The Affordable Care Act, also known as Obamacare, is approaching the finish line in the form of the Open Enrollment Period‘s conclusion. While various aspects of Obamacare were implemented before this time and more will be implemented afterwards, the Open Enrollment Period serves as a measure of progress for the Affordable Care Act. Pundits, politicians, and the press will likely use (or misuse) the final enrollee data from the open enrollment period to:
- Infer public acceptance of the Affordable Care Act at the state and national levels
- Evaluate the Affordable Care Act’s success toward its goal of reducing the uninsured population
- Extrapolate costs relating to premium and out-of-pocket subsidies (though numbers will be needed on the percentage of enrollees who paid premiums and thus activated their health coverage)
- Speculate on 2015 premium rates given the risk pool of 2014 enrollees
The last bullet point will be a game of “liar’s poker” unless information becomes available on the health status of enrollees. While there are trends regarding healthcare utilization of young vs. old, men vs. women, middle class vs. low income, etc., they remain trends that may or may not apply to the actual population of enrollees in Obamacare. The heath status of the actual enrollees in the inaugural open enrollment period will determine the medical claims that drive usage…for the most part. There is still the matter of deductibles and preventive care. Deductibles, as significant out-of-pocket costs, can potentially reduce the rate at which healthcare services are used during the deductible period. Preventive care, in some cases, can reduce overall medical claims if a potentially expensive condition is addressed at a nascent period.
Another variable that may affect premium rates is the percentage of new enrollees that were previously insured in the individual health insurance market. If there is a strong representation of the previously insured, this may translate to lower medical claims and lower premiums since the previously insured were sufficiently healthy to pass medical underwriting in the pre-reform individual health insurance market.
In today’s highly politicized discussions of health insurance costs, the degree to which inefficient insurance company operations contribute to higher costs is often overlooked. High start-up expenses and considerable staffing requirements to meet regulatory burdens have discouraged entrepreneurs from entering the market with disruptive technological innovations and more efficient processes.
Oscar Health Insurance aspires to change this situation. Launching its health insurance coverage in January 2014, the company currently operates within 9 counties of New York State. Armed with over $50 million in funding, Oscar leverages many of interface design and user experience lessons from online retailers for their customer web site. HealthPocket had the opportunity to interview one of Oscar’s three co-founders, Mario Schlosser, to discuss how Oscar intends to change health insurance for the better.
What is the foundation of Oscar’s aspiration to transform health insurance?
“Our data infrastructure. In a traditional insurance company, data exchange is painfully slow between healthcare providers and the insurance companies paying for the services. Once the data arrives at the insurance company, it may live in isolation, locked away from other types of health data which, in turns, limits the insurance company’s ability to understand trends in enrollee medical claims and make real-time interventions that can reduce expenses.”
“At Oscar, we created a centralized data repository that serves as a canonical source of truth for all our systems, whether it be our claims database, our consumer-facing web site, our in-house clinical database, etc. This centralized data strategy allows us to understand our enrollees better and make certain they are receiving the care they need in order to improve health outcomes. This data strategy will allow Oscar to reduce spending on issues such as avoidable hospital re-admissions or the use of face-to-face doctor visits when telemedicine would be more convenient and cost effective for the enrollee. Rapid data exchange between healthcare providers and Oscar also helps us improve customer service by resolving issues like drug prior authorization requests quickly.”
What are the challenges you face when trying to leverage ‘big data’ to improve patient outcomes and lower costs?
“We see two main challenges with big data. 1) Educating consumers on measures of healthcare quality and efficiency so that these measures may be actively used in their healthcare decisions. 2) Making the different types of healthcare information more accessible to consumers. For example, instead of making consumers use a variety of sites to look up hospital quality and other important healthcare information, Oscar would like to integrate all this the data within a single web experience so that it is easier to access and more likely to be used.”
What, if any, changes in the regulatory environment would allow Oscar to serve consumers better while enhancing its business prospects?
“Plans on the New York health insurance exchange have restrictions on plan designs. If these plan design restrictions were relaxed, more niche designs could be explored and we could better match our insurance offerings to different needs within the public. The ability to have more flexibility on co-pyaments and deductibles while maintaining actuarial value requirements would be welcomed.”
Does venture capital funding create any unique challenges for a health insurer like Oscar?
“Our investors include General Catalyst, Thrive Capital, and Khosla. They want Oscar to transform health insurance and they invested for the long haul. We don’t have short-term profit pressures.”
