Can Slick Trump Sick?

By Kim Bellard, September 24, 2015

Health insurance is getting some love from investors.  A lot of that money is going to companies that make it easier to deal with health insurance, but some is going to start-ups -- like OscarClover Health, and Zoom+ -- that actually hope to reinvent the nitty-gritty, often grimy business of providing health insurance.

Oscar, of course, has long been a media darling.  Google just put in another $32 million that ups their valuation to $1.75b.  All this for a company that only has 40,000 members, is offered only in New York/New Jersey (with plans to expand to California and Texas), and which in 2014 lost $28 million on $57 million in revenue.  But never mind all that; they've got a nice website.

That's not really fair, of course.  They've focused on using technology to improve the customer experience, are ahead of the industry curve on use of technology like fitness trackers and telehealth, and are working to use data to match patients with the best physicians for their conditions.

Clover Health, which just raised $100 million in a funding round through some impressive lead investors, has a somewhat different strategy.  It focuses on the Medicare population, putting their primary emphasis on using data to improve patient outcomes.

Clover uses their algorithms to identify high-risk patients, sends nurse practitioners to their homes to develop personalized care plans, and continually loops in new data to update patient profiles. So far Clover (headquartered in San Francisco) is only available in six New Jersey counties, but they claim to have 50% fewer hospital admissions and 34% fewer readmissions than the average for Medicare patients in those counties.  Most of their competitors would claim to have similar efforts for high-risk patients, so we'll have to see if their model scales.

Then there is Zoom+, or, rather, "Zoom+ Performance Health Insurance."  It is the outgrowth of ZoomCare, a network of retail clinics in Portland (OR).    Zoom+ claims to be "the nation’s first health insurance system built from the ground up to enhance human performance," and thinks of itself as "Kaiser 4.0."


Zoom+ has focused heavily on the user experience, wanting "health care to be more like visiting an Apple store," according to Fast Company Design's profile of them.  Zoom+ features not just cool retail centers but also mobile capabilities, a Personal Performance Path, and a Zoom+ Guru, among other services.  It is not your mother's health insurance, and right now can't be yours either unless you happen to live in Portland.

I'm all for reinventing health insurance.  I'm all for making the customer experience much, much better in health insurance and in health care generally.  But I do worry that some of these upstarts may be taking advantage -- perhaps inadvertently -- of one of the underlying problems with health insurance: risk selection beats execution.

Health insurers can market features that are more likely to appeal to younger, healthier customers, like snazzy websites, fitness trackers, or training advice.  None of those are only of interest to "healthy" people, but, it doesn't take much of a shift in the risk profile to have noticeable impacts on costs.

Health insurance needs more consumer-focused technology, more effective use of data, and more focus on promoting health.  However, I'm not getting too excited until I see a health insurer that does away with provider networksrefuses to be complicit in outlandish provider charges, and offers a plan of benefits that consumers can actually understand.

This post is an abridged version of the posting in Kim Bellard’s blogsite. Click here to read the full posting


Will Health Plan Start Ups and Provider Sponsored Plans Fill the Competition Gap?

By Clive Riddle, September 18, 2015

The AMA recently released a special analyses of commercial health insurance markets that found the "combined impact of proposed mergers among four of the nation's largest health insurance companies would exceed federal antitrust guidelines designed to preserve competition in as many as 97 metropolitan areas within 17 states," and that "all told, the two mergers would diminish competition in up to 154 metropolitan areas within 23 states."

Art Caplan, a professor at NYU and a correspondent for NBC News, responded to a recent New York Times editorial, Regulators Need to Scrutinize Health Insurance Mergers, with a humorous post in The Health Care Blog, entitled Merge Away!!!. Here’s the heart of Caplan’s argument: ” Blocking these deals is a terrible idea. The mergers should be allowed to continue. In fact they should proceed until there is only one private insurer left. Only, at that point should the government step in, declare the last company standing to be required to merge with Medicare thereby letting the free market produce what many reformers have only been able to dream of—a single payer system.”

Will the mega mergers result in a vacuum of competition, and perhaps a default single payer system, or perhaps as some noted healthcare pundits have wondered out loud: where health insurance becomes the new cable television provider? Or will emerging players fill the void left in the coming competition gap? This did occur in the airline industry – where the post-merger environment after established airline joined forces didn’t prevent the emergence or growth of carriers like Southwest, Jet Blue, Virgin America  and many others.

Two potential candidates to fill the health plan competition gap are provider sponsored plans and well funded health plan start ups. Provider sponsored plans have always been around, but with today’s environment is much more conducive for their long-term prospects: the growth in Medicaid strengthens the prospects of regional provider backed Medicaid plans; the proliferation of ACOs that can serve as health plan incubators; the emergence of value based payment systems and clinical integration that nudge health systems closer towards the purchaser end of the spectrum.

And then there’s the potential of VC backed health plan start ups. Everyone continues to write about Oscar Health. Here’s a typical headline from last month: Oscar's losses are huge but investors don't care - How one insurance startup with only 40,000 members is worth $1.5 billion.

Oscar Health has been held up as the disruptive innovator embracing tech and customer service for health insurance, in the manner the Uber entered the personal transportation scene. Now this week, you can add this headline to Oscar’s mantle: Google Backs Startup Oscar Health Insurance - Internet company’s growth-equity fund makes $32.5 million investment.

And Oscar isn’t the only VC darling health plan startup. Fortune magazine this week, in their article How this startup is trying to upend health insurance, profiled Clover Health, who just announced a $100 million round of equity and debt funding to expand its presence. Clover is focusing just on Medicare Advantage, and like Oscar, has started small. Founded in 2014, they currently operate in only six New Jersey counties. Also like Oscar – their vision involves embracing technology in a more disruptive means than the traditional health plan approach.

