Exchange tallies under estimates

Non-Medicaid enrollments missing mark, insurers say

Sunday, January 5, 2014

A spokesman for Arkansas’ largest health insurer says the firm and its national affiliate expected more Medicaid-ineligible people to sign up for health coverage that the companies offer on the state’s insurance exchange.


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Not only have fewer Arkansans who don’t qualify for Medicaid signed up, but the average age of those who enrolled was higher than predicted by Arkansas Blue Cross and Blue Shield or the national Blue Cross and Blue Shield Association, said Arkansas Blue Cross spokesman Max Greenwood.

Even though the enrollment period for coverage starting this year doesn’t end until March 31, the early numbers don’t bode well for keeping premiums from rising in future years.

Older people typically have higher medical costs than younger people, but the health-care law limits how much more insurance companies can charge older people to account for that difference.

“For costs to not get out of control, there needs to be people under 30 enrolling in the marketplace,” Greenwood said. “You have to spread the risk.”

Arkansas Blue Cross and the national association are among four companies offering plans on Arkansas’ insurance exchange, which allows people to use a federal website to shop for coverage and to apply for tax-credit subsidies to help pay the premiums.

QualChoice Health Insurance Chief Executive Officer Mike Stock said enrollment in his company’s plans as oflast week was “way below what we would have hoped for or expected.”

A spokesman for the fourth company that offers coverage through the exchange, St. Louis-based Centene Corp., didn’t return a call last week seeking information about enrollment in its plans.

Meanwhile, a surge in December raised total enrollment in insurance exchanges nationally to 2.1 million as of Dec. 28.

That’s in line with expectations, said Matthew Eyles, vice president of the Washington, D.C.-based health-care consulting group Avalere Health.

The firm based its forecast on the Congressional Budget Office’s prediction that 7 million people would sign up for exchange plans in 2014, as well as on enrollment patterns from the Medicare prescription drug benefit’s debut in 2005.

An analysis by the firm found that two-thirds of senior citizens who enrolled in the Medicare drug benefit during the initial enrollment period waited to sign up until after coverage began Jan. 1, 2006. Twenty percent waited until the last month of the enrollment period.

“It’s a very complicated decision about buying a health plan,” especially for those who haven’t had coverage in the past, Eyles said.

“As much as we’d like to think that exchanges could make the purchasing decision more straightforward and simple, it’s still very complex.”

EFFECT ON PREMIUMS

Enrollment in plans on insurance exchanges, set up in every state under the 2010 federal health-care overhaul law, began Oct. 1 for coverage that started Wednesday.

Greenwood said 6,100 people who did not qualify for Medicaid were covered in plans offered through the exchange with Arkansas Blue Cross or the national association.

An additional 2,500 people signed up directly with Arkansas Blue Cross, rather than through the exchange, for unsubsidized plans. The national association is not offering plans outside the exchange.

Stock said 1,100 people who did not qualify for Medicaid had signed up for coverage in his company’s plans as of Thursday, and fewer than 100 people had signed up outside of the exchange for unsubsidized plans.

The enrollment figures are being watched not only as a measure of whether the health-care law is accomplishing its goal to provide more people with insurance, but also because the mix of enrollees could affect insurance companies’ decisions to participate in the exchanges and how high the companies set premiums.

In Arkansas, premiums for insurance plans offered in the past have typically varied by a 5-to-1 ratio based on age, meaning the oldest customers paid fives times as much as the youngest ones.

The federal health-care law limits the amount a plan’s premium can vary based on age to a 3-to-1 ratio for plans that take effect this year or later.

Even with that limitation, premiums still vary enough based on age to make it unlikely that low enrollment by young people would lead to big losses for insurance companies, said Gary Claxton, a vice president at the Menlo Park, Calif.-based Kaiser Family Foundation.

“Mostly it matters if they get a reasonable mix of healthy and sick people,” regardless of age, Claxton said.

Greenwood and Stock said they couldn’t predict what effect enrollment this year will have on premiums for plans offered in 2015.

“There’s not a lot of data with regard to this new population,” Greenwood said. “When you are trying to predict, you’re sort of starting from ground zero.”

Stock noted that, even if enrollment this year is weighted toward older people with costly medical conditions, that could indicate a potential market of younger, healthier people who might be ready to enroll later this year for coverage starting in 2015.

“We could make a business decision to keep rates a little bit lower to attract more of the healthy people in,” Stock said.

“We’ll have to try to glean as much information as we can out of the claims data that starts to come in on these people and do additional market research to decide what we think is the best strategy going forward,” he said.

“Every carrier in the country is going to be doing the same thing.”

Arkansas Insurance Department spokesman Heather Haywood said the department doesn’t expect premiums for 2015 to differ much from this year’s because insurance companies will only have a few months of medical claims data when they set their premiums.

The companies will file with the Insurance Department this spring details of the plans they hope to offer for coverage starting next year, including proposed premiums.

COMBINED RISK POOLS

The federal tax-credit subsidies are available to those who don’t qualify for Medicaid or other government insurance and whose employers don’t offer coverage that is considered affordable, meaning it would cost less than 9.5 percent of the employee’s income.

Applicants must also have incomes of less than 400 percent of the poverty level - $45,960 for an individual or $94,200 for a family of four.

A study released in November by the Kaiser Family Foundation estimated that 150,000 Arkansans are eligible for the tax credits.

