What do ob/gyns need to know about the new healthcare exchanges?

Dr. Lockwood, editor in chief, is Dean of the College of Medicine and Vice President for Health Sciences at The Ohio State University, Columbus, Ohio. Contact him at DrLockwood@advanstar.com.

A new obstetric patient comes to your office recently enrolled in a Bronze tier, high-deductible, high coinsurance federally facilitated health insurance exchange plan. She immediately starts grilling you about your professional charges and your hospital’s technical charges. You soon realize that she is liable for half the costs of having her baby. What is your advice?

I have already encountered recurrent pregnancy loss patients with high-deductible plans who have refused karyotypes and hysterosalpingograms because they would have to pay out of pocket and the results were unlikely to materially affect their management or prognosis. Welcome to the new world of public health insurance exchanges! Here’s what you need to know about the new public exchanges and how will they will affect your practice.

Exchange rules 101

The Affordable Care Act (ACA) includes 2 basic strategies for increasing health insurance coverage of the uninsured: 1) expanding Medicaid coverage to 133%–138% of the federal poverty line (FPL); and 2) providing subsidies to those with incomes between 100% and 400% of the FPL who obtain insurance through a public health insurance exchange “marketplace.” The new exchange plans differ from many current plans in that they mandate 10 categories of benefits (ie, outpatient care, inpatient care, emergency services, obstetrical and newborn care, mental health, rehabilitation, lab tests, prescription drugs, preventative services, and pediatric services) and cover at least 60% of actuarially predicted health costs for that year.¹

President Obama has endured much criticism for backtracking on his campaign promise that everyone could keep their insurance plan, since with the exception of plans that have been “grandfathered” (eg, in place without change since March 23, 2010), only half of current health plans cover all mandated benefits and at least 60% of anticipated costs.¹

Indeed, the 4 tiers of plans offered by public exchanges-Bronze, Silver, Gold and Platinum-are constructed based on their ability to cover 60%, 70%, 80%, and 90% of actuarially projected annual healthcare costs. Enrollees are responsible for the remainder of costs. Different plans offer varying combinations of premiums, deductibles, copays and coinsurance to distribute these costs. Catastrophic coverage-only insurance is also available for adults under 30 years who are exempt from mandates because of low income.

One of the reasons the exchanges were opposed by the insurance industry is that very few can be denied coverage (ie, guaranteed issue) and because pricing can no longer be set through most traditional underwriting practices (ie, adjusting price based on health risks and expected costs). Thus, health plan pricing can no longer be adjusted for pre-existing medical conditions, gender, type of job, etc., although some adjustment in price is permitted for family size, geography, age, and tobacco use-a process termed “adjusted community rating.”² Conversely, the ACA mandates a 20% to 30% discount for participation in wellness programs even though the cost-benefit data to support this policy are equivocal at best.³

On the other hand, the insurance industry is eager to cash in on government subsidies for exchange participants with incomes between 100% and 400% of the FPL. Premium subsidies vary with household income and are paid directly to the insurer. The Henry J. Kaiser Family Foundation has created a simple online premium subsidy calculator for determining eligible federal support.⁴ For example, for a nonsmoking central Ohio family of 3 making $43,000 (215% of the FPL), who are not eligible for an employer-covered plan, the maximum percent of income they would have to pay for a premium would be 6.83%. Thus, of the $12,985 needed for a Silver plan annual premium, the government would pay the insurer $10,118 and the family would need to pay only $2,867 per year. Cost-sharing subsidies are also available for Silver plan participants with incomes less than 250% of the FPL. Using the same calculator, this family’s total out-of-pocket maximum, not including the premium, would be no more than $10,400.

The key “motivation” for individuals to obtain such coverage is the ACA’s mandate that imposes a tax penalty on any adult citizen not covered by an employer-sponsored health insurance plan who fails to obtain such coverage ≥3 months per year even though it is available at a cost of less than 8% of their total income. The IRS will monitor whether such coverage is in force because documentation must be included in everyone’s 1040 form. Now there are 2 problems with the mandate: 1) The penalties are relatively low: $95 or 1% of household income (whichever is larger) in 2014, going up to $695 or 2.5% of household income by 2016; and 2) the IRS has minimal enforcement tools beyond withholding a portion of a filer’s tax refund.