It should be a reasonable wager that Clover and Oscar won’t be the only VC backed startups making news a year from now.


Public Exchange Subsidies – A Snapshot with Distant Clouds

By Clive Riddle, September 11, 2015

Two item of note occurred this week with respect to public exchange subsidies and enrollment: CMS released their June 30, 2015 Effectuated Enrollment Snapshot, and federal judge Rosemary Collyer in an unprecendented ruling that congress has standing for litigation, has allowed United States House of Representatives v. Burwell et al, U.S. District Court for the District of Columbia, No 14-1967 to move forward. 

So the attempts to chip away at health insurance marketplace subsidies did not die with the Supreme Court ruling on King v. Burwell, and another cloud, albeit distant for now – as it will undoubtedly wind through an appeals process assuming it succeeds at Collyer’s level – hangs over the head of public exchange subsidies. 

But in the meantime, CMS has provided a current picture of what these subsidies entail. CMS announced  that “Of the approximately 9.9 million consumers nationwide with effectuated Marketplace enrollments at the end of June 2015, about 84 percent, or more than 8.3 million consumers, were receiving an advanced premium tax credit (APTC) to make their premiums more affordable throughout the year. The average APTC for those enrollees who qualified for the financial assistance was $270 per month. There were 7.2 million consumers with effectuated enrollments at the end of June 2015 through the 37 Federally-Facilitated Marketplaces (including State Partnership Marketplaces) and supported State-based Marketplaces (collectively known as states) and 2.7 million through the remaining State-based Marketplaces.”

Here is an infographoid MCOL will release next week, mapping the average subsidies by state:

CMS notes that “the ten states with the highest rate of consumers who received financial assistance through APTC were: Mississippi (95.4%), Wyoming (92.2%), North Carolina (91.6%), Florida (91.3%), Alabama (90.9%), Louisiana (90.7%), Georgia (90.0%), Arkansas (90.0%), Wisconsin (89.6%), and Alaska (88.8%). The states with the lowest rate of consumers who received APTC are: District of Columbia (10.2%), Minnesota (54.8%), Colorado (55.3%), Hawaii (61.4%), New Hampshire (62.8%), Vermont (64.2%), Utah (65.6%), Kentucky (69.8%), Maryland (70.7%), and New York (71.4%).”

With respect to enrollment by metal plan, CMS shared that 1% were enrolled in Catastrophic plans (63,174); 21% in Bronze plans (2,096,542), 68% in Silver plans (6,761,363); 7% in Gold plans (695,377); and 3% (332,624) in Platinum plans.

The issue of inappropriate marketplace enrollment has been increasingly raised by various parties. CMS released data regarding enrollment data matching initiatives, noting “During the time period from April 1, 2015 to June 30, 2015, enrollment in coverage through the Federally-facilitated Marketplaces was terminated for about 306,000 consumers with citizenship or immigration status data matching issues who failed to produce sufficient documentation of their citizenship or immigration status. In addition, during the same time period, about 734,000 households with annual household income inconsistencies had their APTC and/or CSRs for 2015 coverage adjusted. Overall, as of June 30, 2015 the Marketplace has ended 2015 coverage for approximately 423,000 consumers with 2015 coverage who failed to produce sufficient documentation on their citizenship or immigration status and has adjusted APTC and/or CSRs for about 967,000 households.”


A Quick Look at Provider Billing Facts

By Claire Thayer, September 9, 2015

In 2014, the U.S. health care system spent close to $1 trillion on health care, with half of this paid to hospitals, a third toward physicians and clinical services and the remainder on prescription drug spending. Over the next 10 years, CMS projects that health spending will continue its steady upward pace and grow at an average rate of close to 5.8% per year. While perhaps not surprising, examining the validity of claims is proving to be an enormous undertaking, with a recent GAO Report on the Medicare Program estimating that $60 billion (close to 10%) of total Medicare claims paid in 2014 was paid improperly. These and a few other provider billing and payment facts are highlighted MCOL’s infoGraphoid this week:

MCOL’s weekly infoGraphoid is a benefit for MCOL Basic members and released each Wednesday as part of the MCOL Daily Factoid e-newsletter distribution service – find out more here.


Cadillac tax may hit over 25% of employers starting in 2018

By Claire Thayer, September 2, 2015

One of the provisions of the Affordable Care Act is the high-cost plan tax (HCPT), aka the ‘Cadillac’ tax,  will be imposed on health insurance companies as well as sponsors of self-funded group health plans beginning in 2018.  Plans that exceed cost thresholds will incur the excise tax.  For 2018, cost thresholds are $10,200 for an individual (single coverage) and $27,500 for family. The excise tax is 40% of the amount that exceed these thresholds.

A recent analysis by the Kaiser Family Foundation of the impact of the Cadillac tax on employers summarizes the overall cost for each employee to include:

  • The average cost for the health insurance plan (whether insured or self-funded);
  • Employer contributions to an (HSA), Archer medical spending account or HRA;
  • Contributions (including employee-elected payroll deductions and non-elective employer contributions) to an FSA;
  • The value of coverage in certain on-site medical clinics; and
  • The cost for certain limited-benefit plans if they are provided on a tax-preferred basis.

This same study estimates that in 2018, over 25% of employers offering health plan benefits may be subject to the Cadillac tax, and by 2028, as many as 42% of employers will incur this excise tax:

As employers look for ways to save costs, the Cadillac tax will have a huge impact on flexible spending accounts (FSAs), with some analysts conjecturing that this could lead to the demise of FSAs, as reported last week on Politico. Expect employers to make benefits changes during the open enrollment season for both this year and next. For more in-depth discussion, the Kaiser Family Foundation’s August 2015 Issue Brief will be insightful.

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