BCBS North Carolina 2017 Obamacare Rates

Blue Cross/Blue Shield of North Carolina today announced its approved (by N.C. Department of Insurance) rates for 2017 Obamacare marketplace plans. The average premium increase is 24.3% per BCBS. However, the impact on most people buying insurance plans is much less because of the premium subsidies provided by the federal government (for those between 100% and 400% of poverty) increase with the premiums. Subsidies drop when premiums drop, as they have in some states.

BCBS NC actuary Brian Tajlili has a blog post on the announcement. The bottom line:

When you hear or read about an average rate increase of 24.3 percent, it’s important to remember two points:

  • That figure is based on rates before adding the federal subsidy, which more than 90 percent of people buying on the exchange will qualify for.
  • As premiums increase, so does the subsidy.

In fact, when you account for the subsidy, about 72 percent of our ACA customers who enroll through Healthcare.gov will pay less than or the same next year as they’re paying in 2016. 

Several points about North Carolina’s Obamacare marketplace:

  • Premiums will be lower in 2017 than CBO projected they would be back in 2010. However, the cost of premium subsidies to the federal government is rising a lot this year. Hopefully the market will stabilize in the future, but it will likely take policy action which will require both political parties to get to problem solving mode again someday.
  • North Carolina has lost insurers, and BCBS NC is the only seller in around 90 of the state’s 100 counties. You can’t have competition without multiple sellers. Can we get some to come back?
  • Persons with incomes above 400% of poverty get no premium subsidy, and have to pay the full premium. They will feel this increase. A key issue going forward is whether we should provide some subsidy to such persons, who are virtually the only people in the U.S. who get no federal subsidy for their health insurance. A tax credit that got more of this income group to buy on exchange plans would help the Obamacare insurance market. Could the state do this?
  • Premiums in the Obamacare marketplace are higher than they would be if North Carolina had expanded Medicaid so some of the increase is self inflicted. North Carolina needs to revisit the Medicaid expansion decision and join it to reform.


What effect do higher deductibles have?

A new NBER working paper shows that higher deductibles serve as a blunt tool that does reduce health care use (~12-14% in a large, self insured plan), but that they don’t appear to lead to better decision making by consumers. Several nuggets that are not such good news: consumers don’t seem to learn to shop around in response to higher out of pocket costs, they reduce spending across the board (both in preventive care as well as care more likely to be wasteful, like imaging), and around half of the reductions in spending accrued to individuals who were sick.

We have both overuse and underuse, and need a way to address the one without making the other worse.

This group of patients (large, self insured employee plan) might be expected to be the group most likely to respond to more “skin in the game” in positive fashion, but it didn’t happen. Sobering info as we wrestle with how to reign in spending while maintaining quality, especially as there is a bipartisan rush to do away with the cadillac tax and not replace it with other changes to the tax treatment of employer sponsored insurance.

Update: Sarah Kliff has a much better post on this paper than what I had time for.

More on the flexibility of Basic Health Plan

Andrew Sprung has a well done, longish piece on the future of the ACA that quoted me (accurately) at length, based on an interview we did after the release of the Coburn, Burr Hatch health reform plan.

Andrew has a follow up piece focusing on my comments about trying to expand health insurance coverage in the South, and my proposed use of section 1331 (Basic Health Plan) of the ACA, that figures prominently in my white paper on health reform in North Carolina Don Taylor NC Health Reform Proposal 1 14 14.

The essence of my suggestion is to create a Basic Health Plan option for persons from 0-200% of poverty in North Carolina, who could purchase private health coverage from a traditional insurer such as BCBS NC, or directly from integrated delivery systems like UNC, Duke or ECU and/or Community Care North Carolina (CCNC), in lieu of a traditional Medicaid expansion. It is a plan to expand health insurance coverage for relatively low income people using private insurance as the coverage vehicle instead of Medicaid.

Andrew makes a good point that more left leaning states could try to use a BHP in the opposite direction (he suggests seek a waiver up to 400% of FPL and have it be a choice on an exchange; I’m not sure it would be granted out of worries that it would destabilize the exchange, but who knows, in a strong exchange why not have another, lower cost option?). The existence of the Basic Health Plan option and the more expansive exchange waiver options that begin in 2017 points out that for all the rhetoric of top-down health reform, state flexibility is a feature, and not a bug of the ACA. Vermont has long said they intend to seek “single payer” for their state in 2017 (I put it in quotes because what they really intend to do is use multiple payers to put together true universal coverage in the State), but perhaps the BHP means they could start moving in that direction sooner. On balance, I suspect the Southern States have more leverage than do the eager adopters to try something different, since their default is not expanding Medicaid and this is not a good outcome from the Administrations perspective. It also highlights the vast differences in the politics of health reform and the ACA across states–politicians in Vermont want to use the language of single payer, while many in the South are averse to an increased role for Medicaid.

