Halloween has come and gone, but the ghosts of health policies past are here to stay. From price variation in hospital services paid by private insurers to how the Affordable Care Act (ACA) has affected part-time workers, researchers have brought us plenty of interesting health policy findings this month. In October, we read studies that examine coverage trends, health care costs, immigrant health, and insurers’ marketplace participation and financial performance.
Bai, G and Anderson, G. Market Power: Price Variation Among Commercial Insurers for Hospital Services. Health Affairs; October 1, 2018. Researchers analyzed the prices paid to Florida hospitals across commercial insurances, comparing major medical insurers like preferred provider organizations (PPOs) and health maintenance organizations (HMOs) to “other” payers, such as casualty (automobile), workers’ compensation, liability (motor truck general liability), and travel insurers.
What It Finds
- In 2016, “other” commercial insurers in Florida paid median relative prices about 50 percent higher than commercial PPOs/HMOs for hospital services, indicating that HMOs/PPOs had greater negotiating power than “other” insurers.
- The median price paid by commercial PPOs/HMOs for hospital services in Florida increased from 1.9 times the Medicare rate in 2010 to 2.5 times the Medicare rate in 2016. “Other” insurers saw median prices increase from 2.8 to 3.8 times the Medicare rate in that same time period.
- Median prices paid by commercial PPOs/HMOs trended similarly at non-profit and for-profit Florida hospitals over the study period, however “other” insurers experienced a much greater increase at for-profit Florida hospitals; while the median price paid by “other” insurers at non-profit hospitals increased from 2.6 times the Medicare rate to a factor of 3.2, at for-profit hospitals, the median prices increased from 3.6 to 5.1.
- Hospitals affiliated with major health systems charged higher prices across the board, however “other” insurers still paid more than commercial PPOs/HMOs.
Why It Matters
Very little is known about the price paid by different types of commercial insurers for hospital services. This study points to differences in negotiating power among payers. Most Americans have insurance through their employer; in recent years, employees have seen more and more of their wages funneled into their benefits, which includes the “other” insurance types in this study. Higher employee contributions, along with higher deductibles and higher out-of-pocket costs, are putting increasing financial strain on employees and their families. Some large self-insured employers have fought back against high health care costs by direct contracting with health systems to get better deals. Employers should look at tools available to them to help them gain back a bit of negotiating power to lower costs for consumers.
Griffith, K., et al. Diminishing Insurance Choices in The Affordable Care Act Marketplaces: A County-Based Analysis. Health Affairs; October 1, 2018. After the sharp decrease of insurer participation on the ACA marketplace in 2017, researchers looked to see if underlying market characteristics were associated with insurer exits and reduced competition.
What It Finds
- The number of counties with at least three marketplace insurers fell dramatically between 2015 and 2018, from 80 percent of counties (containing 93 percent of US residents) to 36 percent of counties (containing 60 percent of US residents).
- During the study period, limited insurer competition (having two or fewer distinct participating insurers) occurred disproportionately in rural counties.
- Limited insurance competition was less likely to occur in counties with higher percentages of the population aged 45 to 65 and in counties with relatively larger Latino populations.
- Failure to expand Medicaid was the strongest predictor of limited insurance competition. Counties in states that expanded Medicaid had more participating insurers than counties in non-expansion states.
Why It Matters
Insurer participation in the ACA’s marketplaces is critical to ensuring access to comprehensive and affordable insurance. This study looks at counties that experienced limited insurer competition to tease out characteristics that would make certain markets vulnerable to insurer exits, which lead to limited competition and increased premiums. Studies like these are helpful for states to consider when making policy decisions to keep insurers in the market. Perhaps unexpectedly, this study suggests that one such policy could be to expand Medicaid.
Zallman, L., et al. Immigrants Pay More In Private Insurance Premiums Than They Receive In Benefits. Health Affairs; October 1, 2018. Using premium contribution and insurer expenditure data, researchers evaluated the claim that immigrants are a “drain” on America’s resources, finding that immigrants are actually subsidizing the health care of US-born enrollees.
What It Finds
- Immigrants, both documented and undocumented, and their employers accounted for 12.6 percent of premiums paid to private insurers in 2014, but only 9.1 percent of private insurers’ expenditures, providing an average annual surplus of about $1,134 per enrollee, whereas US-born private insurance enrollees leave an average annual deficit of about $163 each.
- Immigrants enrolled in private insurance and US-born enrollees had similar premium contributions ($4,033 and $4,070, respectively) indicating that immigrant enrollees’ net surplus was primarily due to lower expenditures.
