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Analysis of 2017 Premium Changes and Insurer Participation in the Affordable Care Act’s Health Insurance Marketplaces

Marketplace premiums under the Affordable Care Act (ACA), already a subject of perennial interest, have gained even more attention amid unfavorable financial results from some insurers, as well as initial reports of steep premium increases requested for 2017. Several factors will influence how premiums will change in 2017, and there is reason to believe that increases will be higher than in recent years.

Many of the initial reports of premium increases for 2017 have been based on anecdotal examples or averages across insurers. This brief takes a different approach, presenting an early analysis of changes in insurer participation and premiums for the lowest-cost and second-lowest silver marketplace plans in major cities in 16 states plus the District of Columbia where complete data on rates is publicly available for all insurers. Using this information, we are able to calculate the premium a specific person might pay without a premium tax credit, and take into account new plans entering the market. It follows a similar approach to our analyses of 2014, 2015, and 2016 marketplace premiums. The two lowest-cost silver plans are significant because they are the most common plan choices in the marketplaces, and the second lowest-cost plan is the benchmark used to calculate government premium subsidies.

While we cannot generalize to all states until more data become available later this year, in most of these population centers, the costs for the lowest and second-lowest silver plans are, in fact, increasing faster in 2017 than they have in previous years. Based on insurer rate requests, the cost of the second-lowest silver plan in these cities will increase by a weighted average of 9% in 2017. Last year, premiums for the second-lowest silver plans in these areas increased 2% following review by state insurance departments.  There is substantial variation across markets, with premium changes for second-lowest silver plans ranging from a drop of 13% to an increase of 25%. Premiums for 2017 are still preliminary and could be raised or lowered through these states’ rate review processes.

We also find that some states will have fewer insurers participating in 2017 than participated in 2016.  On average across these 17 marketplaces, participation is down from 2016 but similar to that of 2014. In the 17 marketplaces included in this analysis, 7 states will see insurer participation remain steady or increase, while the other 10 states will see a drop in the number of issuers, in many cases due to the withdrawal of UnitedHealth.

Read the full article here.

Why the Justice Department Rejected the Aetna and Anthem Deals

After more than a year of scrutiny, the U.S. Justice Department filed requests for preliminary injunctions Thursday to block the two health insurance deals led by Aetna and Anthem that would shrink the number of national carriers from five to three if allowed to proceed.

For the past year, Aetna has pursued its $37 billion acquisition of Humana to bolster its Medicare Advantage business. Anthem’s $53 billion bid for Cigna Corp. would consolidate health insurance administration offered to employers.

But federal and state regulators officially sued to block those deals, citing reduced competition and potential harm to American consumers.

“If allowed to proceed, these mergers would fundamentally reshape the health insurance industry,” Attorney General Loretta Lynch said Thursday during a news conference announcing the lawsuits. “They would leave much of the multitrillion-dollar health industry in the hands of three mammoth insurance companies, restricting competition in key markets.”

Aetna and Anthem each released statements saying they intend to fight for their deals. But the Anthem-Cigna tie-up appears to be on its deathbed, with Cigna expressing doubt of an approval.

“We do not believe the transaction will close in 2016, and the earliest it could close is 2017, if at all,” Cigna’s statement reads. Cigna disclosed pessimism on the prospects of the deal in its first quarter regulatory filing with the Securities and Exchange Commission.

Read the full article here.

Where The Money Goes: The Evolving Expenses of the US Health Care System

National health care expenditures constitute revenue to the heath care system. However, little is known about how this revenue is distributed across sectors. This article calculates revenues and detailed expenditures for physicians’ offices, hospitals, and outpatient care centers in 1997, 2002, 2007, and 2012, using a range of Census Bureau and Bureau of Labor Statistics sources. Between 1997 and 2012, spending on these three sectors rose by $580 billion, and employment rose by 1.7 million people. Just under half of all 2012 revenues were spent on labor compensation. The labor compensation share of spending declined slightly; within these sectors, the share of compensation paid to physicians and nurses increased. Although employment of nonprofessional labor grew during the study period, this group did not account for much of the sector’s increased spending. The plurality of the 1997-2012 spending increase went to producers of purchased materials and services, which now account for more than one-third of payments.