Health Reform Ideas for North Carolina

I am releasing a white paper with some health reform ideas for North Carolina (pdf Don Taylor NC Health Reform Proposal 1 14 14). The North Carolina Medicaid Advisory Commission is discussing options that will culminate in their recommendation from the North Carolina Dept of Health and Human Services to the General Assembly on March 17, 2014.

I propose three main ideas:

  • Expand health insurance coverage while reforming Medicaid by seeking both a Medicaid waiver and developing a Basic Health Plan option under section 1331 of the ACA
  • Reform the State’s Medical Malpractice system while addressing patient safety, using Medicaid and the Basic Health Plan as a pilot population; I think the “Michigan Model” holds the most promise
  • Increase the Supply of Health Care Providers by Safely Reduction Regulation; essentially expanding the practice scope of non-physician providers to increase the effective care delivery supply

In the longer run, I suggest North Carolina consider

  • Seeking a more comprehensive waiver that would allow the full cost of the dual eligible population to be federalized, with State savings put towards insurance coverage expansions
  • Seek permission to pilot a competitive bidding demonstration in Medicare Advantage plans sold in North Carolina, two to three years after a Basic Health Plan is up and running in a North Carolina run health insurance exchange

I will spend time over the next few weeks blogging about these and other ideas that emerge (the N.C. Medicaid Advisory Commission meets tomorrow, 9am-4:30pm at the State Library, 109 Jones St., Raleigh, NC). Note that the white paper is a pdf that has hyperlinks to sources (mostly blog posts) in lieu of more traditional citations.

Op-Ed in Raleigh, News and Observer

I have an op-ed in the Sunday Raleigh (N.C.) News and Observer offering a bipartisan way forward on health reform that I think makes sense regardless of what the Supreme Court says about the Affordable Care Act. If you are a reader of this blog, it will be familiar fare.

If you are coming here from the op-ed, here are some related posts:

High deductible plans in the ACA

Yesterday I speculated about what form a health reform deal between Progressives and Conservatives might look take (Universal catastrophic coverage implemented via Medicare).

Like many of the complaints about the ACA, the idea that everyone is forced to purchase the same plan is untrue–it does not mandate a one size fits all policy. Below are actuarial estimates produced by 3 insurance companies commissioned by Kaiser Family Foundation of what various insurance options to be sold in ACA exchanges would look like.

The Actuarial value column shows the percentage of total costs to be borne by a person (there are a series of assumptions made to produce these estimates, that are meant to be illustrative) covered by the mandated benefit package; Plan A, 60% corresponds with the so-called Bronze level package that represents the minimum coverage that persons would have to purchase in 2014 to generally comply with the ACA. You can see that there are other levels of coverage stated in actuarial value terms, 70%, up to 94% that people could choose. Obviously, a higher actuarial value means higher premiums and less out of pocket exposure during the period of insurance, and under the ACA the premium subsidy amount provided to individuals and families varies by income.

Also of note are the different ways to attain the same actuarial value and corresponding out of pocket maximum. Sticking with the Bronze plan (row A) in the Table, Actuarial Research Corporation designed a plan with a deductible of $6,350 and no coinsurance, while Aon Hewitt achieved the same actuarial value with a deductible of $4,350 and coinsurance of 20%. It is true that all of the plans cover the same benefit package.

Several points/questions:

  • The ACA allows catastrophic plans (the max out of pocket allowed in 2014 will be $5950 for individuals, $11,900 for families). I suggested larger deductibles/maximums, but personally I would trade a higher catastrophic deductible/out of pocket max for universal coverage.
  • It is unclear to me how the price charged for care while someone is in their deductible will be set? Presumably that will be an aspect of the plan offered on an exchange in the ACA, but this is an important question, especially for catastrophic plans, and I realize that I am unsure. Under my suggestion, Medicare payment rates could be used.
  • There are different mixes of premiums, deductibles, and coinsurance through which to achieve the same actuarial value. Adding the premium side to this adds more complexity and choices, but you can generally achieve the same premium-side actuarial outcome by a set deductible/out of pocket maximum and income based premium subsidy, or you could modify the deductible/out of pocket maximum by income, probably implemented via a maximum amount of income that could be spent on health care.
  • You have to set a benefit package in some way if you claim to be interested in people making informed choices. Under my suggestion, everything covered by CMS would count toward spending through the catastrophic deductible, and would be covered by Medicare once the maximum out of pocket amount was reached.

