Last week (ACA rollout hits some Massachusetts businesses harder than expected) I described how the implementation of Obamacare caused one small businesses’s Blue Cross Blue Shield of Massachusetts premium to jump by 29 percent for the upcoming renewal. The main issue was family size –previously only the first two kids were counted when calculating premiums, now it’s the first three kids. This group, with lots of kids, is paying the price.
After that I heard from two other BCBS MA customers who were experiencing big premium hikes. One is a two-family partnership where one family has two kids and the other has none. Their premium is up 17%. The second is a non-profit organization where the number of kids also shouldn’t be a deciding factor. Their premium increase is 26%.
Here’s what BCBS MA told me about these two:
The first group was a new customer entering its first renewal year. Initially, BCBS rated the company based on the expected –rather than actual– number of dependents. The rate was based on ~1.5 kids for one family and 0 for the other. (Something tells me they probably knew 1.5 was either too high or too low and not right on!) In any case, in a small group that is enough to make a significant difference in rates. With the ACA, health plans have to gather the dependent info even for new customers.
For the non-profit organization, the number of members covered declined from 12 to 7, which pushed them into a more expensive rate per member. (Even though rating based on group size is being phased out, it’s still a significant factor.) In addition, the group’s prior year increase had been tempered under a state law that limited the rates of increase for renewals. The ACA overrides the state’s rule and BCBS tells me they are unable to cap this year’s rate increase.
For what it’s worth, BCBS tells me that the median rate increase in the merged (individual + small group market) this year is 5-6%, which means these three examples are outliers. They also tell me that rate increases a year from now should be in the low single digits for all three of these customers and others like them.
I’d be interested in hearing from other Massachusetts customers of Blue Cross and other plans. Have your rates jumped? Are they steady? Did they fall? Do the explanations above seem to account for what’s happened to you?
Leave a note in the comments or mention on Twitter @HealthBizBlog.
“Repeal and replace” has been the mantra of Affordable Care Act/ObamaCare opponents almost since ObamaCare. Although the “repeal” part has been tried many times in the House, very little serious attention has been paid to the “replace” part. The recent proposal by Republican Senators Orrin Hatch, Tom Coburn and Richard Burr is still couched in “repeal and replace” terms, but the actual contents of The Patient Choice, Affordability, Responsibility, and Empowerment Act are best described as an effort to retain much of ObamaCare –including changes to Medicare, bans on insurance coverage caps, coverage for children up to age 26 and so on.
There are all sorts of things in this proposal that I don’t like, but in the interest of spurring constructive dialogue to actually improve the Affordable Care Act I will highlight a couple of provisions that I think are improvements.
The first one is in Title 2, Section 201, which calls for allowing insurers to charge older people up to 5x what they charge younger people.
The second is Title 6, Section 601, which “caps the tax exclusion for employee’s health coverage at 65 percent of an average plan’s costs.” In other words, it limits the size of the tax deduction for employer-provided health insurance.
To reinforce my “retain and improve” label, keep in mind that both of these provisions are essentially tweaks to the ACA. The ACA limits insurers to charging 3x the premium for older v. younger people and the so-called “Cadillac Tax” also limits the deductibility of expensive plans.
In any case, here why I like these two provisions:
Older people already get a very good deal from the government. Medicare represents a significant transfer from the working age population to those who are older. While it’s true that people pay into Medicare while working, the amount they pay comes nowhere near the actual costs of the program. It’s a cruel irony that there are many taxpayers without health insurance who pay taxes that subsidize older people on Medicare. The Affordable Care Act exacerbates the transfer from young to old by effectively making younger people overpay for insurance and giving older people a subsidy. The Republican proposal improves intergenerational equity and also helps stabilize the insurance market by bringing the ratio into line with the actual difference in cost.
Providing a tax deduction for health insurance provides an incentive to spend more on health insurance and less on wages. It also represents an unfair advantage for those who get insurance through their work rather than on the individual market. I’m in favor of phasing out the deduction completely over time. This proposal from the GOP does a better job than ObamaCare of reducing the deduction
What do you think? Do you agree with the “retain and improve” label? Are there other things you like about the new proposal? Leave a comment on the blog or Twitter @HealthBizBlog
This is the transcript of my recent podcast interview with Joe Donlan, co-founder and president of ConnectedHealth.
