Health Plan Weekly

COVID-19 Pandemic May Lower Health Care Costs, But Deferral Impact Exists

October 7, 2020

Health insurers will probably have lower health care expenditures in 2020 and 2021 than before the COVID-19 pandemic, according to a new analysis from Willis Towers Watson. However, the white paper emphasizes that substantial risk is still possible and says plan sponsors need to take proactive steps to blunt the future impact of deferred care.

The policy environment could change suddenly and dramatically depending on the outcome of California v. Texas, a suit that could lead the Supreme Court to overturn the Affordable Care Act, and the presidential election.

By Peter Johnson

Health insurers will probably have lower health care expenditures in 2020 and 2021 than before the COVID-19 pandemic, according to a new analysis from Willis Towers Watson. However, the white paper emphasizes that substantial risk is still possible and says plan sponsors need to take proactive steps to blunt the future impact of deferred care.

The policy environment could change suddenly and dramatically depending on the outcome of California v. Texas, a suit that could lead the Supreme Court to overturn the Affordable Care Act, and the presidential election.

“Pursuant to the upcoming case on the ACA, and obviously the current Supreme Court nomination and whether or not it gets through — so many major factors really put a lot of these pieces into an unknown place,” says Trevis Parson, Willis Towers Watson’s managing director and chief actuary for health and benefits, who coauthored the analysis.

According to the paper, “the likelihood of deferred care returning to the system will vary based on the type of care. In fact, we expect that a significant portion of deferred care will be completely forgone and never return. Further, the return time will depend on status of the pandemic, system capacity, public policy, patient willingness to visit care settings and the urgency of the need for care.”

Worryingly, the paper found that “the largest decreases in utilization have been in preventive care and other office-based services.” Parson says plan sponsors were not doing a very good job emphasizing preventive care and holistic health before the pandemic, and the care deferrals could make that problem worse.

The paper also attempts to project the short- and middle-term impact of the pandemic on utilization. Parson and coauthor Jeff Levin-Scherz, M.D., the North America co-leader of the health management practice at Willis Towers Watson, modeled four scenarios, and found that any of the four scenarios would result in a 2.7% to 3.8% net decrease in medical costs per member over the course of the combined two years.

These findings are welcome news to health insurance stakeholders, as previous projections of the pandemic’s costs were much more catastrophic. However, Parson urges plan sponsors to resist complacency — a point he regards as the “key message” of the paper.

Major Blues Plans May Gain Opportunities From Tentative Antitrust Settlement

October 6, 2020

The Blue Cross and Blue Shield Association (BCBSA) has reportedly reached a tentative settlement in a lengthy legal battle over whether its member plans engage in anticompetitive business practices.

The lawsuit in question was filed in 2012 on behalf of employers and policyholders who took issue with Blues plans’ agreement to divide the country among the association’s 36 members and to restrict members’ ability to offer non-Blues products. A related lawsuit filed by health care providers alleged that the Blues’ anticompetitive practices improperly depressed their reimbursement.

The Blue Cross and Blue Shield Association (BCBSA) has reportedly reached a tentative settlement in a lengthy legal battle over whether its member plans engage in anticompetitive business practices.

The lawsuit in question was filed in 2012 on behalf of employers and policyholders who took issue with Blues plans’ agreement to divide the country among the association’s 36 members and to restrict members’ ability to offer non-Blues products. A related lawsuit filed by health care providers alleged that the Blues’ anticompetitive practices improperly depressed their reimbursement.

On Sept. 24, the Wall Street Journal reported that BCBSA negotiated a tentative agreement in which it would pay $2.7 billion to the employer/policyholder plaintiffs. BCBSA also reportedly agreed to:

Relax rules that currently require a national employer to work through the Blues insurer where its headquarters are located when seeking coverage from a Blues plan;

Allow certain national employers to request a bid from a second Blues insurer of their choice when seeking coverage; and

Abandon the rule that requires member plans to derive at least two-thirds of their national health insurance revenue from Blues brands.

Jay Godla, a partner at Strategy&, PwC’s strategy consulting practice, tells AIS Health that the “bigger Blues are obviously very thrilled about the idea of lifting restrictions on the two-thirds rule, because that allows them to grow.”