Because of low penalties and lax mandate enforcement, there is a risk that healthy young people will make the calculated decision to opt out of the insurance market. Because they were supposed to provide the premium revenue needed to cover the costs of enrolling sicker, older patients, this adverse selection could prove a financial burden for prospective insurers. The ACA has designed 3 ways to mitigate such risks. A permanent state and federal risk adjustment strategy allows exchanges to transfer revenue from plans with healthier to unhealthier populations.⁵ This is supposed to minimize the impact of adverse selection and stabilize premiums. A temporary federally administered “reinsurance” program taxes health plans to create a reinsurance pool to cover up to 80% of outlier costs. This program will sunset with the anticipated entry of commercial reinsurance providers after 2016.

Risk corridors, the third strategy, are another temporary federal measure expiring in 2016 that limits losses to qualified health plans. The federal government will cover 0% of allowable charges when an insurer’s claims exceed rates set for 2014 by at least 3% and 80% when that excess hits 8% above target. 0% of allowable charges when an insurer’s claims exceed rates set for 2014 by at least 3% and 80% when that excess hits 8% above target.

On the flip side, a health plan will pay 50% of its excess profit to the government when costs are 97% to 92% less than expected, rising to 80% when costs are <92% of that expected.

Donut holes, state vs. federal exchanges, and other problems

The Supreme Court Decision declaring the ACA constitutional but permitting states to opt out of its provision to expand Medicaid coverage has resulted in 24 states opting out as of this writing, another 23 states expanding Medicaid, and 3 using a nontraditional expansion strategy.⁶ The resultant map looks much like the 2012 presidential election results. Because many of the states that chose not to expand Medicaid do not cover their citizens up to 100% of the FPL, a substantial number of patients will be ineligible for both exchanges and Medicaid-creating a so-called donut hole. A similar ideological divide exists over whether exchanges are to be run by the state or federal government.

As of this writing 17 exchanges were state-based, 7 were state-federal partnerships and 27 were federally run exchanges.⁷ Obtaining assistance in choosing between plans can be a major bottleneck in implementation. State-based exchanges generally have active programs to assist citizens in choosing the best plan. States may also be “active purchasers” of plans which allows them to limit selection options and thus, costs.

Other state and federal exchanges act as “clearinghouses,” setting baseline premiums.⁷ The ACA made provision for “navigators” to assist enrollees in choosing plans, but more conservative states have passed legislation reducing access to such assistance as part of their strategy to scuttle the ACA.⁸

Take-home message

The good news is that exchanges should increase the number of women of childbearing age with insurance. They will now be covered for needed preventative services and contraception, which we can hope will result in enhanced preconceptual care and earlier access to prenatal care.

The bad news is that narrow provider networks may carve ob/gyns out, particularly those whose prices are high. The new patients-particularly those enrolled in Bronze and Silver plans-will also stress your revenue cycle resources and office staff. High copays, high deductibles and high coinsurance provisions will require aggressive efforts to collect payments at the time of service and after receiving partial payments from health plans. Overall reimbursements will likely decline. Finally, the high coinsurance costs may drive your patients to less expensive hospitals or birthing centers where you do not have privileges.

I urge you to watch Dr. Arnold Cohen’s excellent video at 
http://contemporaryobgyn.net/obgyns-ACA-exchanges â€¨that describes a number of these billing challenges.

References

1. Gabel JR, Lore R, McDevitt RD, et al. More than half of individual health plans offer coverage that falls short of what can be sold through exchanges as of 2014. Health Aff. (Millwood). 2012;31(6):1339–1348.

2. UnitedHealthcare. Adjusted Community Rating. www.uhc.com/united_for_reform_resource_center/health_reform_provisions/adjusted_community_rating.htm. Accessed February 16, 2014.

3. Mukhopadhyay S, Wendel J. Evaluating an employee wellness program. Int J Health Care Finance Econ. 2013;13(3-4):173–199.

4. The Henry J. Kaiser Family Foundation. Subsidy Calculator. http://kff.org/interactive/subsidy-calculator. Accessed February 16, 2014.

5. Department of Health and Human Services. Patient Protection and Affordable Care Act; standards related to reinsurance, risk corridors, and risk adjustment. Final rule. Fed Regist. 2012;77(57):17220–17252.

6. State Reforum. Map: Where states stand on Medicaid Expansion Decisions. https://www.statereforum.org/Medicaid-Expansion-Decisions-Map?gclid=CN337Z6k1rwCFY8-MgodThsAZA. Accessed February 16, 2014.

7. The Henry J. Kaiser Family Foundation. State Decisions for Creating Health Insurance Marketplaces, 2014. http://kff.org/health-reform/state-indicator/health-insurance-exchanges/. Accessed February 16, 2014.

8. USA Today. Study: Navigator laws limit health exchange outreach. www.usatoday.com/story/news/nation/2014/01/14/navigator-laws-limit-health-outreach-efforts/4462759/ Accessed February 16, 2014.