More Developments in Small Biz Market
Back in March, I submitted a post that asked whether small businesses would explore self-insurance options for employee health coverage. The basic rationale for pursuing the self-insurance option was the reduction of healthcare costs while avoiding a penalty under the Affordable Care Act (ACA) for not providing health insurance to employees.
A recent article from the Wall Street Journal discussed another health insurance option now under consideration by small employers who object to the costs of a ACA qualified health plan but would like to lessen their exposure to penalties under the ACA: skinny health plans. These so-called “skinny health plans” offer health insurance benefits at a “bare-bones” level, significantly below the Essential Health Benefits of the ACA. In fact, some may only provide preventative care services. No hospitalization, no x-rays, etc. Unlike the self-insurance option, employers who offer a skinny health plan can still face a penalty. However, the combination of the penalty amount plus the health insurance premiums for a skinny health plan may be less than fine for having no health insurance coverage at all for employees.
I can’t imagine insurance regulators letting this strategy survive for too many years, particularly if a statistically significant minority of small businesses pursue the option.
Nonprofit Health Plans Vs. For-Profit Health Plans
Today I’m releasing a new InfoStat study on premium differences between nonprofit and for-profit plans within the individual & family health insurance market. The study began with my interest in investigating the claim “Are profits making health insurance unaffordable?” The question is far from academic since the far ends of America’s political spectrum have passionately different answers on the subject. Because we have a commitment to unbiased research at HealthPocket, I employed several techniques to create as much of an ‘apples-to-apples’ comparison among plans as possible. Only health plans satisfying a base level of benefits were included in the study and premiums were compared among plans with similar deductible amounts. Comparisons were also performed among plans in the same region since state regulations, competitive environment, and the local population’s medical claim trend affect premium cost. When all was said and done, the study examined 2,372 premium quotes from 593 health plans in Pittsburgh, Miami, Kansas City, Dallas, Los Angeles, and Portland (OR). Nonprofit and for-profit health plan premiums were compared in each city for individual female and male nonsmokers ages 25 and 50.
Curious about the results? You can find them here. It would be interesting to know how many readers guessed the results correctly.
Health Datapalooza
You know you’re a geek when you look forward to a conference called “Health Datapalooza.” I have long ago come to accept my own inner geek and I no longer attempt to hide him. I’m excited about the conference. For those of you unfamiliar with Health Datapalooza, it’s an annual event held in D.C. that promotes the “newest and most innovative and effective uses of health data by companies, startups, academics, government agencies and individuals.” It provides executives like myself an opportunity to see how other organizations are leveraging the government’s Open Data Initiative and also share what we’ve been able to accomplish here at HealthPocket. Sheldon Wang, our President, will be demoing our system at the conference and discussing the variety of government data sources we integrate within our consumer experience.
One of the benefits of the conference is the way it simultaneously encourages competition and collaboration. From a competitive standpoint, companies want to demonstrate how their work sets them apart from other people in the marketplace. From a collaborative standpoint, companies engage within one another and often discuss opportunities to connect their respective competencies in new projects and business ventures.
Another important aspect of the Health DataPalooza conference is that it provides government agencies an opportunity to hear feedback on the Open Data Initiative. Anyone who has worked with government data has ideas about additional data collections they would like to see made public and how these collections could be leveraged for the public good within new businesses. Additionally, technologists can share ideas about how data access, documentation, and advanced warning on new releases can result in broader use of government data.
If you’re attending Datapalooza and read this blog, please feel introduce yourself if you see me at the conference. I’m sure we’ll all have name tags. 
Smoking & Insurance Premiums
Within the Affordable Care Act, a health insurance company can offer an applicant who smokes a premium up to 50% higher than the amount offered to a nonsmoking applicant of the same age and region. This is the only ‘rate-up’ allowance within a new Obamacare qualified health plan for a behavioral issue. Weight, alcohol/drug abuse, and other factors influencing healthcare usage cannot be used to modify a premium. Some analysts, such as Maggie Mahar, are opposed to the premium increase on smokers. She argues that the premium increase is counterproductive and will result in some smokers forgoing health insurance coverage and continuing smoking rather than receiving a more affordable premium and pursuing smoking cessation treatment.
