Wednesday, November 27, 2013

Another Obamacare Delay Announced -- Day Before Thanksgiving!

I do feel angry when the government or companies announce important things either on Fridays or before a major holiday.  Where's the honesty in that?

Here's the latest example of such shenanigans.  The SHOP exchanges, one of the potentially better parts of Obamacare, will now be delayed for an entire year.  And when is this announced?  When most people are either traveling, shopping, or just daydreaming about eating turkey.

SHOP, in case you aren't aware, stands for Small Business Health Options Exchange.  The idea is to give employees of small business employers and employees a more efficient way to provide and shop for health care coverage.  This is the second setback for SHOP already.

I suspect that all available government resources are devoted to the consumer-facing health exchanges, as they are getting most of the bad publicity.  SHOP and the back-office programming for risk mitigation and insurer payments are no doubt on the back burner.  Too bad, as small business insurance was one of the problem areas of the old system.

Tuesday, November 19, 2013

More on Risk Mitigation in Obamacare

Senator Marco Rubio of Florida has an editorial in the WSJ noting some of the issues with risk mitigation.  As I said in my post below, stay tuned for action on this front.  Should be interesting.

A short quote from the article, which might be behind the WSJ paywall:

"Buried deep in the Department of Health and Human Services' press release that accompanied the president's Nov. 14 speech was this sentence: "Though this transitional policy was not anticipated by health insurance issuers when setting rates for 2014, the risk corridor program should help ameliorate unanticipated changes in premium revenue. We intend to explore ways to modify the risk corridor program final rules to provide additional assistance."
Risk corridors are generally used to mitigate an insurer's pricing risk. Under ObamaCare, risk corridors were established for the law's first three years as a safety-net for insurers who experience financial losses. While risk corridors can protect taxpayers when they are budget-neutral, ObamaCare's risk corridors are designed in such an open-ended manner that the president's action now exposes taxpayers to a bailout of the health-insurance industry if and when the law fails."

Monday, November 18, 2013

Risk Mitigation for Insurers on the Exchange

I have posted once before on the three risk mitigation mechanisms built into the ACA Health Exchanges:  Reinsurance (to compensate insurers who have high cost individuals); Risk Corridors (to compensate or penalize insurers who perform financially worse or better than they expected); and Risk Adjustment (to minimize adverse selection by paying or charging insurers who get less or more healthy consumers than the average.   See this presentation for a description.

I expect that there is a fair amount of consternation over these risk mitigation schemes right now, from insurers and from the folks in the US government.  We won't hear as much though because these things are not consumer-based.  But they could be even more important.

First, the risk mitigation schemes are going to take a fair amount of manpower and computing power to implement.  Is the system up for this?  Given what we have seen to date, I would be surprised it it were.  And if the risk mitigation systems aren't already ready to roll, I doubt there is sufficient spare capacity in HHS and CMS to help at this point -- everyone is working on the consumer-facing exchanges.   If the enrollment numbers continue on the low side, with mostly high cost individuals enrolling, there are going to be a ton of claims from insurers for risk adjustment payments -- from all three risk mitigation programs.  If I were an insurer, I wouldn't be expecting my accounts payable from CMS to be paid anytime soon.

Second, as Megan McArdle points out today, the government is already making noises about increasing the risk mitigation payments.  She doubts the law permits that to happen, but let's not think that mere rules will stand in the way!  The government is increasingly having to rely on those terrible insurers (remember all the rhetoric to get Obamacare passed) to make the whole damn thing work in any kind of way at all, so they might try real hard to create the necessary incentives.  I would not be surprised at all to hear of changes in the risk mitigation to compensate insurers for losses incurred from low and adverse enrollments.

Sunday, November 17, 2013

Senseless Health Care Pricing or Efficiency?

This is an old subject, see Steve Brill's Steve Brill's Time article.

But having just received a bill from a physician's group practice and thought about it, I have come to think there might be more going on than meets the eye.

Take a look at this bill.  The "amount billed" is $986.06.  These are just lab tests ordered by the doctor and done at that facility, and these are the list prices.  Cigna, my employer's health care administrator (not insurer!) has negotiated with this facility for a discount from those list prices.  In this case the discount is a whopping $713.55, or 72%!!

My first reaction was that this is either stupid or greedy.  It would seem stupid if nobody actually pays those list prices, in which case they are meaningless and a waste of ink.  Come on, let's stop the charade and admit that real prices bear no resemblance to what is listed.

It would seem greedy if someone is actually paying those prices, because my first thought is that the only people paying the list prices would be the uninsured, and as Brill and others have pointed out, it is really sad to be making the uninsured pay the highest prices.

Stupidity and greed are still two good candidates to explain these billing practices but I think there is a third.

It is not only the uninsured who pay the list prices.  Suppose I am a Cigna customer and suppose this physician's group I went to see was not in Cigna's network.  I will still give them my Cigna card and they will bill Cigna first.  Cigna will get the bill and tell me that they will consider those services to be worth only $272.51.  In my case, since I had not yet met my yearly deductible, they would credit that amount toward my deductible.  But I would be responsible for paying this provider the full list price!

My point is that as cruel as this seems, it serves a purpose, which of course is to keep me within the Cigna network.  The higher those list prices, the more control Cigna has over its network.  That can be very efficient, letting Cigna work with a smaller set of providers to improve quality and value of care given to its customers.  Under this view, Cigna actually cares not only about the price they pay -- the discounted price -- but also the list price that they never will pay!

So maybe the high list prices are not stupid and not based on greed but are really to let the insurers use networks efficiently.