David E. Williams: This is David Williams, president of the Health Business Group. I’m speaking today with Joe Donlan. He is president and co-founder of ConnectedHealth. Joe, thanks for joining me.
Joe Donlan: Glad to be here. Thanks, David.
Williams: Joe, what is ConnectedHealth? What’s the idea behind it?
Donlan: ConnectedHealth is a private health insurance exchange. We’re focused on helping employers grow their business by offering a compelling and competitive benefits package to help acquire and retain key talent. The idea is that by offering this type of defined contribution solution, we can get employees thinking about their health and financial security, thinking much more holistically about how they spend and allocate their benefit dollars across benefit options. We know that if an employee is healthy and financially secure, they tend to be more productive in the workplace and can focus on growing the business.
Williams: Joe, there are a number of private health insurance exchanges around. Some focus on specific areas. For example, some work more with retired employees, those that are Medicare-eligible. Does ConnectedHealth have a particular focus?
Donlan: Absolutely. Most of our focus has been on the commercial, under 65 market. We offer capabilities on a group basis as well as offering capabilities for individuals, while always going through the employer. We can help solve employer problems and provide competitive benefits packages both in an individual and group world to those employees.
A good example of what we’re seeing in the marketplace is employers that have both group-eligible populations as well as a lot of 1099 or part-time employees that might not be eligible for those group benefits but could benefit by having easy access to individual health insurance plans.
Our approach has been going to those employers and being able to solve for each and every single one of their employees, given their diverse employee population.
Williams: It’s interesting what you’re describing. From a health care policy perspective and with all the noise regarding the Affordable Care Act, you hear a lot about the employer mandate being a problem for employers. You’re coming at in the other way, which is to say an employer might want to offer benefits even to employees who wouldn’t typically be eligible, in order enhance their attractiveness as an employer.
Donlan: That’s exactly correct. The ACA and health reform really has accelerated much of our business. Our business was never predicated on health reform at all. It was predicated on the fact that employers still need competitive benefit solutions and given their size and challenges, those needs may vary. So, an employer that has fewer than 50 employees might have a different benefit strategy and approach than an employer that has 500 or 1000 employees. We try to solve for those different situations by leveraging our e-commerce shopping platform and oftentimes using a defined contribution approach in the process.
Williams: The idea of a shopping or a customer-oriented approach to selecting health insurance is a new one. It’s getting a lot of attention now because of the Affordable Care Act. But can you describe what the experience would be like for a user? And is it more like what they would do in a typical kind of insurance purchase or is it more similar to Amazon or some other kind of consumer e-commerce website?
Donlan: It’s a great question; Amazon often comes up in this type of discussion. And really, it’s pretty different from Amazon. When you go to Amazon, you tend to know what you want. You know what products you’re looking for and you’ve already done some research, and you go there and you type in that particular product and you buy it and take advantage of Prime and all the other great services that Amazon offers.
Our approach is that people in benefits don’t necessarily know what they want. I’ve been part of organizations that have been developing consumer-oriented health care decision support tools for the past 13 years. And so there have been a lot of lessons learned in terms of what works and what doesn’t work when presenting very difficult information or, said differently, providing solutions or answers to complicated health care questions. So we spend a lot of time thinking about behavioral economics and spend a lot of time thinking about how you establish frameworks and put decisions in context to make the decisions easier for the end user and consumer. We always start with the consumer in mind, and then work backwards in understanding the key factors that influence those decisions.
Health insurance and other related benefits are very complicated and can be very confusing. And when we start talking about an exchange or a marketplace environment, oftentimes we’re talking about creating more choice. But choice doesn’t necessarily ensure satisfaction. The approach we’ve taken is looking at the key factors and the influences: What are the attitudes? What are the behaviors that we can ask someone in order to provide a smart and intelligent recommendation about a particular product? And so, we ask things such as, what is your risk tolerance?
Certainly we don’t literally ask ‘What is your tolerance?’ We ask it in a way that helps people understand how they would balance their dollars so that they realize that if they pay less in premium they could end up spending a heck of a lot more money when they need care.
And that is a concept that, with the way we address the question and the graphics we use, makes it very intuitive for someone to understand. We also ask them how they typically use health care over the course of the year for themselves and their family members. We ask how many times they typically see a doctor and how many times they typically take prescriptions, et cetera. We then apply a proprietary algorithm to that data and information and, factor in their demographic information to all the different benefit plans that are available to them.
