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.


More on BCBS NC v Coventry enrollments

Following up on yesterday’s post on BCBS NC announcing their ACA enrollment as of May 2, 2014 with a chart.

ScreenHunter_01 May. 09 10.21

The dark blue bar furthest left is the percentage of the 357,000 enrollees reported by HHS in a given age band. The golden bar (middle one)  is the 232,000 persons termed actual enrollees by BCBS NC, and the gray bar to the right is the age breakdown of expected enrollees, per BCBS NC. A few points/observations/questions.

  • Most of the discussion about enrollment has been about the age range 18-34 and worries that there would not be enough of these young persons to balance out the older ones. BCBS says that 25% of their enrollees are in this range but they expected 28%. This is a miss. I am unsure of how big a miss it is in actuarial terms.
  • I don’t think I have heard much talk at all about the under 17 age group until this press release, whose main point is driven by under 18 enrollment as compared to expectations. Am I wrong and I missed it? The diddy flying around twitter and in the papers this morning is that BCBS NC expected 50% of their enrollees to be younger than age 34, but that in fact only 32% of them are. The math is correct, but it is mostly driven by a tremendous “miss” in enrollment of children (the 18-34 group about which so much has been written was 25% actual v 28% expected). But, BCBS says in their release that

Our pre-ACA book of business included kids with child-only policies, and many of them were among those who stayed on their pre-ACA plans – which affected the age distribution of our ACA pool.

As I asked yesterday, if most of the miss is kids that stayed on individual purchase policies, is this really a big risk pool problem? I have my doubts, especially because those in this book of business didn’t enter via the enrollment rules of the ACA, but I frame this as a question because I an unsure. I am happy to accept and engage answers from BCBS NC or anyone else.

  • Sticking with the 18-34 age group, if BCBS NC enrolled 25%, but all of N.C. enrollments in this age range is 28%, then the other insurer Coventry had to have done better with this age group that so many talked about all winter and spring. If we use the 85% payment rule (though by May 1, 2014 those enrolling as late as April 18 didn’t have to have paid) then that implies BCBS NC has ~273,000 who have signed up, but 232,000 who have paid (assuming this is their actual enrollee definition). If you assume a similar non payment rate for Coventry, then that implies they have ~84,000 enrollees per the HHS definition, and ~72,000 using the actual enrollee definition. They had to have done *much* better at enrolling the 18-34 demographic than did BCBS NC given the much smaller overall enrollment (3 percentage point difference from a base of 72,000 for Coventry v 232,000 for BCBS).
  • A similar story has to be the case for the age 55+ demographic; Coventry had to have done much better, or there is some tremendous non-random payment of premiums that clusters somehow in the 18-34 and the 55+ age range. I don’t see how this is true.
  • For the less than 18 group, did Coventry get lots more of these customers? Was there a pick up of parents signing up kids on employer provided plans to comply with the mandate instead of buying BCBS NC plans? Exactly what percentage of child only plans that ended up being allowed to be sold were resold? Again, I have heard basically no discussion of this group until the BCBS NC press release. Am I wrong? Here is one of thousands of news stories you can find worrying about age 18-34 enrollment, but not a breath about kids. Is there something very different in N.C. as compared to other states?
  • Final question for now. Where do these people live? Will we ever know geographic distribution of enrollees? Are there big enrollment differences by county in N.C.?

As always, we need more data.

update, 2pm 5/09/14: I talked with Barbara Morales Burke, VP for Health Policy at Blue Cross/Blue Shield of North Carolina. A few points. First, the 232,000 are customers who have paid for their May, 2014 coverage as of May 1, 2014. They had until yesterday to pay for May, 2014 coverage so this number will trickle up. Second, she reiterated that they are not allowed to co-mingle the risk pools of the transitional plans (non qualifying plans allowed to be sold) along with the ACA pools. This is of course true, and will impact 2015 premiums in both pools. But, the true meltdown scenario for an insurer is to pack up and leave a state, and of course that isn’t going to happen as BCBS NC has vast books of business in N.C. outside of the ACA. Third, North Carolina may have more than average “child only” policies than other States because the N.C. State Employee Health Plan does not provide dependent coverage (parents have to pay for premium). Fourth, she does not know if BCBS NC will release enrollment data by county. Such information is very important to target sign ups for next year.

