From 3M Health Information Systems
Improving health care: Actuarial Challenge announces Round 2 results
Earlier this year I wrote a blog about the Actuarial Challenge, a contest sponsored by the Robert Wood Johnson Foundation (RWJ) and judged by Milliman, in which participants work in teams to “consider different policy levers to test alternative approaches for promoting increased enrollment, stable costs, and wide health plan participation in the individual health market.” From fourteen papers submitted for the Challenge, judges chose five finalists. In round two of the Challenge, finalists worked with Milliman to “model their proposals to illustrate the potential financial impact to individual health insurance market.”1
In order to save you a couple of clicks, I’ve reprinted the basics of each finalist’s proposal below.
Improving the Individual Market (formerly Individual Market Redux)
Allows more flexible plan design, wider premium range by age, and limited consideration of enrollee health status when setting premiums. Replaces some premium and cost-sharing subsidies with contributions to individual health savings accounts (HSA). Revises the ACA risk-adjustment methodology. Employs Medicaid reimbursement levels and increases cost transparency. Reduces mandated benefits using evidence-based research. Incentivizes payment reform, integration of healthcare information, implementation of clinical best practices, and value-based care.
Why not BE HIP?
Establishes a nationwide Basic Essential Health Insurance Plan (BE HIP) including a core set of benefits defined by federal regulation. Upgraded benefits can be purchased. Automatic enrollment with penalties for non-enrollment. Uses a risk-adjustment and reinsurance program. Premium equalization adjusts for sociodemographic variation between markets. Offers premium subsidies similar to the ACA.
A fully publicly-funded standard preventive plan is provided for all. Beneficiaries must purchase a separate insurance plan for non-preventive services. Insurers may offer additional plans, subject to state regulations. Premiums limited to more affordable levels. Establishes permanent publically funded risk mitigation program. Hospital costs paid at Medicare reimbursement levels. Lowers drug costs by allowing purchases from qualified international suppliers. Offers low income premium discounts, and includes penalties for non-enrollment. Lifetime universal medical cards track enrollment and act as low-interest credit cards for premiums and out-of-pocket expenses. Current health insurance exchanges will become informational websites only.
Uses auto-enrollment into catastrophic plans to enforce coverage. Combines individual and small group markets with no self-funding allowed. Consumers can add benefits by buying add-on services. Employs state and federal block funds for subsidies which states administer. Lowers or eliminates minimum medical loss ratios. Continues risk adjustment and restores reinsurance for up to five years. Equivalent of cost-sharing reductions would be deposited into consumer’s HSA. Use reference-based pricing for provider fees. Encourage up- and down-side risk contracting with providers. Eliminate direct-to-consumer advertising. Provide more cost transparency tools to consumers.
King of Carrot Flowers
Creates three pools in the individual market: (1) Over 250 percent FPL (federal poverty level) with state regulated underwritten market, (2) Under 250 percent FPL with federally funded underwritten and subsidized market, and (3) Special Needs (High Risk) Pool with a federally-funded, highly-subsidized market for individuals with persistent high costs or uninsurable conditions. Guaranteed insurance with continuous enrollment requirement. Provider incentives for effective patient management included. Encourages tax parity between individual and group markets, and more tax-favored status for HSA contributions.
Sponsors allowed the finalists to tweak their proposals before running simulations to assess the impact on the individual health insurance market of each proposal, if implemented.
Tale of the Tape
Simulations included metrics such as changes in the number of covered lives, out-of-pocket expenditures, health plan premiums, average plan retention, and health provider revenue.
All proposals would reduce the number of uninsured persons, with four of five moving all presently uninsured persons into a coverage market (Table 1). The most common tool used to generate that increase was stiffer penalties for non-enrollment making enrollment less expensive.
Table 1 – Increase in Consumer Counts form Baseline Scenario (millions)
Each proposal projected reductions in out-of-pocket premiums per member per year of between $288 (-6 percent) and $2,488 (-45 percent) from baseline (Table 2). Average health plan gross premiums would increase in two of the proposals and decrease in the other three (Table 3).
Table 2 – Increase in Out-of-Pocket costs from Baseline Scenario Per Member Per Year (PMPY)
Table 3 – Increase in Health Plan Gross Premiums and Actuarial Values from Baseline Scenario
In addition to the measures presented in Tables 1-3, the report estimates that the BE HIP, Carrot Flowers, and Panoptic plans would increase provider revenues (42%, 3% and 23%, respectively), while provider revenues would decrease for the IIM (-17%) and Simplifiers (-3%) plans.
Each plan would require addition funding from sources other than premiums (primarily government funding from tax revenue). When funding is viewed as a per member change for the individual market, however, the BE HIP and Carrot Flowers proposals show an increase, while the others show decreases.
The focus of the Actuarial Challenge was on proposals targeting the individual market. Changes in the employer group market could affect these estimates. If healthcare reforms broaden the scope of employer insurance coverage, some persons may move from the individual market. On the other hand, without a strong employer mandate, more persons may be shifted to the individual market.
These hypothetical scenarios help to elucidate the complexity of healthcare costs and benefits. Every approach is likely to have winners and losers. As the healthcare reform debate continues in the U.S. Congress we are likely to experience more change in the U.S. healthcare marketplace. As a health services researcher, I am looking forward to analyzing what the data show us about these changes.
Paul LaBrec is research director for Populations and Payment Solutions with 3M Health Information Systems.
- Robert Wood Johnson Foundation. The Actuarial Challenge Final Results. Accessed May 25, 2017 at http://challenge.actuary.org/