But there are bigger question marks surrounding how the settlement would affect the national accounts market, according to Godla, who says he could see three primary ways that would play out. Under one scenario, a smaller Blues plan would team up with a larger one in order to enter the national accounts market. Or there could be “account-level collaboration,” in which a smaller Blues plan partners with a larger organization to pursue the business of select national employers. And “the third thing is free for all, where Anthem is competing with Blue Cross Blue Shield of Michigan for autos in Michigan,” Godla says, referring to Detroit-based large employers such as General Motors or Chrysler Group. That last scenario, he says, is probably the least likely.

But Credit Suisse’s A.J. Rice, in a research note to investors, wrote that Anthem “and other well-capitalized Blue plans may be able to compete more aggressively in the markets of other Blue plans if they choose to.”

Surprise Billing Reform Could Reduce Billions in Premiums, Study Shows

October 5, 2020

A study published Sept. 11 in the American Journal of Managed Care found that a federal law to rein in surprise medical billing could reduce overall health insurance premiums by 1% to 5%.

The study, which was prepared by researchers at the USC-Brookings Schaeffer Initiative for Health Policy, is based on 2017 data compiled by the Health Care Cost Institute, which is drawn from claims submitted to UnitedHealthcare, Humana Inc. and CVS Health Corp.’s Aetna.

By Peter Johnson

A study published Sept. 11 in the American Journal of Managed Care found that a federal law to rein in surprise medical billing could reduce overall health insurance premiums by 1% to 5%.

The study, which was prepared by researchers at the USC-Brookings Schaeffer Initiative for Health Policy, is based on 2017 data compiled by the Health Care Cost Institute, which is drawn from claims submitted to UnitedHealthcare, Humana Inc. and CVS Health Corp.’s Aetna.

The cost reduction finding is based on a model that assumes new legislation would reduce procedures that are currently surprise billed either by 15% altogether, or reduce their costs to 150% of traditional Medicare rates. In the former scenario, legislation would save commercially insured members about $12 billion, and in the latter, those members would save roughly $38 billion.

Loren Adler, a fellow at the USC-Brookings Schaeffer Initiative for Health Policy and an author of the study, says surprise bills have an underappreciated impact on overall health plan spending.

“Fundamentally, surprise billing is obviously awful for the people who receive the surprise bills themselves. But this study shows that we’re talking about a pretty substantial effect on premiums,” he adds.

“To me, what really matters is, how much money would you save per member per year if you could get the average payment [of surprise bills] down to what the average payment is for in-network physicians? [The study’s] number is $212 per member per year,” says Joseph Antos, a resident scholar at the American Enterprise Institute.

Antos points out that providers who surprise bill are acting rationally in an unfair set of economic conditions that is enabled by a failure of government.

That gap in the rules has not gone unnoticed by public officials, but Washington, D.C. insiders say that surprise billing legislation isn’t likely to advance any time soon. Many were hopeful that surprise billing legislation would pass Congress by now, but progress has stalled.

“It feels very unlikely that anything constructive is going to be done in health care legislatively at this point, just given everything else that is going on and given that we’re so close to the election. I think that we’re looking into a window of lame duck or into the next session,” says Avalere founder Dan Mendelson.

If Preexisting Condition Protections Vanish, Health Insurers Probably Won’t Cheer

October 1, 2020

Since at least the 2017 saga when Republicans tried to repeal and replace the Affordable Care Act (ACA), one of the law’s most visible — and politically charged — components has become its protections for people with preexisting conditions. Now, with the makeup of the Supreme Court slated to shift, some experts believe those same provisions are the most at risk from being struck down alongside the law’s now-defunct individual mandate.

But that begs the question: Would health insurers actually want to go back to a pre-ACA world?

By Leslie Small

Since at least the 2017 saga when Republicans tried to repeal and replace the Affordable Care Act (ACA), one of the law’s most visible — and politically charged — components has become its protections for people with preexisting conditions. Now, with the makeup of the Supreme Court slated to shift, some experts believe those same provisions are the most at risk from being struck down alongside the law’s now-defunct individual mandate.