BCBS NC ACA private plan enrollment through May 1, 2014

Blue Cross/Blue Shield of North Carolina posted an overview of their ACA exchange enrollment on their blog today. They reported:

  • 232,000 persons “actually enrolled” as of May 1, 2014.
  • 70% of these 232,000 were not BCBS NC customers in 2013. This is noteworthy since (BCBS NC) is the dominant insurer in North Carolina, with around 90% of the individual market and 70% of the group market.
  • BCBS NC says their ACA customers are are older and sicker than they expected. A question I have: where does the self report health data come from? Not the exchange, which has no such questions. I would like to see more on the methods of how these data were collected. How it was asked? What was the response rate? It is not an illegitimate question, it is just that this sort of data is not collected via the exchange enrollment process.
  • They say that many of their customers who stuck with pre-ACA plans after the administration allowed this were “child only” policies. I wonder if there are similar patterns in other states? It looks like the biggest “miss” between expected and actual enrollment is for these “child only” policies, the type of plan BCBS NC says was the most likely “held over” policy. If many of these expected kid sign ups are signed up in BCBS plans, is that a big risk pool problem?

Questions that I have.

  • HHS says that 357,495 North Carolinians signed up for private insurance via the exchanges (357,000 – 232,000 = 125,000). Does that mean that 125,000 persons signed up with Coventry, the only other insurer that offered exchange plans? (and they only offered plans in 37 of 100 of North Carolina’s counties?). I seriously doubt that, and suspect the phrase “actual enrollees” in the BCBS NC release is a subset of what the May 1 HHS release has as a BCBS enrollee. However, I don’t know that for certain and cannot find that Coventry has released data. We need better data.
  • The HHS report leaves open the chance that Coventry managed to sign up a slightly younger group of customers than did BCBS NC if you compare the ages released by BCBS NC and those released by HHS, and assume that most of the 125,000 are not just unpaid BCBS customers. For example, BCBS NC says 25% of its enrollees were ages 18-34, while HHS says the N.C. total is 28%. Similarly, BCBS NC says 29% of its enrollees were age 55+, while HHS says that only 24% of those statewide were in this age group. Either there is a big discrepancy between what constitutes “enrollment” in the BCBS NC report v. the HHS report, or Coventry signed up (1) many more customers than I thought they would, and (2) they are substantially younger than those that BCBS NC managed to attract. I don’t know the correct answer. As always, we need more data….

Biggest question. HHS says 357,000 people signed up as of May 1; BCBS NC says 232,000 were “actual enrollees.” How much of the difference is Coventry sign ups?

Burwell Nomination: Faint echoes of a deal post ’14?

President Obama has nominated Sylvia Burwell to replace Kathleen Sebelius as Secretary of HHS. Burwell is the Director of the Office of Management and Budget and is noted for relatively good relations with Congressional Republicans. She is the type of person who could help broker a deal for modifications of the ACA after the 2014 election.

Changes to the ACA at some point are as inevitable as water seeking the lowest point when poured out of a glass. The question is when the politics allow the first deal that can improve the policy? In any sane system, we would have already revisited multiple things, but Republicans have heretofore chosen complete opposition. That may still be their best 2014 election strategy, but they are in dangerous territory of rendering themselves to be post-policy in the most important and difficult long run issue facing our country.

As easy and perhaps as effective as repeal blah blah blah is for 2014, I will be shocked if it is anything but a disaster for Republicans in 2016. A smart Republican nominee would want Congressional Republicans and the White House to reach a deal on some modifications. Hillary Clinton likely wouldn’t mind, and the Big Dog certainly would not. And Burwell is a signal that the POTUS wants this as well.

What are some relatively simple modifications?

  • Replace the individual mandate with auto enroll procedures plus open enrollment with underwriting allowed if you don’t come in during the enrollment period as proposed by the Coburn-Burr-Hatch policy put out in January 2014.
  • Smooth the “cliff” effect of the ACA exchange subsidy structure by allowing persons with incomes above 400% of poverty to deduct their health insurance premiums. Most people get federal subsidy for their health insurance. We need a rationalization of the amounts and circumstances, but that will take time. This would be a placeholder and would reduce worries about employment effects of high implicit marginal tax rates from the subsidy cliff (that Coburn-Burr-Hatch shares).
  • Replace the cadillac tax with a capping of the tax exlcusion. Coburn-Burr-Hatch initially proposed quite an aggressive cap level, then backed off, but the private score has never been updated. So, they talk up one score, but another policy. In any event, not sure of the level, but capping the tax exclusion of ESI is a better policy because it signals the change to the person getting the now unlimited subsidy–people like me with good employer sponsored health insurance.