And we provide a recommendation from top to bottom depending upon how many choices they have. We don’t say, ‘Here’s your co-pay, co-insurance, deductible, premium.’ It’s ‘Here’s your premium, here’s how much we think you’re going to pay, an estimated out-of-pocket cost.’ So we provide premium plus cost of care, and then the maximum out-of-pocket cost; the total financial exposure.
The approach we’ve taken has been pretty been fascinating. We have been giving people peace of mind in their benefit decision because very simply, the way we display the benefit recommendations, they can see the total financial impact of their decision. They know their baseline of what they’re going to pay in premium and they know their worst-case scenario.
What people don’t typically know is that middle figure. We take the mystery out of it and present it in a way that the user can start to think about what trade-off they may want to make. So if they spend a little bit more money in premium, they can see what the total impact might be and the decrease in estimated out-of-pocket cost or total maximum out-of-pocket cost.
Williams: So, when people think about shopping on these exchanges or marketplaces, there are many barriers, especially for those who don’t make their living like you and I do, thinking about this sort of thing every day. You just went through co-pay, co-insurance deductible, premium. But of course there are other sorts of things to consider – PPO, HMO, POS, narrow networks – all sorts of things that someone may have to deal with. And even the just the notion of it, is it a marketplace or an exchange, it’s pretty hard.
I don’t want to put words in your mouth but to get to the point of making the sort of trade-offs that you’re describing, does the user have to understand all that terminology?
Donlan: They really don’t. Since we keep this focused on essentially the financials, they see what the impact is on those three levers – the premium, estimated out-of-pocket cost and maximum out-of-pocket cost. We provide filters and using sliders, just as someone might use when they’re shopping for an airline ticket at Kayak.com. You can very easily start to understand what the impact might be of your risk. So you have your ability and your tolerance for risk.
It’s very easy to say that, ok, if I’m willing to pay a little bit more every month, what might the decrease in cost be and how might it change the total financial exposure? These are the things that keep the stories off of the New York Times and the Wall Street Journal. We avoid a situation where a family chooses a plan without realizing that the maximum out-of-pocket was $30,000 and then, all of a sudden, they’re bankrupt. We are very clear and upfront about what that total cost is for the health plans so there’s level of transparency. What we’re finding with our clients is that it has given people a lot of peace of mind in order to buy.
We’ve seen with one of our grow their business based on number of applications submitted by over 130 percent. At the same time, they decreased their call center calls by nearly 40 percent. That tells us that people are coming to the shopping platform, they’re navigating it in a way that they would with any contemporary shopping/e-commerce site, and they’re transacting and making the purchase.
We’re seeing a lot of really positive results by taking this approach; it took us a long time to get here. We are applying the lessons that we have acquired over these 10-plus years; understanding the decision points and understanding the complexities of these decisions and figuring out how to make it simple.
On the backend, the way I like to describe it is it’s kind of like an iPhone. The shopping platform is very easy to use, very easy. All the magic essentially happens behind the scenes. We do the hard work behind the scenes so that the user can have a more enjoyable and seamless experience when they’re navigating the site.
Williams: I know you’ve been at this for quite awhile. But for most people, they’re just getting exposure to the kind of shopping experience that you’re describing. I’d like you to push fast forward and think about where we get to in five years. Once it’s kind of routine to use this sort of platform, what kind of extensions might there be on it? What’s next for an employer, beyond trying to get people to buy and use the platform? Where does it go from here?
Donlan: I think we’re just scratching the surface right now, David. And what’s going to be really fun to watch in the market is how levels of personalization continue to get enhanced just like you’ve seen in many other industries. So we spend a lot of time looking at the financial services industry as an example, and think that there are a lot of parallels into what we’re doing in the benefits world.
So the concept of someone thinking about their overall benefits portfolio and how an individual may want to allocate dollars across that benefits portfolio from a health and financial protection standpoint is pretty exciting to me. And in order to make that successful, data and information are going to be key to drive personalization. You can envision a world just as if someone was sitting down with their financial advisor and they’re saying that they want to have a child and they want to retire in 40 years and they want to have a house in Florida when they retire, etcetera. And that financial adviser answers, “OK, here’s what your portfolio needs to look like.”
But that portfolio may change once you have children and maybe multiple children. Maybe you choose to send one of your children to a private school instead of public school. I think the same will hold true when someone looks at this holistic benefits portfolio and how they allocate dollars. Having a child is a good example. You may adjust your benefits portfolio and start allocating more dollars towards life insurance than you would have when you didn’t have children.