What would a health reform deal look like?

A central claim of my book Balancing the Budget is a Progressive Priority is that slowing the rate of health care cost inflation is a necessary, but not a sufficient condition to our ever achieving a sustainable budget down the road (it will also take a tax increase). Further, it will be virtually impossible to take the very hard steps to address health care cost inflation without both political parties coming up with a set of health care reform strategies that we will actually try, and which make both sides responsible for seeing to the hard work this will take. Health reform is far more difficult than Social Security reform (in a technical sense), for example, because mailing checks is much easier than purchasing health care. We will never be done with health reform and there will be many mid course corrections.

Even though we don’t know what all the steps will be, we desperately need to take some initial ones, and we will soon know what the Supreme Court will say about the ACA. This will be a landmark decision that will have profound political and policy consequences, but in one sense, regardless of what the Supremes say, the next step is to identify a bipartisan way forward on health reform (stop laughing; we have to do it).

Central to my book is a set of health reform policies that I claim represent the type of deal that would emerge if the two sides actually negotiated with one another. For such a deal to emerge, it would take both sides being clear about what their primary interest was in health policy. For Progressives, universal coverage has always been the holy grail and dream deferred, not just of health policy, but really of all social policy. As I noted in this debate with Jim Capretta, I don’t thinkConservatives have an interest that is so clear and heartfelt as universal coverage is for Progressives, but if I had to take a stab, I would claim that it is their belief that people don’t have enough “skin in the game.” As an aside, this makes little sense to me and when I look at empirical data on cost sharing with my more conservative friends, we see different things. In a similar way, when I say that I think the lack of a predictable, universal health insurance coverage scheme is an existential mark against our nation, they don’t get my degree of feeling.

Accepting such differences is an important step, because reaching a deal will mean abiding with one other to reach a compromise.

The essence of the deal I suggest in the book is this:

  • Universal catastrophic coverage implemented through Medicare, with gap insurance available to persons wanting it (no mandate!) via state based exchanges (with subsidy for low income persons)
  • With a massive deductible (I suggest $10,000/persons; $15,000/family to maintain a key role for private insurance; far larger out of pocket exposure than Bronze level cover in the ACA)

There are many legitimate ‘yeah buts’ that both sides will have, and I am not even getting into the other parts of the health policy deal I propose, and that are detailed in the book, in this post. However, a compromise health reform deal will have to capture the ‘big idea’ for both sides. I think step one of such a deal looks something like this if we ever manage to do it. And if we don’t, we will never again have a sustainable budget.

GAO suggests new Medicaid formula

The GAO has proposed a Medicaid matching formula that would better target federal resources to states during economic downturns when Medicaid enrollment typically increases. When the Employment to Working Age Population (EPOP) ratio dropped in 26 states, an increase in the federal cost share (Federal Medical Assistance Percentage, FMAP) of the Medicaid program would be triggered automatically, and would remain in place until the EPOP returned to pre-recession levels. The EPOP measure would not be influenced by persons “giving up” and leaving the labor force, so provides a more precise measure of economic hardship in a state that is likely to trigger Medicaid enrollment increases than would unemployment.

If this policy had been in place during the recent recession, increases in federal aid for Medicaid to states would have begun in January, 2008 and ended in September, 2011 and would have increased federal costs by $36 Billion. Under the Recovery act, the dates of increase were October, 2008 to June, 2011, but GAO notes the amounts are not directly comparable because they were not only designed to respond to recession-driven cost increases.

GAO suggests that moving to this formula would provide a more predictable amount of federal support for Medicaid during economic downturns. HHS is generally positive about this change per comments it provided on the GAO report, but suggested that more work is needed to identify the appropriate number of states experiencing a downturn based on the EPOP measure that must be observed before increased FMAP share is granted (many options). However, GAO points out that the 26 state threshold is closely correlated historically with the official beginning of recessions, and is easily measured, allowing for an automatic and quick response.

Medicaid is a counter-cyclical program that means costs for states rise just as tax receipts generally fall. This proposal would shift more of this extra recession-driven burden to the federal government, which is better able to deficit finance during economic downturns than are states. The proposed policy makes sense so long as we are roughly maintaining Medicaid in its current safety net role. Moving toward block granting of Medicaid is really the polar opposite approach; fixing the per capita Medicaid costs of the federal government no matter what, with more of the burden being shifted to states.

Fairly stark policy options.