More complicated, but places I could see a deal going.

  • Provide more routinized state flexibility for states to do a variety of things with the low income portion of Medicaid. States can get waivers and the like as Arkansas is doing for a privatized Medicaid expansion, but this process could be made easier. I would want to be very cautious with changes in the dual eligible and long term disabled portions of Medicaid. We need a way to get the South to participate fully in health reform.
  • Decide what the maximum deductible should be, and create a “copper” level plan that might even simply be financial protection. Such a plan could even be what States auto enroll persons into. I would be open to an explicitly different max deductible amount by age (more for younger, less for older) and seek to get as close to universal coverage as we could. There are quite high deductibles in allowed in ACA plans now.

Eventually there will be a deal, just like water flows to the low point. The question is when will the politics be right for some of the things above?

Employment, Health Insurance and Income Based Subsidies

The CBO Budget Outlook (2014-24) is out today, and much of the focus is on their revised estimate of the ACA’s impact on the labor market (Appendix C, pp. 118-27). CBO is projecting that “the ACA will cause a reduction of roughly 1 percent in aggregate labor compensation over the 2017-2024 period, compared with what it would have been otherwise” (p. 117). This is basically CBO’s estimate of the impact of the marginal tax rate on labor income created by the various policy structures of the ACA that Casey Mulligan has written about. As I wrote in this post, you get less of something if you tax it, so if that is not your goal (it is with tobacco taxes, for example) then you are left to decide whether the reduction is worth achieving an alternative goal(s). That can be a difficult question to answer, because you are trading off important things–labor market participation, rates of uninsured, and the system reform provisions of the ACA.

Is reduced labor market participation a sign that we should move away from the structure of the ACA? If yes, to where?

Republican Senators Burr, Coburn and Hatch introduced their health reform proposal PCARE last week to much fanfare (this contains links to my previous four posts on PCARE). Many Republicans were understandably glad that key leaders in their party had finally taken this step of offering a coherent health reform strategy. While the focus last week was on what PCARE would do to the tax treatment of employer sponsored health insurance and coverage rates, the CBO report should prompt those who are critical of the ACA’s labor market impacts to ask how PCARE would impact the marginal tax rate of labor? I asked Casey Mulligan on twitter last Saturday about this:

ScreenHunter_01 Feb. 04 14.14

Casey answered:

ScreenHunter_02 Feb. 04 14.17

While the numbers haven’t been run yet, Casey says that the marginal tax rate of labor income in PCARE will be similar to those in the ACA. Why is this? It is primarily because PCARE provides tax credits from 100% to 300% of poverty (the ACA goes from 100% to 400%).

The intuition of wanting to target and not waste precious resources that leads us to design means tested programs creates higher marginal tax rates on labor income. This reduces incentive to work more hours, and you get results like what CBO predicts for labor compensation (Casey predicts even higher impacts than does CBO). Casey expects a similar impact from PCARE, because of its means tested subsidy structure (it is worth remembering that it was the income based means test structure of tax credits in the ACA [Table 1, p. 48]  that created the largest work disincentive in Casey’s paper, not the employer mandate). The Republican reform plan PCARE shares this means tested structure.

Where does that leave us?

  • A consensus that the pre-ACA status quo is not acceptable
  • An expectation that the ACA will reduce work incentives
  • Strong reason to believe (someone needs to run the numbers) that the leading Republican alternative, PCARE, will do the same

It is relatively easy to sketch a distant health reform approach, be it left, right or center, if you can control all of the variables. However, you cannot control them all, and we can only begin to transition from where we are now. If we decide that minimizing negative work incentives is paramount, then means tested subsidies are a bad idea, and some sort of universal approach, or flat financing mechamism seems warranted; but that will undermine employer sponsored insurance rapidly if flat subsidies are large, or lead to concerns about what can be bought with them if they are small (The Patients’ Choice Act from 2009 had flat subsidies, that were small as compared to the cost of insurance).

