Springfield Business Journal Editor Eric Olson discusses health insurance changes with Mark Acre, president of OneSource Insurance Group LLC; Matt Aug, president of Cox HealthPlans LLC; Brandon Roerick, owner of Hometown Benefits Group LLC; and Ken Stephens, partner of Employee Benefit Design LLC.
Eric Olson: The health care industry as it relates to insurance is under immense change. What’s the biggest way you guys are seeing it?
Matt Aug: The whole health care space is kind of going through a transformational change of how providers are paid, moving from a fee-for-service environment – getting paid based on how many activities they do – to more of a value-based or population health methodology. That then translates into the insurance side by how insurance companies’ contracts are set up, how that affects premium for groups.
Ken Stephens: The individual marketplace is going through more upheaval and disruption right now than the group/commercial side. What was it, 2014, the part of the (Affordable Care Act) where you had to buy insurance or pay a penalty in the marketplace? There was three or four players that you could go on the marketplace and search and see if you qualify for a subsidy based on your family income and number in your family. Now we are down, in this area, to one, Ambetter. I don’t think they really knew what they were pricing, so rates were good and access was wonderful. That was the first time in my 34 years that our agency could sell somebody an individual policy with no questions asked, no pre-existing condition. Then, next year, everything went up 30-40 percent. Next year, they go up 30-40 percent. There’s been no stability to that market, so it’s just chaos. We’re still getting along fine on the commercial/group side, except for the looming community-rated plans that are due to take effect January of 2020.
Brandon Roerick: The ones who don’t qualify for tax subsidies are the ones that are really getting hammered. [With subsidies] you can’t charge more than 9.5 percent of their income. A lot of our business is small-business owners, and they’ve always had their own individual plans. I’ve got people in their mid-50s spending almost $2,000 a month for health insurance, with a $6,000 deductible. You’re out $30,000 if something happens to you.
Stephens: They’re all flocking back to group insurance now because there’s price stability and the plans are better. The people that hurt is, hey, it’s just me and my wife.
Aug: Anybody that makes over 400 percent of federal poverty level falls into that nonsubsidized category. That’s really been kind of the hidden tax ... for middle, middle-upper class. Say you’re making $100,000 for a family of four, you’re spending 25 percent of that, not counting your deductible, for out-of-pockets on health insurance, which is really unreasonable.
Roerick: The other thing that I’m seeing, they call it “the family glitch.” So, a teacher working at Republic, she gets insurance for free for her, but she adds a husband and two kids on and it’s $1,000 a month. They call me: ‘Hey, I can’t afford it. I want to get tax subsidies because our income is $50,000 for a family of four.’ Well, it doesn’t matter what your income is [because] if you have access to put your dependents on your group plan, you can’t get tax subsidies. When it first started, a 50-year-old might get $200-$300 a month because full price was $400. Well, now subsidies might be $800 or $900 a month for that same income level. It’s a big-time hammer when they filed their taxes.
Aug: The complexity of how they drafted the law and implemented it, it puts a lot of burdens on the people to understand. A lot of people try to do it online themselves and don’t understand that, and then get to the end of the year with a big tax penalty because they’re not aware. One of the unfortunate things is they adjusted the rating structures where essentially the younger people got hurt in the individual market by the pricing. The older individuals, the rates essentially came down because the margins could be only 3:1 as your lowest to highest rates. It really hurt younger people.
Stephens: It used to be an 8:1 rate compression. In other words, an 18-year-old male was [a one], and a 64-year-old male was an eight. They compressed it to 3:1, so it made the 18-year-old male go way up and it made the 64-year-old male come way down. Basically, the younger 18-30 person is now subsidizing the 50-60 person.
Roerick: The other thing that’s hurt rates this year, in 2018 and 2019, is the current administration refusing to pay for the cost-sharing reduction plans. If somebody’s income is low enough, they get a cost-sharing reduction plan, which means if I go buy a silver plan with Ambetter, the deductible is $6,000 [and] the max out-of-pocket is $7,900. Well, if your income is below a certain threshold, government says this plan is not affordable to you, so they force the insurance companies to give you lower deductibles and lower max out-of-pockets. These insurance companies said, “Here’s our rates if we’re going to get reimbursed for the cost-sharing reduction plans; if we’re not, 25 percent higher.”
Aug: The uncertainty creates pricing uncertainty, which creates pricing increases.
Healthy leaving the sick
Olson: What have you seen in group rates for 2019? I heard a 30-40 percent increase in past years. Has it been more stable than that?
Mark Acre: Group rates have been more stable over the years. I think as Ken was speaking earlier, ’14, ’15, ’16, [there were] 15-20 percent increases. Last year, I kind of did a little synopsis from my groups: a 9-11 percent increase in 2018 and about 7-9 percent on 2019 rates.
Olson: What would you say has helped to level it out?
Aug: Medical costs really have stabilized quite a bit. The pharmacy costs are really probably the driver now of a lot of trend. As new drugs come out, prices increase. Those do get passed on to what we pay as a carrier and what’s seen in the premium.
Olson: Anything that you see the industry doing to adjust those costs to help your clients not have to dig so deep?
Roerick: Ambetter had a rate decrease locally this year, which was kind of mind boggling. If you get three or four different companies in southwest Missouri, that may force some companies to lower their rates a little bit.
Acre: I’ve kind of coined this as the law of unintended consequences. When (the ACA) first started, we had five or six players in the individual market. Coventry lost ($700) million [in revenue from 2014 to 2016.] They didn’t realize that taking on this many clients with this low of subsidy and not getting reimbursed the proper amounts from the government, that they will lose that much money to take on every single pre-existing condition. They’re slowly pulling out. Now, we’re down to one company, but now they’re saying you don’t have to have insurance if you don’t want. Now what’s going to happen is we’re going to have all people that prepared properly, they have a good mind to have insurance, but also the ones that are really sick are going to be on the plans still and they’re going to be costing that company lots of money without the healthy people helping subsidize the unhealthy ones.
