School may be out for Summer, but health policy research is in full swing. In July we read new studies on coverage gains for workers, the evolution of Accountable Care Organizations (ACOs), and the effects of the Affordable Care Act’s (ACA) Medical Loss Ratio (MLR) rule.

Agarwal, S, et al.  Blue-Collar Workers Had Greatest Insurance Gains After ACA Implementation. Health Affairs; July 1, 2019. Researchers at Harvard University analyzed national survey data from the American Community Survey to find how the ACA has impacted different populations of workers.

What It Finds

• Beginning in 2014, uninsurance rates dropped across all occupation groups.
• Workers in traditionally “blue-collar” industries (the service industry, farming, construction, and transportation) had the largest coverage gains after ACA implementation.
  • Service workers went from an uninsurance rate of 32.1 percent in 2010 to 18 percent in 2017.
  • Managers and professional workers, who already had high rates of employer-sponsored insurance (ESI), saw a 3-percentage-point drop in uninsurance between 2010 to 2017.
• The largest coverage gains for blue collar workers were from Medicaid and directly purchased individual market coverage.
• Full- and part-time workers both saw significant gains in coverage through Medicaid and directly purchased individual market coverage, but part-time workers saw larger gains.

Why It Matters

The ACA filled in coverage gaps for workers in traditionally blue-collar industries. Interestingly, these gains were predominately driven by the expansion of Medicaid and coverage purchased through the individual market, rather than by ESI. While the majority of Americans access coverage through their employer, studies like this reveal the importance of the ACA’s marketplaces as well as Medicaid expansion for workers, and the need for policymakers to consider the gains that may be reversed if the ACA continues to be rolled back or overturned entirely.

Peck, K, et al. ACO Contracts with Downside Financial Risk Growing, But Still in the Minority. Health Affairs; July 1, 2019. ACOs emerged after ACA implementation as a value-based payment model under Medicare. The payment model has also been implemented by commercial insurers, in the hopes it will help improve health outcomes and control cost. However, to more effectively control costs, many argue that providers must share downside risk when financial targets are missed. Researchers at the Dartmouth Institute for Health Policy and Clinical Practice studied the evolution of the ACO model with particular focus on the introduction of downside risk by looking at responses to a national survey.

What it Finds

• ACOs have grown nearly fivefold since 2012, but the proportion of ACO arrangements taking on downside risk grew from 28 percent in 2012 to just 33 percent in 2018 across payer types.
• ACOs with downside risk are more likely than those without to have more ACO contracts across payer types (Medicaid, Medicare and commercial).
• ACOs with downside risk were more likely than other ACOs to be an integrated delivery system, and more likely to include a hospital.
• In 2018, ACOs with downside risk were more likely to have providers with experience in risk-bearing contracts, including Medicare Advantage, episode-based or bundled payments and capitated commercial plans,
• ACOs with downside risk were more likely to deliver (either directly or through contracting) certain services, including rehabilitation, routine specialty care, and skilled nursing facility care.

Why it Matters

As employers, payers, and policymakers work to find solutions to rapidly rising health costs, value-based payment models often become a topic of conversation. Research has found, however, that without downside risk, “one-sided” ACOs may struggle to meet cost saving targets. To get the “value” out of value-based payments, understanding the disparities between different ACOs and the evolution of the payment model will be vital to successful payment reform.

Hall, M and McCue, M.  How the ACA’s Medical Loss Ratio Rule Protects Consumers and Insurers Against Ongoing Uncertainty. Commonwealth Fund; July 2, 2019. The medical loss ratio (MLR) is an ACA reform that requires insurers to spend no more than 20 percent of their premium revenue on administrative overhead and profit margin; if they spend more, they must pay rebates to policyholders. This study from the Commonwealth Fund examines the implementation of the MLR rule, and how insurers are faring today.

What It Finds

• In the individual market, aggregate MLR rebates have declined, from around $400 million in 2011 to just over $100 million in 2015 and 2016. The authors attribute this to financial losses from competitive underpricing in the early years of the ACA’s insurance reforms and actuarial uncertainty.
• In 2017, insurers recouped profits by increasing premiums at a much higher rate than actual medical claims, leading to an 11-point profit margin increase.
• Because insurers overcompensated for their risk when setting premiums for 2017, that year they paid out 50 percent more in rebates. Twenty-nine insurers paid rebates averaging $140 per member, reducing their profit margins by around 25 percent.
• However, insurers are protected by the way the MLR is calculated, with determines the ratio over a three-year period.

Why It Matters

Insurers’ financial roller coaster on the ACA’s exchanges was a natural consequence of a new insurance landscape. Companies struggled to price products correctly and faced steep financial losses, but as the market matured and insurers found their footing, pricing became more accurate. Recent federal actions to undermine the individual market caused many insurers to increase prices more than they needed to. The MLR rule has helped compensate policyholders for those excess premiums.