If we decide that we want to minimize crowd out of employer sponsored health insurance and to minimize disruption, then that favors means tested subsidies, while seeking ways to keep employer sponsored health insurance as stable as possible (employer mandates). However, today we are worrying about the impact on the labor market of the ACA, that does just these things.

I am drawn to the question “how do you want your children (or grand children) to get health insurance in 20 years?” I think that a distant system in which employment is not a means of obtaining health insurance would be a better way to do it, and could lead to more risk taking in the economy. And the ACA as eventually modified in some way by the Republican PCARE proposal can be the first steps to this, assuming near continuous tweaking for the rest of my life. The alternatives to this muddled through approach strike me as politically impossible (big bang single payer, ESI level of flat subsidy provided to everyone), or are unknown to me.

Update: I am unsure of the magnitude of the disincentive effect of ACA v. PCARE (meaning, which one is more disruptive to labor market). Someone needs to run the numbers, and I have suggested to Doug Holtz-Eakin and Steve Parente that if they did this in a dispassionate manner, it would be a great service to the debate. I think the density of workers from 100-300% of poverty v 100-400% is important, and am also uncertain of how the high risk pool structure in PCARE and the tax treatment changes proposed in PCARE will impact these calculations.

Private Score of Burr, Coburn, Hatch Plan

Brad Flansbaum sent me a link to a private score of PCARE, the reform plan released on Monday by Republican Sens. Burr, Coburn, and Hatch. I don’t know the Center for Health and the Economy, though I do know several members of their advisory board and many of you will as well. I don’t have my own simulation model to be able to verify these sorts of results, and the CBO is the final word, but I will just assume that a group that has Uwe and Holtz-Eakin on the Board must be somewhat credible. There is much to be learned here, even if you assume this to be an overly optimistic score.

First off, lets just say that the rage machine that has been perfected to argue against the ACA could get plenty cranked up from the these results. There is a breathless Americans for Prosperity Ad running in North Carolina talking about a nice lady losing her doctor in an Obamacare plan, in health policy speak, due to the rise of the narrow network. Yep, this score says PCARE will have a slight increase in persons covered by 2023 compared to the ACA, but most of that arises from a shift of people into narrow network plans.

ScreenHunter_05 Jan. 30 09.02

Now narrow network plans don’t bother me one bit (I thought everyone wanted to reduce costs!), but the ad machine that is trying to give the Republicans the Senate in 2014 is demagouging something that is a feature and not a bug of the plan put forth by Republican Sens. Burr, Coburn, Hatch. They achieve coverage expansions via an increase in individual based coverage (up 30% by 2023) at the expense of employer sponsored coverage (down 2% by 2023) and Medicaid (down 11% by 2023). What impact does this shift have on access? They calculate a “Provider Access Index” that identifies the degree to which persons insured by different options can pick the providers they want and they say:

With respect to patient’s access to their providers of choice, the CARE Act is expected to achieve similar access to current law, based on the H&E Provider Access Index (PAI).[6] The proposal is projected to reduce the average PAI in the individual market, due to an influx of consumers enrolling in low-cost narrow network plans. However, that reduction is offset by a reduced reliance on Medicaid to insure the low-income population.

On premiums, the analysis says they will be generally lower in the non employer market, but most of the decline is among individuals and not families.

By 2023, the proposal is expected to yield substantially lower premiums than current law in individual insurance product categories with savings of 2 – 11 percent for single policies. H&E predicts that family policies will see a modest decrease ranging from 0.3 – 1 percent.

On the overall federal budget, they expect a 10 year reduction as compared to current law (ACA), a reduction of about $1.5 Trillion over 10 years. This is actually consistent with the co-sponors saying the plan will be “roughly revenue neutral” because of how large the federal budget is from 2014-2023 ($46.7 Trillion, see p. 8), the appropriate denominator to have in mind. For example, CBO’s budget forecast over the same period was reduced by ~$618 Billion just from their February, 2013 to June, 2013 estimates! It is illustrative to look at the components of the estimated deficit reduction from passage of PCARE over the 10 year window:

ScreenHunter_08 Jan. 30 09.49

Yep, most of the action is achieved by the capping of the tax exclusion of employer sponsored health insurance. You know what this would be called if this (good in my opinion) policy were to replace the cadillac tax in the ACA? A Trillion dollar tax increase (Ah-Trill-Yun! with scary music in the background). The Medicaid changes which will result in blood on the floor debate yield around $150 Billion in savings over 10 years, and the savings from medical malpractice reform are essentially a rounding error in the context of the 10 year federal budget.

