem announced it would leave the marketplaces — also called exchanges — where individuals can use federal subsidies to buy health plans in two states in 2018, Indiana and Wisconsin. Oscar Health, a start-up company that was co-founded by Ivanka Trump’s brother-in-law, announced it would expand in Ohio, New Jersey, Texas, Tennessee, California and New York.

The deadline applies to all 39 states whose marketplaces are run by the federal government. An evolving map by the Kaiser Family Foundation showing which counties are at risk of having no insurance options next year highlights 44 counties in four states, where about 30,000 people buy insurance through the marketplaces.

People who buy individual insurance plans in the marketplaces can take advantage of federal tax credits that are pegged to income and reduce monthly premium payments. To date, there has not been a county with zero insurers selling policies on its marketplaces, and it’s not totally clear what will happen if a county is left without any plans. It’s possible, however, that without a functional exchange, would-be participants would have to shoulder the full costs of their health insurance — or go without.

The future of the marketplaces has become a major political talking point, with the White House declaring the marketplaces a failure. Democrats blame the struggles of the market on Republicans’ failure to offer insurers reasonable clarity about the future. In particular, insurers have complained that decision-making has been difficult without certainty that cost-sharing reduction subsidies, federal payments that help bring down the out-of-pocket costs for lower-income Americans, will be paid next year.

The business of selling health coverage on the Affordable Care Act marketplaces has become “difficult due to a shrinking and deteriorating individual market, as well as continual changes and uncertainty in federal operations, rules and guidance, including cost sharing reduction subsidies and the restoration of taxes on fully insured coverage,” Anthem said in a statement announcing the decision.

Mario Schlosser, chief executive of the start-up Oscar, made the opposite decision to expand its small footprint because of his faith in the long-term business of selling insurance to individuals.

“When the dust settles, there is more work to be done on the regulatory side to make sure it will be stable, but I’m confident we will see a stable market there,” Schlosser said.

MDwise Marketplace, an insurer in Indiana also announced it would leave that state’s exchange. That could put four counties at possible risk of having no insurer next year, according to Kaiser, although that is uncertain because a different insurer, Centene, has announced it is expanding in the state. A spokeswoman for Centene said the company was still working through the filing process and would not share information until it was complete.

Kaiser found counties in Ohio, Missouri and Washington are at risk of having no insurers.

Blue Shield CEO Says GOP’s ‘Flawed’ Health Bill Would Harm Sicker Consumers

Posted on by • Posted in Uncategorized • Tagged , , , , • Leave a comment

http://www.healthleadersmedia.com/health-plans/blue-shield-ceo-says-gop%E2%80%99s-%E2%80%98flawed%E2%80%99-health-bill-would-harm-sicker-consumers?spMailingID=10958671&spUserID=MTY3ODg4NTg1MzQ4S0&spJobID=1160435461&spReportId=MTE2MDQzNTQ2MQS2

blue-shield-calif2

The CEO’s comments break with conventional wisdom, showing that at least one insurance industry leader has strong reservations about returning to the practice of scrutinizing people’s medical histories to determine rates.