So, that’s where the really exciting times are ahead of us is. It’s getting people to take ownership of their health and financial security portfolio.
Williams: I’ve been speaking today with Joe Donlan, president and co-founder of ConnectedHealth. We’ve been talking about private health insurance exchanges. Joe, thanks so much for your time.
Donlan: Thank you, David. I really appreciate talking to you today.
Is Obamacare just a trap set to lead the country toward a single payer system? The answer is no, but opponents of the law might want to think twice before gloating about the rocky rollout. I’ve said before that if Obamacare fails we are more likely to move toward single payer than back to whatever you want to call the status quo ante.
Loosening of Medicaid eligibility will expand the constituency for the program to include white working-class voters who often vote Republican
Relatively low income individuals who get skimpy private plans through the health insurance exchanges will be jealous of their slightly less well-off brethren on Medicaid and will push for bigger subsidies for private insurance or for further expansion of Medicaid
Same thing for Medicare. Those who are a little younger than Medicare age will long for Medicare to replace their inferior exchange plans and may end up getting Medicare expanded or their exchange plans improved
Overall, once more people have insurance there will be a push for better insurance, and that will be hard for politicians to resist. Remember, one of candidate Romney’s big –and not very fair– points of emphasis was that the Affordable Care Act would make cuts to Medicare. In a few years we may see supposedly conservative Republicans fighting to keep or expand Obamacare
The Wall Street Journal’s letter section had a few interesting submissions from writers commenting on an earlier piece What to Do When ObamaCare unravels, by John H. Cochrane. I had read the original piece but ignored it since it seemed so detached from reality. A couple of the letter writers are in my camp but the other two (both from Connecticut for whatever reason) are not.
What I found funny about the original piece was that the proposed solution “A much freer market in health care and health insurance” was defined as health insurance that is “individual, portable across jobs, states and providers; lifelong and guaranteed-renewable, meaning you have the right to continue with no unexpected increase in premiums if you get sick.” That’s a funny definition of a “free” market.
As one writer points out “such a… plan would require its own detailed set of regulations.” Another seems to take Cochrane at his word and asks why premiums aren’t going to go up after policyholders file a claim, just like how it works for other insurance markets like auto. This writer’s simpler solution: Medicare for all.
The last couple letters are pure WSJ fantasy land stuff. The writer from Denver says, “All federal government involvement in health care should be eliminated.” Reason #1? The 10th Amendment, “black letter law” forbidding the federal government from getting involved.
The final writer bemoans the fact that, “Intelligent solutions, market-based calculations, and actuarially sound arguments by Prof. Cochrane cannot compete with the socialist myth system of promises.” Why is it that some on the right are so convinced that there are so many socialists out there in America? Is this the 47 percent in another guise?
In any case, if this is the best Obamacare’s opponents can come up with, the President can rest easy.
photo credit: Public Citizen via photopincc
Polls show that few people understand health insurance or the Affordable Care Act. That’s especially so for those who have the most to gain from Obamacare: people who are uninsured and haven’t had health insurance for a while. It doesn’t help that so much of the political debate and news coverage is about the battle over Obamacare rather than education about how it works.
Amidst all the noise, the BlueCross BlueShield Association has posted a new website, AskBlue to try to explain insurance in lay terms, educate the public on the impact of Obamacare, and point users to Blues plans in their area to buy insurance. All of this is happening in the run-up to the scheduled October opening of the health insurance marketplaces.
Premiums versus out-of-pocket costs. The differences between copays, deductibles, coinsurance and how they interact with one another and with out-of-pocket maximums
Types of plans: PPOs v. HDHPS v. HMOs, and the hybrid models like POS plans
“Metal” levels: Bronze, Gold, Silver, Platinum that are independent of the types of plans
Two terms for the new insurance shopping sites: “marketplaces” and “exchanges”
Despite all these topics, the site barely skims the surface on topics that matter such as: choosing a doctor, navigating the delivery system, evidence based care, pharmacy benefits, FSAs, patient portals.
Bottom line: Can we really expect people to understand all of this and act on it in an intelligent manner?
The site is a solid resource for those seeking to understand more. But all the complexities of the commercial insurance world will continue to make it pretty hard for most people to optimize their use of benefits, and will keep administrative costs high.