So, this score says that PCARE will achieve similar levels of insurance coverage as the ACA by 2023, and will result in a reduction of the federal budget as compared to the ACA, primarily by shifting people into narrow network private insurance plans, and increasing taxes of persons with generous employer sponsored health insurance. It doesn’t analyze the generosity of benefits covered (at least that I can tell, but they had to make assumptions), nor does it identify the impact on out of pocket costs that will result in these coverage levels; these are important items to understand, especially given that there are no proposals about transitioning to different models of care and the like.

Taking a look back in time through the lens of this proposal, I can’t help but thinking that Sens. Burr and Coburn missed a big opportunity in January 2010, by not throwing Sen. Olympia Snowe a lifeline (remember, she voted for ACA out of the Senate Finance Committee), which would likely have brought along Sen. Collins. Those four together could have gotten a lot once Scott Brown was elected. Instead they choose full opposition, and gross over-statements in their arguments against the ACA, especially given the proposal they now put forth. In the end, they helped to create and exacerbate the political culture that will make it so hard for their proposal to be given the subtle, and nuanced listen that it deserves.

Update: I am trying to get details of the model, assumptions and the like. I have requested it officially for the site that put out the score. I have also been talking on twitter with members of the Advisory Board. I think the model is an update of Steve Parente’s model (old one, paper likely behind new one). Will confirm/clarify as I get info.

Update 2: I confirmed that Steve Parente did the simulation. Here is a pdf of the paper linked above Parente.hesr_12036 behind the model, published in HSR. However, it is based on ACA uptake after SCOTUS ruling, so I am still trying to understand PCARE assumptions; Steve and I are going to talk.

Update 3: Loren Adler has 7 important questions/points in his twitter timeline about detail gaps in the private score. I have conversed quickly with Steve Parente via email, but don’t have enough yet to clarify. I will likely do so in another post when I understand more.

Burr, Coburn, Hatch Reform Plan

Republican Senators Richard Burr, Tom Coburn and Orrin Hatch released “The Patient Choice, Affordability, Responsibility, and Empowerment Act” today. I am going to call it PCARE. A few quick thoughts/highlights as I am running today (more later):

  • It acknowledges gravity, while making changes. While PCARE talks of repeal of the ACA, it locks in a good deal of the structure of the ACA, and addresses changes from that new status quo. For example, no lifetime limits (sec 201) is retained from the ACA, as is keeping people up to 26 on their parents health insurance, while the current 3-to-1 age banding premium regulation is replaced with 5-to-1 (now a 64 year old could not be charged more than 3 times what a 20 something could be charged;now they could be charged 5 times as much). Winner 20-somethings, loser 60-somethings. Eventually they say they plan to allow States to set these rules with a looser federal touch, meaning a state could decide to stick with the 3-to-1 premium banding by age, for example. I want to hear more about guaranteed renewability and related insurance market regulations as the 2nd full paragraph of page 2 is a bit slippery. For example, it contains this quote: “Insurance companies would also be banned from making unfair coverage terminations of health coverage.” (emphasis mine). What might “fair” ones be?
  • Continuous coverage provisions could provide lots of incentive for people to sign up. Section 202 seeks (I think) to replace the ban on pre-existing conditions as a forever standard with an “everyone has a chance to come in once” and then continuous coverage provides you with protection once you do so. This is more along some of the earlier individual mandate logic of responsibility.
  • Subsidies to buy private insurance (or health care directly) are pared back to 300% of poverty level. Down from the 400% of poverty max in the ACA, and the credit could be used to pay directly for health care under PCARE. They have dropped the Patients’ Choice Act flat tax credit for singles and families and gone to an age banded structure, with the table below being for those at 200% of poverty.

ScreenHunter_02 Jan. 27 14.31

Duke’s employer sponsored plan costs about $1,450 per month, so the tax credit for my age ($6,600) is less than half of that. At my income there would be no subsidy (as with the ACA), but the no subsidy level now will be around $35,000 for singles, and $65,000 for families. These credits will finance catastrophic levels of coverage compared to what most now have, but of course advocating catastrophic coverage with people paying more is a policy approach. Lets see if they own up to what this will purchase. I would love to see a comparison of OOP and premiums of what these subsidies will finance as compared to the ACA. However, this could mute some of the incentive to move out of employer sponsored coverage to exchanges that tax treatment of ESI changes proposed will kick off (see below). [update: a data driven comparison really is needed; Larry Levitt via twitter was pointing out many details will have to be clarified to allow this].