I think smoking is a horrible addiction with which to struggle and I have both friends and family members who have suffered from the practice. However, I am uncomfortable with the idea of removing the premium rate-up for smokers. Smoking cessation medications such as Chantix can have unpleasant side effects and it can be easier to discontinue the medication than to continue the process to completion. It seems to me that a rate-up would be one motivation to help smokers stick with a smoking cessation therapy especially if insurers would return the annual rate-up amount to a smoker that successfully completed the therapy. In the end, we want smokers to stop smoking for their own benefit as well as reducing medical costs paid by insurers, government, and tax payers through subsidies.
It would be interesting to see a large scale test that examined the rate of smoking cessation commencement and success for 1) health plan enrollees who do have to pay the premium rate, 2) health plan enrollees who do not have to pay the premium rate, and 3) health plan enrollees who have the premium rate-up cost returned at the end of the end if smoking cessation treatment is successfully completed. We will have data for options 1 and 2 since the rate-up is part of Obamacare and some states are eliminating the rate-up. Hopefully option 3 will be pursued some time in the future as well.
If we eventually have adequate data for comparative analysis on the three options, it will be interesting to see which option is most successful at reducing smoking among plan beneficiaries. However, there is always the possibility that none of the options will produce significantly different results from the other. All analysts are vulnerable to ”the slaying of a beautiful hypothesis by an ugly fact.”
A Step in the Right Direction…
Last week there was a great deal of press attention given to the release of hospital-specific charges for the 100 most frequently billed discharges paid under Medicare in 2011. The data was released through the government’s CMS.gov web site and included data from more than 3,000 hospitals across the United States. Despite other research that has demonstrated considerable disparities in costs for the same medical procedure at different hospitals, the volume of data provided by Medicare demonstrates how pervasive a problem this is. Consumers are shocked to read about joint replacement that cost around $5,000 in one hospital and over $200,000 at another hospital. Some analysts are shocked that consumers are so shocked. Wide variations in prices are predictable when both consumers and competitors have limited means to compare the cost of services.
Will the release of CMS.gov data drive prices down? I think it’s a step in the right direction but, in and of itself, it won’t bring down prices in the short-term. For people that have insurance, their carrier has negotiated rates with participating hospitals. If the out-of-pocket costs are the same for the patient regardless of the provider, why would a consumer be motivated to use a less expensive provider? Worse yet, in the absence of any quality data the consumer may assume more expensive services means higher quality. For people without insurance, it is unlikely that the majority of them will download the CMS data to evaluate hospital costs prior to a medical procedure. While there are some web sites that attempt to provide medical procedure costs across hospitals, the scope and accuracy of data is a challenge.
Legislation has been introduced in Congress that directs the Agency for Healthcare Research and Quality (AHRQ) to analyze the types of medical price information most useful to consumers and recommend how this information could be distributed in a simple manner. This bill, the Health Care Price Transparency Promotion Act of 2013, also requires hospitals to publish prices for certain inpatient and outpatient medical procedures. Whether or not this legislation passes, it indicates that our political class is becoming more sensitive to the need for price transparency in healthcare.
Affordability & The Affordable Care Act
HealthPocket released an InfoPoll survey today that investigated how consumers would judge the success or failure of the Affordable Care Act in 2014. Consumers were given options related to Affordable Care Act legislation: “Premium affordability,” “% of people uninsured,” “% of people keeping existing health plan,” “% of people keeping their doctor” and “breadth of insurance benefits.”
For the 1,001 survey respondents, the most popular option chosen within this selection was “Premium Affordability” at 38%. The percentage of people uninsured was the second most popular answer at 30%. None of the remaining options gathered more than 13% support from the people answering the survey.