- Immigrants enrolled in private insurance who have lived in the US for more than 10 years contribute less of a surplus than recent immigrants, but still contribute an average net subsidy of $981 per person per year.
- Undocumented immigrants enrolled in private insurance spend an average of $1,781 on medical services per enrollee, while US-born enrollees spent an average of $4,233.
Why It Matters
The United States is embroiled in a debate on immigration that typically comes down to a checklist of give and take: do people who move to this country take more than they give? When it comes to health care, time and time again, the answer is no. While previous studies have focused primarily on Medicare, this study focuses in on the population of immigrants that purchase private health insurance. As policymakers debate laws that would make accessing health insurance more difficult for immigrants, this less costly portion of the risk pool may exit private insurance markets, causing premiums to rise for those who are U.S. born.
Berdahl, T. and Moriya, A. Difference in Uninsurance Rates Between Full- And Part-Time Workers Declined In 2014. Health Affairs; October 1, 2018. After the ACA’s health insurance exchanges and Medicaid expansion were implemented in 2014, the expectation was that more people would have insurance regardless of their employment status. Researchers analyzed the Medical Expenditure Panel Survey to find whether part-time workers, who typically do not have offers of employer-sponsored insurance, gained greater access to coverage after ACA implementation.
What It Finds
- Between 2010-13 and 2015, part-time workers accounted for the largest decreases in uninsured workers, with declines of 13.3 percent in Medicaid expansion states 12.4 percent in non-expansion states, compared to a roughly 6 percent decline in the uninsurance rate of full-time workers.
- In Medicaid expansion states, Medicaid coverage of part-time workers increased 18%, while in non-expansion states, individual private insurance coverage (predominately marketplace coverage) of part-time workers increased by 10.1 percent.
- Before 2014, part-time workers were twice as likely to be uninsured when compared to full-time workers.
Why It Matters
Part-time workers do not have access to employer-sponsored insurance at the same rate as full-time workers, and are more likely to be low-income. Without Medicaid expansion and federally subsidized private health insurance, the uninsured rate for part-time workers would likely rise again. Policymakers need to consider the needs of part-time workers – 19 million people in 2017 – as they debate policies that could destabilize the individual market or chip away at Medicaid expansion.
Fehr, R., et. al. Individual Insurance Market Performance in Mid-2018. Kaiser Family Foundation; October 5, 2018. Last fall, the Trump Administration made a number of policy changes that led to higher premiums, insurer exits, and concern over whether the problem would worsen in the coming years. Before the policy changes took effect, however, the Kaiser Family Foundation (KFF) found that insurers were making a profit, returning to levels seen prior to the launch of the ACA’s marketplaces in 2014. This study examines insurer financials for the first half of 2018 to see the effects of the 2017 policy changes.
What It Finds
- Medical Loss Ratios (MLR), or the percentage of premiums insurers spend on medical claims, saw continued improvement mid- 2018, down to an average of?? 69 percent as compared to a peak of 93 percent in 2015, indicating an increase in insurer profitability.
- When measuring performance of an insurer by gross margins, or by the amount an individual’s premium exceeds what they actually spend on medical services, insurers saw a significant bump in 2018, increasing $156 per member per month from just $36 in 2015.
- Premiums between mid-2017 and mid-2018 rose by an average of 23 percent, while medical claims by members rose 10 percent. The discrepancy is in part due to the federal government ceasing reimbursements for cost-sharing reduction subsidies paid by insurers.
- The average number of days that individual market enrollees spent in the hospital during the first half of 2018 was higher than the previous three years. This trend could indicate that premium increases, which are driving insurers’ improved financial performance, are also contributing to some adverse selection in the individual market.
Why It Matters
Looking at the financials of insurers mid-2018 is a way to identify challenges ahead, and how insurers weathered challenges past. This study shows that insurers made a market correction in 2017 and 2018 to offset federal policy changes and uncertainty, and because they may have over-corrected, premiums for 2019 are likely to have only modest increases or even decreases, despite continued obstacles and uncertainty. Even so, early claims data suggest the risk pool may be sicker than in years past, suggesting that rising premiums drove out healthy people from the individual market. Going forward, policy changes that loosen restrictions on non-ACA-compliant short-term limited duration insurance, association health plans, and other products and policies that may lead to the siphoning of healthy people from the ACA-compliant risk pool, are likely to drive premiums even higher in the long run.