Health Plans Wrestle With ACA Changes, State Budget

As efforts to dismantle the Affordable Care Act continue, Michigan’s Health Plans have stepped up their search for solutions to mounting complications.

The Trump White House has administratively chipped away at Obamacare’s policies, including cancelling in cost-sharing reduction (CSR) subsidies and non-enforcement of penalties consumers pay for not adhering to the ACA’s requirement that individuals buy comprehensive health insurance.

The two measures present a double whammy to health plans. The CSR payments were funds paid to insurers to offset the cost of care for individuals earning too little money to cover out-of-pocket healthcare expenses such as copays. The money totaled about $7 billion in payments to health plans nationally. It is separate from the premium assistance offered to individuals buying marketplace plans.

Not enforcing the individual mandate has several effects. First, it is likely to reduce enrollment as young, healthy people now face no financial penalty if they forego health insurance, a trend that was in place before the ACA. Fewer young and healthy people paying premiums means insurers pay a higher percentage of premium dollars to provide healthcare services and are forced to raise premiums for everyone, another trend predating the ACA.

“I will tell you in talking to my plans that are involved I the individual market, their opinions differ as to how successful the mandate was in the first place…but far more are viewing (non-enforcement) as potentially problematic, further destabilizing of the individual market in Michigan,” said Dominick Pallone, executive director of the Michigan Association of Health Plans, an industry trade group that represents 13 Michigan health plans.

Health insurance premiums increased an industry average of 27.5 percent for product year 2018, and about 10 percent of that was due to cost-sharing reduction subsidies being pulled, said Pallone. He said people who earn just enough to qualify for premium subsidies will be hit the hardest, as they have no protection from rate increases. Those who do qualify, in some cases people who earn about $40,000 per year, will see their subsidies rise as a percentage of their premium, so as rates go up, so do their subsidies, offering them some protection.

The “essential benefit” provision of the ACA is also being quietly eroded. Obamacare requires that any plan satisfying the mandate’s requirement offer a list of “essential benefits” including coverage for maternity and mental health. That could change as the Trump Administration flirts CMS rule changes that would allow the sale of “catastrophic” plans covering only major illnesses and products outside of the exchange that offer narrower coverage, said Pallone.

“We’re going to be tracking this year to see what the impacts of are for our plans in Michigan and see if there is a tremendous loss of (insured) lives. We were losing (insured) lives anyways, and so we want to see does this continue the trend, does this steepen the curve,” said Pallone.

From almost any angle, reducing premiums in the individual health insurance market is paramount. With decreasing subsidies and a toothless mandate, health plans are challenged to effectively provide care for their sickest, highest risk patients.

One way to stanch the bleeding is create government-subsidized high-risk pools to pay for the most expensive patients in the individual market. It is widely believed that taking high-risk patients out of the premium calculation for individual insurance could help drive down premiums for those remaining in the market—and subsequently, it is hoped, bring more young, healthy people into the market as premium payers.

Pallone said several states, including Minnesota and Oklahoma, have initiated federal 1332 waivers detailing how they would reduce the cost of care for high-risk patients in hopes of receiving federal dollars to set up such programs.

“These 1332s have been used to repurpose advance premium tax credits and there is discussion about additional one-, two-, three-year grants for this population,” said Pallone. Other states have been successful in 1332 capturing federal dollars.

High-risk pools are one type of solution, but there are others. Some states have made carrier payments for care of (high-risk) individuals a factor of Medicare—Medicare plus 20 percent for example, said Pallone.

In Michigan, MAHP is in contact with the governor’s office, the Department of Insurance and Financial Services Blue Cross and Blue Shield of Michigan and the legislature and hopes to come up with a plan for product year 2019 or 2020.

Pallone said the key issue is sharing data, particularly claims data. BCBSM is not a member of MAHP, but owns a majority share in the marketplace. Pallone estimates that his 13 members combined could generate about 40 percent of the state’s data, not enough to form a reliable model for high-risk care. Complicating that, the Blues are sensitive about sharing data, as are various members of MAHP. The information is considered proprietary and the industry is competitive.

Still, Pallone said the onus is on the health plan community to put “meat on the bones” and come up with a plan that satisfies the stakeholders and convinces the legislature to authorize a waiver.

ACA changes and individual market woes are not the only challenges facing Michigan’s health plans. The state and federal budgets present their own challenges, both directly and indirectly.

Ten of MAHP’s thirteen health plan members contract with Medicaid. Federal proposals are afoot aiming to push Medicaid from a federal matching program (in which the federal government provides a percentage of every dollar states spend on the program) to a block grant programs that pays states a specific amount of money per person insured under Medicaid. Pallone thinks the policy approach has the potential to reduce the cost of care, but “it needs to be done in a fair approach so that we’re not taking a loss from day one. And the proposals we’re seeing on the table automatically have us taking a loss from day one.”

Pallone thinks MAHP’s membership would “accepting of” an approach that started with the same amount of money funding the Medicaid program as is in place now, “with a reasonable inflationary factor built into it” to cover future cost increases.

On the state level, MAHP is carefully watching proposals to reduce Michigan’s state income tax. Medicaid, as an entitlement program, must be funded in a way that is actuarially sound. Pallone said income tax reduction proposals should only be discussed once the state’s statutory fiscal obligations are met.

On the policy side in Michigan, behavioral health integration is high on MAHP’s list of priorities. Years ago, behavioral health services were “carved out” of Medicaid managed care plans and delivered through a locally managed system. The result, from the health plan point of view, was that health plans were being tasked with providing all essential care for members, but were only able to provide half of that equation. Further, Pallone said, the behavioral health part of the care equation affects the physical health part and vice versa. For example, a schizophrenic diabetic might be poorly managed from a behavioral health standpoint and get off of her drug regimen for diabetes treatment.

Gov. Rick Snyder’s current budget calls for pilot programs to integrate behavioral and physical health under the Michigan’s Medicaid program. The state has contracted with the University of Michigan as a third-party evaluator and begun setting up meetings with stakeholders. The goal is better care and lower costs.

“We want to be able to show better behavioral and physical health outcomes for individuals,” said Pallone. “The trifecta here is if we can find a way to do it that saves money for the state’s taxpayers then we’ve hit that triple aim pretty well.”
In the background, traditional battles against high drug prices and insurance mandates continue unabated.

“We are open to anything being on the table to get a handle on drug pricing. It is currently costing us about 20 percent of our premium and growing, and that’s unsustainable,” said Pallone.

Current state efforts fall well short of ensuring drug price negotiation with Medicaid and focus instead on transparency. House Bill 5223 requires drug manufacturers to provide cost information on drugs with prices above a certain threshold. The bill remains in House committee.

On the mandate front, MAHP is concerned about a proposal aimed at requiring health plans to provide oral chemotherapy drugs without increasing the patient’s copay. The trouble is that chemotherapy drugs—whether oral or intravenous—are an expensive class of drugs, but oral chemo drugs are particularly expensive. Pallone said the oral drugs are covered, but the copay is higher to account for the higher prices for those drugs. The bill has passed the Senate and awaits action in the House.