For those who chose “% of uninsured” as the answer, one assumes that they will view the Affordable Care Act as a success in 2014 since it is very unlikely that the number of uninsured will increase due to the legislation. Those that chose “premium affordability” are harder to predict with respect to their future evaluation of the Affordable Care Act since premiums can be affected by government tax credits.
One of the areas not explored by the survey are additional criteria by which the Affordable Care Act may be evaluated. The options selected tied closely to areas of the health insurance market closely affected by the legislation. Other issues such as clinical outcomes of care or healthcare-related deficit spending were not explored as potential criteria by which the Affordable Care Act could be judged in 2014.
As an analyst of the U.S. healthcare market, I take very little risk in predicting that the 2014 evaluation of the Affordable Care Act will be highly fragmented and often reflect political affiliation. With that said, it will be interesting to watch how healthcare consumerism does (or does not) evolve. The commoditization of insurance coverage through the Essential Health Benefits and the actuarial value designs of the health plans will leave premiums and doctor/hospital network quality with greater importance. The question is whether this importance will be reflected in consumers’ shopping habits?
Implications of the Oregon Medicaid Study
A recent study published in the New England Journal of Medicine has been receiving significant press attention as well as political spin. The study examined clinical outcomes of low-income Oregon residents who were enrolled in Oregon’s Medicaid program over a two-year period versus similar low-income residents who were not enrolled. The study results were as follows:
“We found no significant effect of Medicaid coverage on the prevalence or diagnosis of hypertension or high cholesterol levels or on the use of medication for these conditions. Medicaid coverage significantly increased the probability of a diagnosis of diabetes and the use of diabetes medication, but we observed no significant effect on average glycated hemoglobin levels or on the percentage of participants with levels of 6.5% or higher. Medicaid coverage decreased the probability of a positive screening for depression…increased the use of many preventive services, and nearly eliminated catastrophic out-of-pocket medical expenditures…This randomized, controlled study showed that Medicaid coverage generated no significant improvements in measured physical health outcomes in the first 2 years, but it did increase use of health care services, raise rates of diabetes detection and management, lower rates of depression, and reduce financial strain.”
Depending on a journalist’s political leanings, the positive or negative results of the study were highlighted as most relevant.
I don’t have an interest in taking a political position. I think the study is thought-provoking on several fronts regarding the benefits that do and do not result from Medicaid enrollment. The increase utilization of healthcare services without a corresponding improvement in physical health points to one of the greatest challenges of contemporary health reform: the need to reduce medical costs that lie beneath insurance payments. There is a reason why this is a much less popular topic in healthcare. It’s very complex and the answers are not self-evident. However, I suspect that the issue will become more pressing under the Affordable Care Act inasmuch as enabling a portion of the uninsured to obtain insurance will likely result in increase healthcare service utilization. In other words, I think the Affordable Care Act will do more than help pay for care that was previously paid out-of-pocket, it will increase the frequency by which healthcare is used. The resulting increase in medical claims will eventually make its way into the hands of actuaries and premiums will rise unless steps are taken to reduce the cost of healthcare delivery and improve clinical outcomes so that overall healthcare claims are lower. Given that medical claims within Affordable Care Act first have to amass and be analyzed, we will not know if this prediction of increased utilization is correct until 2015 or 2016.
One encouraging area in the fight against healthcare costs is data-driven medicine. Data-driven medicine leverages massive amounts of medical information in order to provide guidance to healthcare professionals in their diagnosis and treatment of patients. However, the practice has several challenges. One of the challenges is the need for improved software systems that can quickly capture patient information during visits and provide ‘real time’ guidance for the physician. Many physicians already groan under the time they already spend with clunky electronic health record systems. One doctor told me that the use of the system consumed 10% to 20% of his time during the day without clear clinical benefits as compared to the hard copy system it replaced. Another challenge is liability. Medical testing is sometimes used to decrease the chance of future litigation if a diagnosis provides wrong. For data-driven medicine to maximize its effectiveness, there would need to be guidelines for its use that would provide a degree of malpractice protection.