  • Transition to capped Medicaid amounts given to States. The Medicaid section (301, p. 5-6) covers lots of complicated territory and many more details are needed. However, I am going to grant the benefit of the doubt and say lets talk more about this. The parts of what they write that I like include acknowledging the distinct “sub programs” within Medicaid and the fact that they are not the same and do not have the same needs. The part I like the least is that for the dual eligibles and the disabled, the acute care financing stays the same, while providing a capped amount for the long term care costs of such persons to be given to the States, with the States retaining the responsibility for the remainder of the long term care. This locks in the two-payers problem with these sickest people in the nation, while shifting LTC burden to states. I am willing to listen here, but would rather Medicare federalize the acute care side of the duals if they want to shift LTC responsibility to states (there is lots of policy in that last sentence, I will clarify later).
  • Medical Malpractice reform. This is not a great place for federal intervention, and that has always been a problem for Republicans. However, their writing about it puts back in play a piece that has always been one of the political stepping stones to a health reform deal (I wrote this in 2009). The latest issue of Health Affairs has lots on Medical Malpractice, an issue that went nearly completely away for several years, which was a sign Republicans didn’t want a deal. It coming back means some of them want one. I included Medical Malpractice and patient safety (two sides of the same coin) in my white paper on N.C. Health Reform that I put out two weeks ago. Most of the action here will be state level.
  • Title VIII of PCA is dead. This makes me sad.What a strange chapter of health reform was the appearance of unelected boards in a Republican bill one month before the first version of HR3200 was passed out of the Commerce committee, and then unelected boards became such a rallying cry for Republican opposition to the ACA. It was also hilarious how none of the sponsors would own up to it being their idea, but I digress.
  • Cap the tax exclusion of ESI at 65% of an average plan’s costs and grow at CPI+1%. Sign me up; let’s replace the caddy tax in the ACA with this. I’ve written about this over and over. Keep in mind that this will be quite dislocating for employer sponsored health insurance. That is where I want to go down the road, but 3-5 Million people with cancelled indy policies just about ground health reform to a halt in November/December with an assist from a screwed up website. 165 Million people have employer sponsored health insurance, most of them have no idea that get tax free income from it, but all of them will be sure that they deserve it, once they find out they are going to lose some of it.
  • Sponsors/Politics. Interestingly, Bur and Coburn lost Paul Ryan and Devin Nunes in the House as co-sponsors (these 4 co-sponsored the Patients’ Choice Act). Burr and Coburn introduced the Seniors Choice Act in 2012, and those Medicare-specific reforms are not contained in today’s-released PCARE. Do they still support Seniors Choice Act? Senator Hatch last year introduced his own bill with a mix of things (his Medicaid ideas seem to have come through most clearly in PCARE). My political analysis goes two ways on this. First, if members of the House co-sponsor then people like me say mark up the bill and get a CBO score since they control the House, and they don’t want to do that (and Dems aren’t going to mark this in the Senate). It is a definite advantage to have a plan that is not subjected to such scrutiny. At the same time, when there is a deal someday, it seems almost certain to pop out of the Senate, just like the fiscal cliff deal did. Not sure when that will be, but this is a step towards that day, and I welcome it.

What Will Republicans do w ACA if they Clean Sweep?

Andrew Sprung asks wonks to weigh in on some questions regarding what Republicans will do with the ACA if they win the White House and both houses of Congress in 2016. He assumes that outright repeal then would be too disruptive, so wonders about many changes to sabotage the ACA. I have long been writing that both sides need a health reform deal, at least in part because some day Republicans will have all branches of government again, even if not in 2016. Brief answers to the questions Andrew poses:

Back to my reporting project: let me make it open source here. Wonks, politicos, and other interested parties: what do you think of the feasibility and likely effects of possible future Republican drives to, for example

1) repeal the individual mandate.

They could repeal the individual mandate and replace it with the auto-enroll procedures envisioned by Paul Ryan’s Patients’ Choice Act, which was originally released May 20, 2009, about one month before the first version of HR3200 was passed out of the Commerce Committee. In fact, in 2011 I was wondering whether auto-enroll procedures might be a better risk pooling mechanism than the existing mandate, making this an obvious place for a deal if we ever got back to the policy.