But that begs the question: Would health insurers actually want to go back to a pre-ACA world?

“No, they so do not want that to happen,” says Chris Sloan, an associate principal at Avalere Health. Before the ACA was enacted, “it wasn’t that they [insurers] liked medically underwriting…it’s just that anybody who didn’t would get all the bad risk and their health plan would collapse,” Sloan explains.

Katie Keith, a health care attorney and faculty member at Georgetown University’s Center on Health Insurance Reforms, says that companies that are already underwriting short-term, limited-duration plans “could jump right in” and underwrite more plans if parts of the ACA are struck down. But other insurers might not even have the infrastructure to do so anymore, having given up their underwriting divisions after the ACA was enacted, she observes.

About 54 million people currently have a preexisting condition that could have resulted in them being denied coverage in the pre-ACA individual market, according to a new analysis from the Kaiser Family Foundation. The ACA required insurers in the non-group, small-group and large-group markets to issue coverage regardless of health status and prohibited non-group and small-group plans from varying premiums based on health status or gender, among other protections for preexisting conditions.

In Sloan’s view, insurers would prefer to keep operating in a post-underwriting world mainly because “they like that everybody plays by the same rules across the markets” so that they can compete more fairly.

Sloan also points out that “disruption is challenging — I mean, just think about how long it took to get the ACA and the individual markets to a sort of stable place.” Therefore, insurers “above all else value stability in markets, and in particular, stability when it comes to rules and regulations,” he adds.

Experts Remain Skeptical That SCOTUS Will Scuttle Entire ACA

September 29, 2020

The Sept. 18 death of Justice Ruth Bader Ginsburg — which could tip the scales in favor of striking down the Affordable Care Act (ACA) — was hardly welcome news for health insurers during a year when a pandemic and a presidential election are already fueling high levels of uncertainty. However, industry analysts and legal experts say there are plenty of reasons not to hit the panic button just yet.

“This definitely increases the chance of the Supreme Court striking down the full ACA. But we’re going from a pretty low likelihood base,” says Chris Sloan at Avalere Health. “The odds are still really stacked against anything materially changing for the ACA.”

By Leslie Small

The Sept. 18 death of Justice Ruth Bader Ginsburg — which could tip the scales in favor of striking down the Affordable Care Act (ACA) — was hardly welcome news for health insurers during a year when a pandemic and a presidential election are already fueling high levels of uncertainty. However, industry analysts and legal experts say there are plenty of reasons not to hit the panic button just yet.

“This definitely increases the chance of the Supreme Court striking down the full ACA. But we’re going from a pretty low likelihood base,” says Chris Sloan at Avalere Health. “The odds are still really stacked against anything materially changing for the ACA.”

At issue is a case now known as California v. Texas, which Republican state officials filed in 2018 to challenge the constitutionality of the ACA. Because Congress changed the tax penalty for the law’s individual mandate to $0 via the 2017 Tax Cuts and Jobs Act, they argued, the mandate is unlawful, and if that part is unconstitutional, the whole law must go.

Until Ginsburg’s death from cancer complications, many legal observers expected that the ACA had a good shot at surviving this latest Supreme Court challenge. But if Senate Republicans are able to confirm a replacement for Ginsburg before Nov. 10 oral arguments, not one but two conservative justices would have to side with their liberal colleagues to produce a pro-ACA ruling, explains health care attorney Katie Keith.

Ultimately, “I’m still skeptical that the entire law would be invalidated; I think that would be a step too far and does go against some of the recent decisions we’ve seen on severability from this court,” Keith says. However, she adds that the loss of Ginsburg “makes it more likely that parts of the ACA will be struck down” — in particular, the so-called preexisting condition protections.

Wall Street analysts, meanwhile, appeared unconvinced that the law will be unraveled — but noted that Centene Corp. has the most exposure if that happens, given its strong concentration in Medicaid and the individual market. Credit Suisse’s A.J. Rice estimated that those two business lines make up roughly 26% of Centene’s earnings, but only 4% for Anthem, Inc., and less than 1% each for Cigna Corp., CVS Health Corp., Humana Inc. and UnitedHealth Group.