Health & Human Services released the latest enrollment numbers for January. There were 1,146,071 enrollments. In a press release from HHS, Kathleen Sebelius made the following comment about the latest enrollment numbers:
“Enrollment in the Health Insurance Marketplace continued to rise in January, with a 53 percent increase in overall enrollment over the prior three month reporting period, with young adult enrollment outpacing all other age groups combined, HHS Secretary Kathleen Sebelius announced today.”
Not surprisingly, critics of the Affordable Care Act were curious why rolling three month periods were being compared as opposed to month-to-month comparisons. In December 2013, the month prior, there were 1,788,000 enrollments. The latest enrollment figure, in comparison, represents a 36% decrease in enrollment volume.
So what do we make of these dueling enrollment evaluations? First, the rolling three month comparison was nothing short of a silly attempt to position a dip in enrollment as an increase. Second, the use of January enrollment numbers as evidence of declining interest in enrollment is hard to justify inasmuch as the earliest people could get coverage was January 1st and it is reasonable to speculate that this condition contributed to an increase in enrollment activity for December. The January numbers, in contrary, appear to be evidence of sustained enrollment interest on the part of the public.
So what’s the truth about the latest enrollment numbers? I’m not entirely sure what the truth is and here’s why:
- The January enrollment numbers represent a period longer than a month (December 29, 2013 to February 1, 2014) so there is a bit of inflation in the January enrollment volume
- It is unclear whether some portion of the January enrollees were people that had problems enrolling in the end of December and had to complete their enrollments in early January
- We are currently uncertain of the percentage of enrollees who have not paid their premiums and, thus, effectively lack insurance coverage
I expected a dip in enrollment volume for January due to the motivation of consumers to enroll in December in order to get January 1st coverage so the January numbers don’t strike me as an excessively negative bellwether. At this point, I would still expect a big increase in enrollment in March as the open enrollment period comes to an end. However, I would also be surprised if the 7 million enrollee goal is reached given that we have 3.3 million enrollees and 58 days from February 2 through March 31st to enroll the remaining 3.7 million people. That would be a rate of approximately 63,793 enrollees a day. That seems a pretty tall order at this point.
In my earlier blog post “Welcome to 2013…I Mean 2014” I wrote “Assuming the employer mandate for 2015 is not delayed, we should be able to analyze its initial effect (or lack thereof) on business hiring in Q4 2014.” Why did I hedge and say “Assuming the employer mandate for 2015 is not delayed”? The short answer is that the employer mandate was already delayed once so it seemed logical that it might be delayed again. Alongside this modification of the law, there was also the decision to move the open enrollment period until after the November midterm elections. This move effectively has the nation vote before consumers in individual health insurance market begin shopping for 2015 health plans and see the new premium rates. The justification given for the new enrollment period dates was that it provided insurance companies more time to evaluate enrollments and medical claims. It was an odd justification. Looking out for the interests of insurance companies has not been a priority for the health reform effort. Moreover, the later in the year that you evaluate medical claims from health plan enrollees, the greater the chance for politically unattractive upward premium adjustments. Why? Deductibles commence at the beginning of the year (for those with coverage beginning on January 1st). During a deductible period, you would expect a generally slower rate of healthcare usage as enrollees are exposed to greater out-of-pocket costs. After the deductible is satisfied, we would expect to see some degree of medical service use acceleration for those enrollees who put off some procedures or treatments until the out-of-pocket costs would represent a smaller lump sum. The later in the year you evaluate medical claims, the greater the chance of more claims and/or higher claims. More medical claim expense = higher premiums.
The Wall Street Journal reported today that the administration has decided to delay the employer mandate for providing health insurance to employees in cases where businesses have 50 to 99 full-time workers or in some cases where businesses with 100 or more employees and can demonstrate they provide health coverage to at least 70% of their full-time workers. This latest delay has led some critics of the Affordable Care Act to speculate an administration fear of the employer mandate steering too many businesses to Q4 employee reductions in anticipation of the mandate’s 2015 implementation. The reality is that it is unclear how business community as a whole would have responded. There are various studies with contradictory predictions regarding the employer mandate’s effect upon employment. However, the latest mandate suspension has kept in play the discussion of what aspects of the Affordable Care Act are non-negotiable and what aspects are enforceable at the discretion of the government. This situation could produce considerable civic frustration unless both political parties would be willing to include the public as a decision maker within the health reform implementation process.
I have family as well as friends who work in healthcare. Whenever possible, I try to ask these people about their experiences in order to gain some additional context for the larger data trends I study. Often I find myself set in new directions with respect to research but sometimes I just laugh. Below is an instance of the latter.