Blahous on CLASS, reform

I respect Charles Blahous a great deal as an analyst, and I like him and think that he is a nice guy. In fact, I brought you a series of interviews with him last May on the Medicare and Social Security Annual Trustee reports. However, I find his latest at e21 on the CLASS Act and health reform generally to be frustrating, because it focuses on deconstructing (CLASS and the ACA) without offering something better.

I agree with him that CLASS as passed wouldn’t work, but it is just as clear that there are policy options that could make it work and address LTC. Imagine the impact a post by him (Medicare and Social Security Trustee) offering solutions might have–saying something like “CLASS was flawed but how we deal with LTC is also flawed, and the the current default is for Medicaid to be on the hook for massive nursing home expenditures. Here is how we could move to implement a voluntary LTC insurance program. This is good for the country.”

However, I respect the idea that an adversarial political system creates better policy through the competition of ideas. Yet, in health reform, conservatives seem to be far clearer about what they are against as compared to what they are for (I mean this generally, and am not singling Blahous out here). When I hear Republicans say “lets repeal Obamacare and we will then pass common sense reforms” I can only think why didn’t you do anything from 2002-06 when you controlled both branches of Congress and the White House?*

I can respect the adversarial argument, and have spilled about 50,000 words saying the key to a long range sustainable budget is a compromise on health reform. However, it takes two sides to compromise. The House of Representatives owes it to the country to move ahead and begin marking up bills like the Patients’ Choice Act, and Rep. Ryan’s Medicare reforms in the committees with jurisdiction such as Commerce and Ways and Means to show us what they would do. They need to commit to the details so that the CBO can weigh in and we can look at both the fiscal impact and effect on the uninsured of their ideas under the same bright lights to which the ACA has rightly been exposed. And then we can decide what to do.

*Many of my conservative friends will say they did worse than nothing, they deficit financed the Medicare Part D drug benefit during this period.

Patients’ Choice Act Needs to Meet the CBO

As I noted Thursday, Rep. Paul Ryan‘s speech last week embracing the Patients’ Choice Act (PCA), completed the “replace” part of his call to “repeal and replace” the Affordable Care Act.  While the details of Rep. Ryan’s plan differ for the various parts of the system, the overriding idea is moving toward a defined contribution from the federal government, instead of a commitment to providing a given level of insurance coverage, shifting costs to either individuals or states. The outline of Rep. Ryan’s overall “replace” plan is:

  • Medicare (45 Million persons in 2011). No great changes for those now covered by Medicare, or who will be so covered in the next 10 years. However, for those who become eligible for Medicare more than 10 years from now, they would receive a voucher with which to purchase private health insurance. Eventually, Medicare as a government insurance plan would go away with the death of the last beneficiary, replaced by this system of private coverage.
  • Medicaid (60 Million persons in 2011). Block grant the program to states, fixing the cost to the federal government and shifting the balance to the states.

These two policies were adopted  in broad form (235-189) when the House of Representatives passed its Budget Resolution on April 15, 2011, and have been much discussed; I am not going to get into them (Austin has written a lot on the Medicare proposal). I am going to instead focus on the last part of Rep. Ryan’s replacement strategy, the Patients’ Choice Act, that would directly impact around two-thirds of the U.S. population almost immediately if passed:

  • Privately insured (160 Million persons in 2011) and uninsured (50 Million persons in 2011). The Patients’ Choice Act represents Rep. Ryan’s vision for how health insurance would be remade for persons who are not elderly and not poor enough to qualify for Medicaid. In short, the tax preference of employer paid insurance would be repealed, all persons/families would get the same tax credit with which to purchase private health insurance, either inside or outside of state-based exchanges. The premium levels are far below average premiums today, meaning they would finance only catastrophic levels of coverage. There are many details that need to be considered. I outlined some of them last week.

I am going to drill down on these details by going through several of the key Titles of the PCA over the next couple of weeks. However, the punch line for this analysis is clear regardless of what I think:

  • the House Republicans need to mark up the PCA in committee (Commerce and Ways and Means for sure, perhaps Budget), pass the bill out of the relevant committees, and see what the CBO has to say about them.

Politically, it is an advantage to “have a plan” but not commit to the nitty gritty details. The PCA has been around for a while, having been introduced into the 111th Congress on May 20, 2009 but has never been scored by CBO since it did not see the light of day in the last Congress because the Democrats controlled the House of Representatives. However, the Republicans have controlled it for the past 9 months, and there is nothing standing in their way of filling in the blanks, passing the  PCA out of committee(s) and seeing what the CBO has to say. To paraphrase what a Little League umpire once told me, the PCA is nothing until CBO tells us what it is. Only then can the country understand the replace part of repeal and replace.