Under the health-care law, an insurance company is required to include all of its plans in the individual insurance market that take effect in 2014 or later in the same risk pool, meaning medical expenses paid under those plans are used to calculate future premiums for all the plans.

The risk pools include plans sold through insurance exchanges as well as unsubsidized plans purchased directly from an insurer.

The risk pool in Arkansas also includes those whose low incomes make them eligible to enroll in private plans on the state’s exchange and have the premiums paid by Medicaid.

The state Legislature last year extended eligibility for Medicaid to about 250,000 people - adults with incomes below 138 percent of the federal poverty level.

That income threshold is $15,860 for an individual or $32,500 for a family of four.

Most of those who qualify under the extended Medicaid program are expected to be able to sign up for a private, Medicaid-funded plan, while about 10 percent of those eligible are expected to be assigned to the traditional Medicaid program because they are considered to have exceptional health needs.

According to the Arkansas Department of Human Services, enrollment in private, Medicaid-funded plans for coverage that started Wednesday included 46,275 people in plans offered by Blue Cross or its national affiliate, 11,063 in plans offered by Centene Corp. under the name Ambetter Arkansas, and 1,246 in plans offered by QualChoice.

State Insurance Commissioner Jay Bradford said the population eligible for the expanded Medicaid program has a higher proportion of young people than the general population, which should help the insurance companies’ bottom lines. Excluding some Medicaid recipients from the private plans because of their health needs will also help reduce claims paid by the companies, he said.

WEBSITE PROBLEMS

Greenwood said enrollment in the Medicaid plans is in line with what Arkansas Blue Cross and Blue Shield and the national association expected. Stock said enrollment in QualChoice plans among those eligible for Medicaid is lower than his company expected.

Greenwood and Stock said enrollment in the non-Medicaid exchange plans was hampered by problems with healthcare.gov, the federal online enrollment portal for Arkansas and 35 other states. The remaining states chose to set up their own insurance exchanges and enrollment websites.

“It’s fair to say there was probably a lot of frustration when the [federal] website went online, especially among those who are young and technically savvy,” Greenwood said. “They’re probably not used to running into glitches like this.”

“We did see an increase in enrollment right at the end of the year,” indicating that the site is working better, she added.

Stock said the cost of the premiums for plans with coverage starting in 2014 may be keeping away those who are not eligible for subsidies.

The premiums are higher than those for plans companies have offered in the past because of the limit on charging older people higher rates, as well as the health law’s prohibition on denying people coverage or charging them more based on their medical histories.

The law also requires plans to cover some services, including therapy for the developmentally disabled and maternity care, that were optional or not covered at all under plans that have been offered in the past.

For a 50-year-old Pulaski County resident, the unsubsidized monthly premium for a Blue Cross plan on the exchange with a $1,000 deductible is $470.13.

Under a plan with the same deductible that Blue Cross stopped selling to new customers last year because it does not meet the health-care law’s requirements, the premium for someone with no history of medical problems was $168.21 for a man or $196.39 for a woman.

To urge more people to apply for coverage through the exchange, Arkansas Blue Cross mounted a statewide television advertising campaign that ended last week.

Greenwood said the company is also planning radio advertisements, starting Monday, that will ask people to send a text message to Blue Cross with information that can be used to determine whether they qualify for subsidized coverage.

People who qualify for Medicaid can sign up at any time during the year. For everyone else signing up for plans in the individual insurance market, enrollment for coverage starting in 2014 ends March 31.

SAFEGUARDS FOR COMPANIES

The federal health-care law includes financial protections meant to limit insurance companies’ potential losses.

A $25 billion fund, financed with an annual fee on all health plans, will pay for some of the expenses of patients with high medical bills through 2016. The fee this year is $63 for every person covered by a group or individual health-insurance plan.

Under another program, insurance companies that end up with a large share of enrollees with costly medical conditions will receive payments from companies with fewer high-cost enrollees.

A third program, known as the risk-corridor program, which will operate through 2016, requires insurance companies with medical claim expenses that are lower than expected to make payments to the federal government. Companies with greater-than-expected claims will receive government payments.

The Congressional Budget Office has predicted that the payments made by insurance companies under the risk-corridor program would equal the payouts by the government, meaning the program would largely pay for itself. The cost to the government could increase, however, if many companies have higher-than-expected claims.

U.S. Rep. Tim Griffin, R-Ark., calls the risk-corridor program a potential “bailout” for insurance companies.

In November, he introduced a bill, a companion to a bill filed by Sen. Marco Rubio, R-Fla., that would abolish the program.

Griffin said delays by President Barrack Obama in implementing portions of the health-care law have increased the financial risk to insurance companies. He also noted that, after announcing a policy meant to allow more people to stay in health plans in 2014 that do not comply with the health-care law, a federal agency official said the agency would explore ways to modify the program’s final rules “to provide additional assistance.”

“I want to prevent [Obama] from going, ‘Hey I’m going to let this provision bail out the insurance companies that I’ve just put in a worse position through my unilateral changes,’” Griffin said.

The financial protections for insurance companies and premium subsidies will prevent the insurance exchanges from collapsing in a “death spiral” of rising premiums and low enrollment, said Edmund Haislmaier, a senior research fellow at The Heritage Foundation, a conservative think tank.

But Haislmaier predicted that the insurance exchanges will eventually reach an “equilibrium state” with a small number of companies participating, and enrollment limited to those with low incomes or costly medical conditions.

“The question in my mind is, how quickly do we get to that end state?” Haislmaier said.

Front Section, Pages 1 on 01/05/2014