Olson: You are referring to the elimination of the individual mandate penalty, right?
Stephens: That’s going to make it worse. Fewer younger, healthier people will buy insurance because they don’t have to pay a penalty.
Acre: There’s no threat.
Aug: The concept of insurance, of course, is you’re going to have this pool of healthy people that paid for the sick people. Eventually, those healthy people will have something happen so that money will be there for them, but when you kind of do away with those rules, you create a death spiral on the pricing side.
Olson: Have you seen any numbers of specific drops in enrollment since the penalty was removed?
Aug: It was about a 10 percent drop in enrollment in Missouri.
Roerick: You had a lot of young people who probably wouldn’t have health insurance if there wasn’t a law in place. I think there’d be way fewer young people with health insurance right now if there was no ACA. I know when I was in my early 20s, I didn’t even carry insurance. You’re Superman. You don’t think you’re going to need it.
Aug: I was looking at some information released from (Missouri) Department of Insurance. Pre-ACA there was about 13-14 percent uninsured population in the state. After ACA, it’s hovered right around 8-8.5 percent uninsured. That’ll creep up a little bit in 2019 to probably close to 10 percent uninsured. The ACA created access to that 5-6 percent that were previously uninsured. That will worsen a little bit over the next few years if the mandate [penalty] remains at zero dollars.
Stephens: The mandate is still prevalent for employers 50 or over. If you’re 50 or more eligible people, it’s pay or play. I think that’s why that market is fairly stable. More 50-plus employers are engaged in buying insurance.
Olson: Have you heard an outcry from those larger companies saying, hey, the individual mandate is gone, what about us?
Aug: In the economy we’re in right now, it’s a benefit to help retain employees, too. If the economy was struggling, I think you’d probably hear more pushback.
Stephens: If they tried to rip it out now ... unemployment in the market is so low, they’d lose people.
Roerick: It can work the complete opposite. Let’s say you got a 20-man group and 15 of them are making $30,000 a year. The wife is a stay-at-home mom, they got two kids and they’re getting subsidies – he could get his whole entire family subsidized and pay maybe 80-100 bucks for his entire family.
Well, if that employer starts offering group insurance, he has to get on it, and now they have to pay at least 50 percent of his premium.
Olson: What about these health insurance consortiums? I’ve seen them created by the Missouri Association of Manufacturers, and the state chamber has one for their members.
Aug: For smaller groups, it can help provide some rate stability. Smaller employer groups can kind of pool their resources with other smaller employer groups. Some of these types of plans based on how they’re set up, you don’t have to follow the exact ACA rules. There’s more flexibility.
Stephens: What everybody was gearing up for was buying across state lines. They could have a Realtor plan, and whether you live in California or New York or Missouri, you could buy in to it. Those things never happened, so that’s what’s tripping up all these association plans so far. If you want to buy insurance, if you’re not hanging onto your grandmother plan, it’s going to be a community-rated ACA plan. It’s guaranteed issue. But it’s not going to be the cheapest thing out there. It worries me about the ACA, what’s left, because eventually what’s going to happen is just the sick groups that’ll be left.
Evaluating the law
Olson: Did the Affordable Care Act do what it intended to do?
Roerick: I don’t know what the endgame was, except for maybe to get everybody insured. I just don’t think that was realistic. What I’ve seen a lot of people do, instead of going onto the ACA paying full price, is getting on faith-based plans, like Medi-Share, or short-term plans. A lot of them right now are just catastrophic plans. Now, you can be declined if you have conditions, and they may not cover pre-existing conditions for a certain amount of time. But that young, healthy demographic of 18-30 … it can be a really nice fit.
Stephens: I think it accomplished more people being insured. But mainly, if you look at the United States, it’s mainly on those states that expanded Medicaid, which Missouri was not one of those. Those states, the uninsured went way down. The threshold went up for Medicaid, so they had coverage. The law never was health care reform as much as it was insurance reform.
Olson: What types of technologies are disrupting insurance?
Roerick: I’ve got an app on my phone right now through Medi-Share, MDLive, and I can FaceTime call into a doctor as much as I want whenever I want and it’s free. Not having to leave your office or leave your house to go see a doctor – it’s just convenient, easy and cheap.
Aug: With Cox’s virtual visits, it’s within 15 minutes you’ll see a provider. (Cox) has created online scheduling opportunities to schedule an urgent care visit online. On technology from an insurance company, I think it’s hopefully making enrollment easy, benefits selection easy, providing online portals that they can communicate with us 24/7.
Stephens: There’s a lot of new phone apps for shopping prescriptions. Let’s say somebody is prescribed a med, so they’re going to have to pay it for the first $3,000 with their health care. They want to find it at the best possible price, so they can go on these apps and put that in there and it’ll shop.
Roerick: I got a lot of people buying it in Canada. Getting a three-month supply mail-ordered to them just because it’s so much cheaper. I’ve got several people who take Boniva. It’s $100 a month for one pill, and they can get a three-month supply for $85.
Stephens: Maybe medicine is getting more transparent, it’s still very hard to shop medical care. The transparency is not there.
Olson: That’s changing, right? Didn’t the Trump administration require hospitals starting Jan. 1 of this year to post pricing?
Stephens: That would be like every car dealer posting the sticker price on the car. Nobody pays the sticker price.
Excerpts from Features Editor Christine Temple, email@example.com.
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