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You are here: Home / Anderson On Health Insurance / Utilization in H1 2014

Utilization in H1 2014

by David Anderson|  September 3, 20148:01 am| 6 Comments

This post is in: Anderson On Health Insurance, All we want is life beyond the thunderdome

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The Robert Woods Johnson Foundation has published some interesting data on the utilization of hospital services for the first half of 2014.  The basic story that the data is telling is the one that we expected.

Hospital utilization in the group market overall declined considerably, with a median decrease in both admissions and patient days of 7 and 6 percent, respectively….

The group/employer sponsored insurance market is relatively healthy. Some of the changes are probably quirks in the data set and the group composition, but a good chunk is probably real and a result of better care management.  The goal of almost all care management programs is to minimize the number of admissions and the number of days in the hospital.  Hospital days are insanely expensive.  The more interesting chunk of data concerns the individual market.

In the non-group market, the median admissions per 1,000 members increased between 2013 and 2014 from 9.6 to 9.8, but many of the national, publicly traded corporations show decreases (Aetna, United, HCSC), although WellPoint posted an increase. Among the Blues, results are mixed, with some (Alabama, Florida, Minnesota, and Vermont) showing large increases, while others (Arizona, South Carolina, and Massachusetts) report lower hospital utilization in 2014. Independence Blue Cross, which adopted a very narrow network, showed considerable decline in hospital utilization. Molina Healthcare, which has Medicaid and QHP plans, reported an increase in hospital utilization in 2014, yet at levels which are considerably below the median. Wellcare, a privately traded company with Medicaid plans in a number of states, reported a high level of hospital utilization in 2014. Many, but not all, of the new entrants in 2014 post high levels of hospital utilization

There are a couple of very interesting nuggets.  First, as expected utilization within the individual market segment went up.  The individual market segment until December 31,2013 was often a comprehensively underwritten product.  Underwriting, in most states, was designed to keep the people who are most likely to use hospital services out of the product.  On January 1, 2014, the individual market became a minimally underwritten product as no one could be turned down and rates were based on age, location and smoking status only.  Unshockingly, the risk pools got sicker and insurerss in the individual market paid for more services as the pools were sicker in January, and February 2014 than they were in the same months in 2013.  As the enrollment surged in March, the risk pools probably got to look more similar to 2013 risk pools.

The next interesting nugget is Independence Blue Cross with a narrow network structure showed large utilization declines.  I am speculating wildly out of my ass now.  There are two plausible stories that would explain this utilization decline.  The first is the narrow network scared away people who know that they are highly likely to be admitted to a hospital.  Those visits were shifted from Independence Blue Cross to another carrier.  That is good news for the bonus pool at IBC but either neutral or slightly bad news for society as a whole.  The other story is that the narrow network had minimal scare-off attributes, but it cut out providers and hospitals that liked to over-admit and over-stay patients.  I can’t tell which story is plausible, or more likely, which story has more weight over the other story.

The third nugget of interest to me is that the new entries had high levels of utilization.  This was expected for a couple of reasons.  The first is purely compositional.  A new entry, by definition, had no grandfathered plans and it had no grandmothered (if you like it, you can keep it kludge plans), so therefore they had no underwritten membership that would help balance their numbers.  Secondly, the co-ops and other new players were often making a pitch to underserved and expensive to cover populations.  They were looking for the medically needy.  Finally, setting up effective care and case management is partially a relationship building experience, and relationships take time to build between case manager and member, case manager and the nurse at the doctor’s office, and case manager and the admitting doc.  I would bet a nickel to the RNC that 2nd half of 2014 results will see a normalization and decline of utilization as case management gets better at the new entries.

Overall, the big takeaways are utilization as a whole is going down which should lead to flat or low cost increases, and the exchanges are not deviating too far from aggregate insurance industry expecations.

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6Comments

  1. 1.

    Schlemizel

    September 3, 2014 at 8:41 am

    I wonder about that third tidbit. Assuming that one of the reasons the uninsured were uninsured was a pre-existing condition, isn’t it possible that utilization rates will not decline as much as hoped? I would expect that some treatment would help this condition but how much? Do we have any numbers on pre-existing conditions? WHat percent of the total?

  2. 2.

    Richard Mayhew

    September 3, 2014 at 8:54 am

    @Schlemizel: My bet is that earliest adapters (ie the people who signed up for coverage to start January 1, Februarry 1) are overwhelmingly likely to have had at least a pre-exisiting condition while people who signed up coverage starting on May 1, were likely to be reasonably healthy. The late adapters are a much larger group than the early adapters so I think they will swamp the sick effect.

  3. 3.

    Gin & Tonic

    September 3, 2014 at 9:12 am

    Unshockingly, the risk pools got sicker and insurers in the individual market

    I think you meant to say “insureds” in that sentence.

  4. 4.

    JoyfulA

    September 3, 2014 at 11:49 am

    I wonder about Independence Blue Cross and its narrow networks. IBC is Philadelphia, which has a bunch of teaching hospitals. If it allowed just a few nonteaching hospitals in its network, anyone who thought they might possibly, potentially wind up in a hospital might have avoided IBC and low-cost surgery.

    Then again, 20 years ago, I was with IBC and moved out of its area. I kept IBC out of my native overprudence for several years, and IBC continued paying my health care bills, all to out-of-area providers. I assume IBC had a very broad network then.

  5. 5.

    StringOnAStick

    September 3, 2014 at 2:05 pm

    Too bad we won’t have the second half of the year data until after the midterm elections, especially since it is quite likely, as you said, to show that once everyone who was going to sign up for ACA did so the utilization numbers will likely look fine, and not just include the early adopting, sicker patients.

  6. 6.

    jl

    September 3, 2014 at 3:59 pm

    thanks to RM and commenters for useful info.

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