Reprinted from HEALTH PLAN WEEK, the most reliable source of objective business, financial and regulatory news of the health insurance industry.
By Patrick Connole, Editor
May 6, 2013Volume 23Issue 16
Early signs from rate filings for 2014 — as in Maryland, where the dominant Blues plan recently asked state regulators for a 25% premium increase compared with 2013 policies for individual plans sold on the state-based marketplace opening next year — are indications of the uncertainties about how accurate pricing will be in the initial year of the public exchanges, health insurance industry insiders say, since other carriers asked for much more modest hikes.
Combined with this unease over actuarial accuracy is anxiety about whether insurers will be ready on an operational basis, with the new IT systems they must have in place to communicate with federal and state-run marketplaces in time for open enrollment in five months. For example, just before the April 30 deadline for carriers to submit their applications to become qualified health plans on federally facilitated exchanges in 2014, the insurers asked for more time, a sign of how big of a task it is for the industry to meet Affordable Care Act (ACA) deadlines.
“Health Insurance Issuers have asked us to provide them with more time to submit their applications to offer Qualified Health Plans and we are accommodating that request by extending the submission deadline three days, until the end of the week [May 3]. Open enrollment for the Health Insurance Marketplace will begin on time on Oct. 1,” Richard Olague, a spokesperson at CMS, tells HPW.
Against this backdrop, industry watchers gathered for the Health Insurance Exchange Summit, sponsored by Global Health Care, LLC, and held May 1 to 3 outside of Washington, D.C. During the conference, industry insiders said carriers struggling to finalize business and technology preparations this year will learn from their mistakes and successes in 2014 and adjust small-group and individual market business plans accordingly for 2015 and beyond.
“There will be a lot of cleanup to do at some point,” said Scott Keefer, vice president of public policy and legislative affairs at Blue Cross and Blue Shield of Minnesota. He spoke at a May 1 panel discussion covering strategic alternatives for insurers doing business in health insurance exchanges.
Brett Graham, partner and director in the health insurance exchange practice at Leavitt Partners, a Salt Lake City consulting firm, and moderator of the May 1 conference session, said “the payer will look at this as a learning opportunity to apply in subsequent cycles.”
“No single strategy will rule out across the market,” Graham advised insurers. He added that it would be interesting to see how the different markets, with the various exchange models in play and uneven levels of readiness and enthusiasm, will play out. He contrasted Maryland, a state running its own exchange, and Massachusetts, a state running its own market and with experience in doing so, with states like Texas, Florida and Louisiana, where HHS will manage the exchanges with little excitement among state leaders for the marketplaces in particular or the ACA as a whole.
Carriers Have to Think Out Their Strategies
Payers have many angles to think through on how they play inside public exchanges and in the individual and small-group markets off the exchange as well, Graham said. Plans can be aggressive and price to get as many lives in the exchanges as possible, or they can be conservative and avoid putting their reserves at risk, he said. National insurers like UnitedHealth Group and Aetna Inc. will look to be aggressive “where they have large blocks of business or a competitive advantage,” Graham added. If they don’t have these factors on their side, then major plans will likely back away from public exchanges in that particular market.
One near certainty is competition with Blues plans, since those insurers “will be in every state,” predicted Joel Ario, managing director at Manatt Health Solutions, a unit of Manatt, Phelps & Phillips, LLP, who also spoke on the panel. Ario is the former director of CMS’s Office on Health Insurance Exchanges.
But many carriers are concerned about positioning benefit designs to avoid adverse selection. If a carrier’s price is too high, it risks a low market share with few healthy customers. Or, a carrier could choose to absorb some losses by charging less and possibly retain a healthier market. The strategy of pricing aggressively and getting more lives is made more tenable by the fact that for-profit health insurers have been doing well financially in the last few years, and it may make sense to take a financial hit early on in the exchanges to reap benefits later.
Ario explained that, like in Medicare Part D, it is important for insurers to consider the “stickiness” of their products, since consumers, once enrolled in a health plan, often remain with that insurer. Graham pointed out that Massachusetts offers a lesson to health plans as well since the state’s own exchanges saw new market entrants garner business with innovative product designs. “If payers don’t price aggressive, they may enable competitors,” he said.
It is not just plans that may use 2014 as a test lab, but also states and other players as well, Ario said. States running their own exchanges can choose to act as merely a clearinghouse, inviting as many carriers as possible to take part next year, but then change to a more selective model and have plans bid against one another for business in subsequent years. “Plans are mostly opting for the clearinghouse [as being their preferred mode] and Maryland and Minnesota are trending that way to be a first-year clearinghouse and be an active purchaser in the future,” Ario said.
Pricing Depends on Actuarial Expectations
On pricing, it is clear there will be wide divergence in rates proposed by carriers on a market-by-market basis. This is because plan actuaries are forced to “price the future by looking into a rearview mirror,” Ario said. Different assumptions by different health plans are already evident, even in preliminary reports. In Maryland, CareFirst, Inc.’s CareFirst BlueCross BlueShield is proposing rates for exchange products that are 25% higher than 2013 policies available in the individual and small-group markets (HPW 4/29/13, p. 7). Other carriers asked for lower increases, like Aetna, which requested a 12% to 16% average increase compared with existing 2013 products, for small-group policies in the exchange. “A lot of this is explained by different [actuarial] assumptions,” he said.
It is also likely there will be corrections to these rate requests in future years if the actuarial “guesses” were off base or the health plan changes its strategy. The fact so much is up in the air, even at the start of May, plays into the unease being experienced across the stakeholder community, Keefer said. He cited his own state, where the Minnesota legislature is in session until May 20 and has yet to decide the fate of legislation to mandate autism coverage in essential health coverage. If lawmakers take until the very end of their session, it may wreak havoc with health plans since “the rate filing deadline is May 17,” Keefer said. The cost of paying for autism care runs from $50,000 to $75,000 a year per beneficiary. “In the small-group market, that would have a profound impact,” he added.
Obama Reassures, Says ACA Is on Schedule
For HHS, the question of “will they or won’t they” be ready to open the new marketplaces on time has gotten so loud that President Obama addressed it at an April 30 news conference, declaring the administration would beat the clock. “Anytime you’re implementing something big, there’s going be people who are nervous and anxious about ‘is it going to get done?’ until it’s actually done,” Obama said.
But Obama’s statement does not ease fears among many insurers, with actuarial anxiety now being joined by operational anxiety, Keefer said. On top of insurers figuring out whether to be price-aggressive or price-timid inside and outside of exchanges next year, carriers’ technology staff members are changing and rewriting huge amounts of new code to make their computer systems compatible with the Federal Data Hub with minimal time to test their work, he stressed. There also is the matter of making sure the System for Electronic Rate and Form Filing (SERFF) used in 40 states is updated with the latest functionality in time for open enrollment, Keefer said.
http://aishealth.com/archive/nhpw050613-03
No comments:
Post a Comment