2) Deregulate the exchanges , e.g., perhaps by a) abolishing the 3-to-1 age rating cap;

Sure they could get rid of 3-to-1. But, which way would they go? In my Duke provided insurance there is straight community rating and I don’t hear people complaining about it; 28 year old Assistant Professor pays same premium as a 64 year old. They could let the age rating go up, say to 5-to-1. It is possible that the 3-to-1 is not optimal, but it is unclear to me the preferred change. But keep in mind that 165 Million have employer sponsored insurance that is typically straight community rated.

b) repealing the ban on lifetime and annual caps;

This is imaginable, but with all the rhetoric of preferring more catastrophic coverage (more exposure up front), then it doesn’t really follow to then truncate the back end. Of course, the traditional Medicare program has benefit limits and caps, and no cap of out of pocket expenditures. I would be interested in seeing the relative impact of no lifetime limits, no pre-existing conditions/guaranteed renewal, benefit mandates, etc on premiums. I suspect this change will be judged as not worth it by Republicans and the insurance industry when the time comes for Republicans to drive the train.

c) allowing exclusions for services such as mental health or childbirth;

I could imagine a move toward providing catastrophic insurance that focused on defining the financial size of the deductible before insurance kicked in, and essentially bypassing the question of benefits by covering everything that was not experimental, for example. My guess is that this would sound better to my Republican friends the more theoretical it was, and that prenatal care and childbirth would end up being preferenced before a deductible was met once they had to pass legislation (update: or issue rule changes). Back to my employer sponsored plan at Duke: the benefits are the same for everyone, so plenty of people “who can’t have a baby” are cross subsidizing those who plan to do so. And not to belabor the obvious that seems to be lost in lots of discussions of this issue, but it takes two to make a baby (we professors can figure out these complicated things). Maybe men could take out fertility liability insurance if Republicans decided that all maternity/labor costs should be assigned to the woman having the baby?

d) allowing sales across state lines (in concert with eliminating or drastically reducing federal coverage guidelines); or by other means.

I think if you live in Manhattan and call up Blue Cross Blue Shield of Arkansas, they will be fine selling you a policy, so long as you come to Arkansas to use health care. Premiums are determined by benefits, contracts to provide care and the health risk of the insured. This is a much better applause line at a political rally than a policy, which will become clear once someone tries to write the legislation necessary to bring this about.

3) Foster adverse selection within the exchanges by deregulating plans sold outside them, e.g., repealing the requirement that insurers put all customers within a given state in one risk pool.

I have written positively about the Patients’ Choice Act, and think that it is the most comprehensive Republican plan put forth. Its biggest flaw (they could change this) is allowing tax credits to flow in and outside of exchanges, but altering pre-existing conditions inside them only. This won’t work and will lead to death spiral. Again, committing to the details, passing it through the Commerce Committee, CBO weighing in, etc. will likely be quite a shock for Republicans. They just don’t have experience in doing this. It is hard.

4) Reduce subsidies (“we can’t afford them”…).

Maybe so. But, then premium shock. There definitely could be some changing of the subsidy level to try and smooth out the impact of the existing subsidy structure on marginal labor income tax rates. Of course doing this will increase the cost of the bill. The goldilocks principle “its juuuuuust right” is elusive. Again, it is hard to get this correct.

5) Reduce federal reimbursement for Medicaid expansion; block-grant Medicaid.

The biggest block to a block grant that is simply designed to limit federal costs and say “tag, you’re it” to states will be all 50 Governors, regardless of party. There are some more nuanced policies that focus on the different “parts” of the Medicaid program that I would actually support over the long run (more state responsibility for acute care insurance for states, federalizing the cost of the dual eligibles). I suggest this as a long term strategy in North Carolina. The focus of health reform is now in the States, and I suspect that will continue.

update: I fixed some typos and clarified a few things.

Taxes and Tradeoffs

I got several interesting emails about my post on Casey Mulligan’s paper on the impact of the ACA on labor markets, so I thought I would elaborate a bit.

If you tax something, you get less of it. So, there are only two reasons I can think of to levy a tax.