One of my wife’s relatives works in nursing and I asked if anything new or interesting was happening in her work in 2014. She said the closest thing to a change happened a few weeks ago when the elevator doors opened on her hospital floor revealing a man who looked lost.
“Can I help you?” my relative asked.
“Where am I?”
“Fifth floor. Providence Hospice and Home Care.”
“What do you do?”
“We can draw your blood, change your catheter, give you an enema, or help you die with dignity. What do you need?”
HealthPocket released a new InfoStat study this morning, “Consumers Risk Higher Healthcare Costs When Using Shortcuts in Health Plan Shopping.” The study examined the lowest to highest deductibles as well as medical out-of-pocket cost caps for the new individual & family marketplace metal plans in 34 states.
In the bronze, silver, and gold tiers, there were deductible ranges spanning thousands of dollars. The silver tier had the largest range of deductibles with a low of $0 and a high of $6,250. The platinum tier had the smallest deductible range with a low of $0 and a high of $1,000.
Bronze plans had the smallest range of caps with a low of $4,350 and a high of $6,350. Both gold and platinum plans had the widest cap range, with a $4,850 difference between the lowest and highest caps.
Bronze plans had on average the highest deductibles and caps on annual out-of-pocket medical costs out of the four metal plans in the individual & family marketplace. However there were bronze plans with lower deductibles than some gold plans in the same county. Moreover there were platinum plans with higher caps on annual out-of-pocket medical costs than some bronze plans in the same county.
HealthPocket also examined small business marketplace metal plans in 32 states and found results similar to what was found for the individual & family marketplace. Since national averages on deductibles and out-of-pocket caps for each metal tier can be misleading, consumers are advised to carefully review their local health plan options and judge plans by their individual cost-sharing expenses (deductibles, caps, copayments, coinsurance) rather than choosing plans solely based on their metal tier and premiums.
The year has changed but the battle lines in health reform have not. I expect 2014 to be 2013 redux. The enrollment volume for federal and state exchanges will continue to fund considerable blindness and insight on the part of each political party. I also believe we have not heard the last technical problem/security problem story regarding an exchange. I may be wrong but the lack of transparency regarding the present state of security testing on the federal exchange is disconcerting. Out-of-pocket costs in the new Affordable Care Act plans will remain a story but I suspect we will see much greater sensitivity to cost-sharing increases among the unsubsidized not only because they are ineligible for cost-sharing reduction plans but also because they’ll be (I suspect) more less likely to purchase a higher tier metal plan with lower deductibles.
What do I expect to change in 2014? I think we’ll see more public opinion on health reform in the news but it will likely be in the form of dueling testimonials (e.g. ACA is paradise, ACA is Armageddon) as opposed to politicians earnestly seeking public participation in future attempts at health reform in the United States. I also expect a surge in enrollments in March of this year after a dip in enrollment volume for January and February. Why? I think that those who were most motivated to obtain health insurance already have enrolled in order to have coverage by January 1st. Those who still intend to buy health insurance (but are not in a hurry) only have two major motivations to enroll by March 31st: 1) Avoid a nominal uninsured penalty for 2014, and 2) obtain coverage in 2014 rather than waiting for the next coverage period beginning January 1, 2015.
I also believe that 2014 will bring greater attention to the premium stabilization programs, that so-called “3 Rs” of risk adjustment, risk corridors, and reinsurance. This has been a largely arcane area of health reform typically ignored in the news. However, if the enrollment targets for the Affordable Care Act are significantly missed and the resulting risk pools have a widespread trend of increased health issues among enrollees then the 3 Rs will receive a lot of discussion. One of the issues with the 3 Rs is that two out of the three programs move funds among insurers, away from those with healthier risk pools and into those with more sickly risk pools. This monetary redistribution can work when there is a diverse collection of risk pools. However, the redistribution becomes stressed if there is an overall trend for all risk pools toward more sickly enrollees. The third R, however, reinsurance, is not affected by this scenario and the administration just happened to propose lowering the minimum amount of medical claims that triggers eligibility for reinsurance funding.
Assuming the employer mandate for 2015 is not delayed, we should be able to analyze its initial effect (or lack thereof) on business hiring in Q4 2014. Another story we’ll encounter is consumers’ relative satisfaction with their healthcare services received through exchange plans. While narrow networks have been in higher use for exchange plans (at least this is claimed but I have not seen data supporting or refuting this), I think consumers’ perspective on the matter will be deeply shaped by whether they previously had insurance. Those that were previously uninsured may have no problem with narrow networks while those who had prior insurance coverage may have some frustration of hospital and doctor access.