What Health Insurance Exchanges and Pro-Football Have in Common

Thursday, September 8, 2016 | Larry Sobal

In honor of the NFL season officially kicking off this weekend, I’m going to try and mix a little football with health care. Let me know if it works.

There’s a famous sound bite from Vince Lombardi, the legendary coach of my beloved Green Bay Packers. He yells, “What the hell is going on out there?” to nobody, or everybody, depending on your perspective. Here’s a link to that iconic moment.

Just as Vince was bewildered by what he saw going on with the football game, I share an inclination to scream out those same words when I think of the current state of the Affordable Care Act (ACA), particularly health exchanges. Before you start assuming this is some sort of political commentary, be aware that it is not. The reality is, like most of us, I’m bewildered about the current status of how the Affordable Care Act and exchanges are working.

What is going on with health exchanges? Let’s start from the beginning. The Patient Protection and Affordable Care Act (PPACA), commonly called the Affordable Care Act, is a United States federal statute enacted by President Barack Obama on March 23, 2010. At that time, the Congressional Budget Office predicted that 21 million people would have exchange-based coverage in 2016; the real number today is about 12 million.

The health insurance exchange was considered the centerpiece of private insurance reforms in the Affordable Care Act. If the exchanges functioned as planned, they would expand coverage to more Americans, offer greater choices for insurance coverage, reduce insurance costs, and improve the quality of coverage—perhaps even health care itself.

There were problems with the exchanges from the beginning. First, the ACA began with only 16 states (including D.C.) setting up their own exchanges, while seven agreed to a partnership exchange. In addition, the launch of the exchanges, especially the computerized enrollment, had immediate issues, as people were not able to successfully select coverage on the exchange website.

Second, fewer than 25% of the companies offering products on the exchanges are making money. Here’s why:

1. There were fewer enrollees than originally predicted, in part because employers did not dump their health plans as expected and fewer “young invincibles” signed up for coverage.

2. There is an imbalanced risk pool. Although fewer young individuals enrolled, sicker individuals who were previously excluded from purchasing did, thanks to a cornerstone provision that prohibited insurers from denying policies to individuals with pre-existing conditions. That, coupled with fewer employers dropping health plans, threw off the risk pool and left insurers with underestimated medical costs to carry the burden. 

3. There are risk corridor payment problems. The ACA included provisions designed to protect insurers from paying the price for enrolling sicker individuals, commonly referred to as the “three R’s.”Of those, the risk corridor program ran into trouble and government paid just about 12% of what it owed to insurers.

Subsequently, two state-run exchanges (Nevada and Oregon) failed in 2014 and two more (Hawaii and New Mexico) failed in 2015. Another five state-run exchanges (California, District of Columbia, Minnesota, Vermont and Washington) are financially troubled, and financial problems at two others (Colorado and Rhode Island) are so severe that they’re in danger of shutting down. Likewise, the Massachusetts exchange has been plagued with both technical and financial difficulties that raise questions about its survivability.

To add to these woes, Aetna, one of the nation’s largest insurance companies, recently announced that it was cutting back its participation in the health care exchange market and will sell individual insurance policies in only 242 counties in four states (down almost 70% from the 778 counties in 15 states where the company marketed exchange plans this year). 

Aetna, which today covers about 900,000 people through the exchanges, is the third major insurer to pull back from the ACA exchange marketplaces. UnitedHealth Group said in April it planned to pull out of ACA marketplaces in most states. In July, Humana, which covers about 800,000 people, said it will cut back its offerings to just a handful of counties.

Going back to the football analogy, the (exchange) game doesn’t appear to be going as planned. The exchanges have created insurance products that feature the worst of all worlds.

Many analysts believe that the exchange premium rates for 2017 will contain price hikes significantly steeper than the increases seen in prior years. The price increases will reflect not only higher medical costs, but also the fact that many plans are seeing older, sicker enrollees than had been projected. Such enrollees can often cost more in terms of benefits paid than what they pay in monthly premiums.

Going back to the football analogy, the (exchange) game doesn’t appear to be going as planned. The exchanges have created insurance products that feature the worst of all worlds. They are not attracting a younger (healthier) population necessary to spread costs; therefore, they have high premiums, high deductibles and copays, and plans are forced to offer limited networks of doctors and hospitals in an attempt to stem their losses. In other words, the game plan is not working.

What we know for sure is that on Tuesday, November 8, a new owner will be taking over the franchise (something we never have to worry about with the Packers, the only publically-owned professional sports team). He or she will either keep the team and game plan together or clean house and start over (as owners often do when performance isn’t up to par).

And just like the NFL season, whatever changes are (or aren’t) made to the ACA and exchanges, we all have the opportunity to do our best Monday morning quarterbacking and either second guess—or justify—everything. I can't wait.

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Larry Sobal is Executive Vice President of Business Development at MedAxiom. He has a 35-year background as a senior executive in medical group leadership, hospital leadership and insurance. As part of his current role, Larry consults, writes and presents on topics relevant to transforming physician practices and health systems.

 

 

 

Illustration: Lee Sauer

 

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