Understanding the ACA's Modified Community Rating Requirements

This week's post is dedicated to explaining one of the many new provisions of the Affordable Care Act (ACA) which is scheduled to be implemented in 2014 - MODIFIED COMMUNITY RATING (MCR for the rest of this blog post).  Let me begin by stipulating which stakeholders this provision affects and which it does not:




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Health Insurer For Sale!

Insurance holding company - Assurant Inc. - announced their intent to exit the health insurance marketplace by 2016; and have retained investment banking firm - Barclays Capital - to locate a potential buyer for their health insurance and employee benefits subsidiaries.  Like the legions of health insurers that have exited the market before and after passage of the Affordable Care Act (ACA), the reason is simple - quarterly losses in the millions with seemingly no end in sight.  In the case of Assurant Health (and its more recognizable subsidiary insurers in the health insurance market including Time, John Alden Life, and Union Security Life) it appears the ACA was the proverbial "straw that broker the camel's back".  Here's what we know based on a variety of media outlets, and Assurant's own press release...

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Health Care Payment Alternatives

Back in the 1960's, the average cost of an overnight hospital admission was around $100.  Not coincidentally, most health insurance plans at the time set their deductible amounts somewhere between $0 and $100.  Today, adjusting for geographical differences, PPO discounts, etc., an overnight stay in a hospital will run you between $1,700 - $2,500.  According to the Kaiser Family Foundation (KFF), the average health insurance plan deductible in 2014 for an individual covered by employer based coverage was $1,214 (up from $826 in 2009).  Smaller employers (fewer than 200 employees) tend to have higher deductibles (nearly $1,800); while larger employers lean toward lower deductibles ( $971).  Clearly, there is a relationship between health insurance deductible amounts, and the average cost of an overnight hospitalization.

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Defined Contribution in Health Insurance

 

Many in the health insurance and employee benefits space are claiming to have found the next new, innovative and sure fire way to reduce health insurance costs.  Actually its an old idea, originally deployed in the retirement/pension area of the overall employee benefits palette, and fairly recently resurrected for use in employer provided health insurance.  The next "silver bullet"?

DEFINED CONTRIBUTION

(Remember 401(k)s gradual replacement of many defined benefit retirement pension plans in the eighties?)
Two large, well known U.S. businesses recently announced their intent to go with a defined contribution strategy for their health insurance offering (Time Magazine and Hilton Worldwide), joining others previously taking the plunge including Darden Restaurants, Sears, and Walgreens.  So what are the pros and cons to such an approach?  What is it exactly?  How does an employer deploy it?

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King v. Burwell ~ Deciding the ACA's Future

Next week (March 2, 2015), the Supreme Court of the United States (SCOTUS) will take up a very important case - King versus Burwell.  All politics and rhetoric aside, this case has the potential to virtually upend the Affordable Care Act (ACA), and stakeholders should be informed as to its implications.   At the core of the case is whether or not the federal government has the authority to issue subsidies (or tax credits) to otherwise eligible individuals that reside in a state that does not have a "state based health insurance exchange" (emphasis on the word - state).  Nearly three years ago, the SCOTUS rendered a decision addressing the constitutionality of the ACA...specifically the individual mandate. This time around, the SCOTUS will be interpreting specific language within the 2,700 pages of the law, and their determination could have a profound impact on the future of health care in America.

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2015 ACA Compliance and Planning

As we approach the 5th anniversary of the signing of the Affordable Care Act (ACA) into law, compliance and planning have become more important than ever.  Listed below are ACA provisions that have particular relevance this year, and deserve attention and planning...

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The Demise of a Health Insurer in 1 Year!

 

Although the following chain of events directly affects some 120,000 health insurance policyholders residing in the states of Nebraska and Iowa, it could be a bell weather for individuals residing in one of the other 23 states that have/offer health insurance through a federal government approved/funded, non-profit, member owned health insurer. (see http://sstevenshealthcare.blogspot.com/2014/12/coop-health-insurancealert.html for the states currently offering health insurance through a government funded/approved COOP).
 

March 23, 2010 – The Patient Protection and Affordable Care Act (PPACA) is signed into law by the President.  Section 1322 of PPACA includes a provision allowing for the establishment of “consumer operated and oriented plans”, or COOPs.

January, 2012 – CoOportunity Health is founded as a non-profit, 501c(3) entity in Iowa, led by former Wellmark/Blue Cross Blue Shield executives.

February, 2012 – The Centers for Medicare and Medicaid Services (CMS) approves CoOportunity Health, along with 22 other COOPs in 23 states around the country.  CoOportunity Health receives initial, low interest loans from the U.S. government totaling $112.6 million.  (Note: the loan included a 15 year payback, and an initial interest rate under 0.4% on the solvency portion, and a 5 year payback time frame on the initial start up portion.) This initial amount was divided/used as follows: $14.7 million for initial operations; $98 million as operating capital, meeting insurance department solvency and surplus to premium requirements. (Note: according to the Omaha World Herald; Money & Jobs; December 28, 2014 article, the initial operating capital allocation was $15.4 million and $130.6 million in solvency funds, respectively.)

October, 2013 – CoOportunity Health is officially open for business in the states of Iowa and Nebraska, and begins enrolling members, both on and off the federal health insurance exchange, individual and employer group coverage.

January 1, 2014 – The earliest allowable effective dates of issued coverage.

Q2, Q3, 2014 – CoOportunity Health realizes significant growth, reaching 5,000 covered members by Q2, 89,000 members in Q3, and 120,000 members by early Q4.

November 1, 2014 – 2015 open enrollment begins (concludes 2/15/15)

December 13, 2014 – The $1.1 trillion Budget Reconciliation Act (or CRomnibus Bill) is passed by Congress.  One of the provisions of the bill eliminates anticipated funding for the 24 COOPs, including CoOp Health.  As a result, $60 million of CoOp Health’s anticipated, additional $125.6 million of government funding was eliminated, placing them at risk. (Note: the Iowa Department of Insurance allowed CoOp Health to include the $125.6 million on its balance sheet as an asset.)

December 23, 2014 – The Iowa Insurance Commissioner submits a petition for an “order of rehabilitation”, ceasing any new business activity from that point forward.  Within an issued statement, the commissioner says – “…people who signed up for the first time with CoOportunity Health after December 15, 2014 will not have coverage and should find other insurers”. 

January 7, 2015 – The Iowa Department of Insurance issues guidance strongly encouraging agents and brokers to “explore other coverage options for individuals and groups”.  The guidance also outlines the possibility of CoOp Health’s status changing to “liquidation”.  In such an event, insured groups would be terminated 45 days after a liquidation order is issued.  Affected terminated members would have the option of filing claims through the state guarantee fund, which has a $500,000 per member limit on medical and pharmacy claims.

January 23, 2015 – The Iowa Department of Insurance announces its intent to file a petition with the court for liquidation.  The insurance commissioner indicates that “there is no expectation for additional cash inflow until the second half of 2015 and medical claims currently exceed cash on hand”.  It is anticipated that a hearing will take place in February (2015), and the order to liquidate CoOportunity Health will commence on February 28, 2015.

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