  • you want less of something (excise taxes on tobacco)
  • you want to raise money to redistribute via government to obtain an outcome that markets didn’t reach

The second point means there is always a tradeoff. Is the outcome I seek (increased health insurance coverage, a larger military, minimum social security benefit for the elderly, interstate highway system, cancer research, etc) worth the distortion or inefficiency that I will inevitably create by taxing and redistributing money worth it? Note that I am saying that every dollar of government spending is inherently redistributional. If not, there must be a tax that is levied and then returned in the exact share to those who paid it. I don’t think such a tax/spending pattern exists. This doesn’t mean you cannot dispute the legitimacy of a given tax or of a spending priority, but that first and foremost that is an argument that the distributional outcome to be obtained by governmental redistribution is not worth it, not that it is redistributional.

Casey Mulligan focuses on the marginal tax rate of labor income, and says that the labor market will not return to pre-crash levels until we lower this marginal rate. His work shows an increase in this tax rate due to the expansion of unemployment insurance during the economic crisis, and from the provision of subsidy to purchase health insurance in the ACA; all of this on top of the explicit tax code. At the conference, Casey noted that doesn’t mean that extending unemployment insurance is necessarily the wrong policy at a given point. This surprised me given my reading of his blogging, but it showed that he was engaging in the tradeoff; something could be warranted in the short run, that exacerbates a longer run concern. There is plenty of art involved in getting questions like this right.

What would be useful for policy making would be to take the detailed data/programming machinery that Casey has assembled and model different means of financing health insurance coverage expansions, and showing how they may differentially impact the marginal labor income tax rate. In particular, quantifying the degree to which the intuition in creating a policy like the ACA “we have to reduce the cost of subsidy” actually increases the impact on incentives for full time or part time work. What is the crossover point at which more subsidy is worth it when evaluating the policy from a labor market perspective?

Asking these questions and being interested in the answers doesn’t mean that you you to buy into the degree to which labor market behavior will be changed due to the ACA. The predictions from Casey’s paper should be made, but in the end, that is an empirical question that we should have more information on in the coming months and years.

update: I forgot I wrote this in November.

Premiums higher where less competition: what can be done?

Austin Frakt links to Peter Gosselin who provides the following analysis of premiums by number of insurers in States with federally run marketplaces; they are lower with more competition:

Plenty of caveats and this is an early look, but it shows higher premiums in States like North Carolina with little competition among insurance companies. This is an old story in North Carolina, where only two insurers are selling plans in the marketplaces, and only Blue Cross Blue Shield is selling in all 100 counties.

A couple of thoughts:

  • This shows the limits of what the ACA can do in a short period; in States with a dominant insurer prior to the ACA (like BCBS NC, with about 75% of group sales, and 90% of individual ones), they are likely to have a similar situation afterwards.
  • While N.C. certainly has little competition among insurance companies, there is some evidence that too many choices leads to sub-optimal consumer choices, at least for Medicare Advantage beneficiaries, especially those with cognitive limits. We certainly don’t have too many insurance companies selling plans, but a state-run exchange could take a closer look at the optimal number of plans; a quick look shows BCBS NC offering 24 plans in my zip code in Durham for family coverage when I put in our information. Duke University’s employer provided insurance, by comparison, provides only 4 choices of plan.
  • Health insurance premiums in North Carolina’s federally run marketplace are almost certainly higher due to the decision of the State not to expand Medicaid, which keeps cost shifting a larger concern. There is likely both an actual impact of this, as well as what I would call a “negotiating impact” of this in which an insurer will appeal to this issue to justify higher rates (as will providers when negotiating rates with said insurer). I’d love to see a precise estimate here, but I don’t have one to offer.
  • What can be done? One answer is to incentivize new insurers to enter the North Carolina marketplace. I am not really sure how to do this. Another possibility it to add a public option that is based on ability to set prices, most simply achieved via Medicare. This could be especially important in more rural parts of the State where developing a provider network from which to bid in the exchange would be particularly hard for newcomer companies. Note: I don’t think a public option is worth doing sans rate setting, at least to start. Another, more distant possibility (meaning it would require modification of the ACA) is that in some States that appear to have a “natural monopoly” or maybe just a few sellers of insurance, they could come to be viewed like public utilities and therefore have rates regulated, presumably by a more robust state-based exchange mechanism.

I am not sure what the health system will look like in 10 years, but the move ahead with the ACA is the event that broke the logjam that was the status quo.