Health expenditures have been rising faster than the general rate of US inflation for many years. As Uwe Reinhardt has pointed out, however, “Every dollar of health care expenditures is someone’s health care income.”1  Spending is tracked routinely, but much less is known about where the money goes. In this article, spending is decomposed into three categories – hospital, physician, and outpatient – to provide a sense of who collects the revenue and how the shares received have changed over time. This analysis reveals that purchases of medical services and increased compensation of highly skilled professionals accounted for the plurality of spending growth in the time period examined.

Read the full article here.

 

Marketplace Notices: What Employers Should Know

Soon the U.S. Department of Health and Human Services (HHS) will begin notifying employers about employees receiving advance premium tax credits (APTC) or subsidies for 2016 on the ACA federally facilitated exchange. For an idea of what the notice will look like, see the sample employer notice recently posted by HHS. If you receive a notice despite providing ACA-compliant health coverage, you may take the following two actions: 1) Appeal to HHS and 2) Notify employee.

Steps for Reviewing and Responding to an Exchange Notice
First, confirm who is sending the request. Some of the steps outlined below, such as use of the model appeal form, apply only to notices from the Federal exchange or a state-based exchange operating in California, Maryland, Colorado, Massachusetts, the District of Columbia, New York, Kentucky, or Vermont. If employer receives a notice from another state-based exchange, it would be necessary to review the contents of the notice regarding required appeal steps and documentation to be provided (although many state exchanges are likely to apply a similar process to the one used by the HHS).

Then check your records to confirm whether the person listed is an employee of the employer, or a dependent of the employee. If the notice does not provide enough detail for employer to confirm this point, such as a name that is similar to the name of an employee, but slightly different from the information in employer’s records, it may be necessary to call the phone number provided in the notice in an attempt to confirm whether the notice identifies an employee or dependent.

Read the full article here.

An Action Plan For Employers Who Receive Exchange Notices (Spoiler Alert- the Action Plan May Be “Do Nothing”)

In recent weeks, many employers have been receiving notices from the federally-facilitated marketplace (“FFM”), or state-administered public exchanges (generally, “Exchanges”), advising that one of their employees has been found eligible for advance payments of a premium tax credit or cost sharing reduction (“APTC”) during 2016. The notices advise that when the employee applied for health coverage through the Exchange, he or she indicated one of the following: (1) no offer of health coverage was made by the employer; (2) an offer of health coverage was made but it wasn’t “affordable” or “minimum value”; or (3) the employee couldn’t enroll in health coverage because he or she was in a waiting period. Finally, the notice advises the employer that it can appeal the determination that the employee is eligible for the APTC.

The question for employers is: what to do with these notices? As an initial matter, it is important to reinforce that receipt of the notice does NOT mean that the employer has been assessed a penalty under the Affordable Care Act’s (“ACA’s”) employer shared responsibility, or “employer mandate” rules, for failing to offer sufficient coverage to the employee. Those penalties will be assessed by the Internal Revenue Service (“IRS”) under a completely different process, described below. However, there are reasons why an employer might want to take action, including possibly filing an appeal with the Exchange, if there is reason to believe that the employee provided incorrect information to the Exchange about his or her access to employer-sponsored coverage.

Background

The federal government is establishing two different processes for communicating with employers– a “notification” process through the Exchanges, and a “certification” process through IRS/Treasury. The distinction between the two processes is much of where the confusion arises.

The “notification” process through the Exchanges serves as a “heads-up” that an employee has been found to be eligible for an APTC. This notice is being provided to employers as part of the FFM or state exchange’s efforts to determine whether an individual should be found conditionally eligible for APTCs. In contrast, the “certification” process is how employer shared responsibility penalties will actually be assessed. Notably, the IRS has not yet set up the certification process, but it will give employers the right to appeal those assessments. We expect the IRS will provide additional information about the certification process by the end of 2016.

Read the full article here.