Premiums

Friday Health Plans Management Services Company, Inc. is in the death throes of its life as an Affordable Care Act exchange insurer — regulators are stepping in to take over its operations, and it’s laying off all employees in its home state of Colorado. Meanwhile, Bright Health Group, Inc., which has already exited every ACA exchange in which it operated, reached a deal to sell its California Medicare Advantage plans to Molina Healthcare, Inc. in order to satisfy Bright’s creditors.

Experts tell AIS Health, a division of MMIT, that both insurers largely followed the same playbook: raising massive amounts of funding from venture capital (VC) investors and promising to delight customers with tech-driven, differentiated products. But those big plans fell apart when faced with the realities of an industry that is especially challenging to disrupt, and then capital infusions dried up when interest rates rose.

Although multiple states have set up some version of a public option — a government-established insurance plan — on their Affordable Care Act exchanges, two researchers are striving to convince policymakers to consider a public option program in California that they say will more effectively enhance competition and bring down premiums.

The “secret sauce” of the proposal is the state’s existing “delegated model,” in which provider organizations take on some or all the financial risk associated with delivering health care services, according to Stephen Shortell, Ph.D., a health policy professor at University of California, Berkeley.

A new report by the Institute for Clinical and Economic Review (ICER) argues that “white bagging,” if used appropriately, could save health plans enough money to slow premium growth, but it stipulates that policy reforms and clinical guidelines are necessary to make the practice fair to patients. Health care insiders tell AIS Health, a division of MMIT, that in their view, the white paper correctly and fairly identifies both the challenges and opportunities presented by the white bagging trend.

White bagging is a payer practice that significantly changes the customary dispensing and billing arrangements around specialty drugs. Until recently, nearly every specialty pharmacy transaction involved the so-called “buy-and-bill” framework. In buy-and-bill transactions, which still account for the vast majority of specialty pharmacy care, providers purchase a specialty drug, stock it in their facility and charge a payer for it after administering the drug to a patient. White bagging, on the other hand, involves a payer purchasing a drug directly from the manufacturer, distributor, or specialty pharmacy and arranging for the drug to be delivered to the site of care. In a similar practice also covered by the ICER report, “brown bagging,” payers also purchase the specialty drug directly, but have it delivered to the patient’s home instead of the provider’s facility.

Express Scripts and Optum Rx recently disclosed initiatives including pass-through arrangements, lower copays and price matches that they say will help clients and members save money and increase transparency. Marc Guieb, Pharm.D., a consulting pharmacist with Milliman, Inc., says the announcements are not “new or revolutionary or anything” and that they “seem to be rebranding of existing programs and products that are already offered.”

Guieb notes that the press releases are likely in response to the increasing scrutiny the PBM industry faces from politicians and others. Several Senate committees this year have introduced PBM legislation, and the Federal Trade Commission (FTC) last year opened an investigation into the business practices and consolidation of PBMs.

If the federal government decreased payments to Medicare Advantage plans — something of a boogeyman for insurers in recent years — would seniors see higher premiums and a reduction in the availability of supplemental benefits? That’s a question a new study published in the April 2023 issue of Health Affairs aimed to answer, to mixed results.

Using a nationally representative sample of both MA and traditional Medicare data from 2012 to 2019, researchers sought to estimate the impact of changes in MA benchmark payments on plan premiums, member cost sharing and supplemental benefit availability. (One of the study’s four co-authors is Harvard University’s Michael Chernew, Ph.D., chair of the Medicare Payment Advisory Commission, which has long argued that MA plans are overpaid relative to traditional Medicare.) The benchmark is an annual payment established by CMS to determine the maximum amount that Medicare will pay an MA plan for providing services to each member. The amount is calculated based on traditional Medicare costs in a given service area and is adjusted based on member health status and the plan’s individual offerings. If an MA plan's bid is below the benchmark in its county, the difference is returned to the plan and can be used to provide supplemental benefits and/or lower premiums. If the bid is above the benchmark, the plan must cover the additional cost or pass it on to members in the form of higher premiums or cost sharing.

While “benchmark” Affordable Care Act premiums rose in 2023 after declining for multiple years, greater insurer competition in heavily populated regions is still helping to keep rates in check, according to a new analysis from the Urban Institute. Yet some rural areas and smaller cities often don’t attract enough insurers to create meaningful competition — a market dynamic that remains challenging to overcome, one of the report’s authors says.

To produce the analysis, researchers examined premium and insurer participation data from HealthCare.gov for 33 states and from 18 state-based marketplace websites. They zeroed in on “benchmark” premiums — or the rates for the second-lowest-cost silver plans available — because those determine the level of premium tax credits consumers receive.

Many of the largest U.S. hospital systems reported negative net income from 2022, a list that includes Kaiser Permanente, Mass General Brigham, and the Cleveland Clinic, each of which lost at least $1 billion. Although some prominent hospital systems’ red ink is due to negative investment income, the latest available data suggest that inpatient volumes are down from their pre-pandemic baseline and are likely to stay that way. As a result, experts tell AIS Health, a division of MMIT, hospitals are likely to be even more aggressive with payers than they have been in recent rate negotiation rounds to replace some of that lost revenue and expired federal pandemic relief funds.

Consulting firm Kaufman Hall & Associates, which compiles monthly indices of hospital finances, found in a March 28 report that the median hospital operating margin was -1.1% in February, a slight decrease from January’s -0.8%. The report added that “due to external economic factors, relatively flat margins are likely to continue in the near term.”

A record high 16.4 million people enrolled in Affordable Care Act marketplace coverage during the 2023 Open Enrollment Period, including 12.2 million people who live in states using HealthCare.gov and 4.2 million in 18 states with their own marketplace, according to CMS. Enrollment in HealthCare.gov marketplaces was up 19% compared with 2022, while signups in the state-based marketplaces saw a slight decline for the first time since 2019.

More than half of states saw their enrollment increase by at least 5% from 2022 to 2023, with five states experiencing signup surges of more than 25%. Meanwhile, plan selections in Kentucky, Massachusetts and New Mexico shrunk by over 10% year over year.

Washington’s “public option” has had a substantive downward impact on premium rates on the state’s individual exchange, according to state officials — encouraging news for policymakers who have tinkered with the insurance program after it disappointed in the first two years after it launched. Experts tell AIS Health, a division of MMIT, that the results bode well for other states’ public options, even though Washington is still adjusting important elements like network scope and reimbursement rates.

The Washington State Health Care Authority (HCA), one of the state agencies that administers the public option — called Cascade Select — said that in a February report enrollment more than tripled for plan year 2023, increasing from 8,000 in 2022 to 27,000 people statewide. The same report also said that “Cascade Select plans are the lowest cost Silver premiums available on the Exchange in 25 counties, up from 13 counties in 2022.” HCA said Cascade Select plans’ average gross premium rates this year decreased by 3%, compared to average rate increases of 8% for other exchange plans. According to a December 2022 HCA report, Cascade Select plans are available in 34 of 39 counties, up from 19 in 2021.

By the end of 2021, gross margins per enrollee in the Medicare Advantage market had returned to pre-pandemic levels, and were significantly higher than gross margins in other health insurance markets, according to a recent Kaiser Family Foundation analysis. In 2021, gross margins for MA plans averaged $1,730 per enrollee, more than double the margins in the individual market ($745), the fully insured group ($689) and the Medicaid managed care market ($768). Gross margins for the individual market and group markets were 36% and 17% lower, respectively, in 2021 than they were in 2019, whereas the gross margins per enrollee for Medicaid managed care plans were higher in 2021 than pre-pandemic.