Nicholas Bagley at the Incidental Economist has a good piece on the chaos that punting the definition of Essential Health Benefits. I think he gets it wrong in his conclusion though:
The amendment tells each state to define what counts as essential within the state. State-defined benefits will then set a floor on what insurers can offer, arresting the race to the bottom…..
However you feel about the policy, though, the manager’s amendment is troubling. Start with its irresponsibility. The new rule would apply as of January 1, 2018. But insurers have to create and price their health plans within the next few months in order to get them approved prior to the start of open enrollment. They don’t know which services their states will say are essential and they don’t have time to wait around while their states bicker about it. Insurers are likely to walk. All of them. The individual market in 2018 will be a ghost town.
He is right. Insurers have to submit their 2018 plans for initial approval in late June. They have spent years now learning by doing in the individual market. Most insurers are making fairly modest tweaks to their benefit designs, their networks, their disease management strategies and their pricing. At this point, submitting a mildly tweaked clone of a 2017 plan is not a back breaking amount of effort.
A brand new set of Essential Health Benefits is a massive change in the work effort. Networks would need significant additions if new benefits are included. Networks would need to be examined to identify providers that could be dropped if the actuaries and analytics teams determine that they provide now non-essential benefits and are a magnet for adverse selection. Actuaries would be re-running their pricing models to determine what types of deductibles and other cost sharing is needed to get to a sell-able product. The disease management team would need to shift priorities and resources as the new EHBs will give them a new profile of diseases to manage.
When insurers were building out for the October 1, 2013 launch, exploratory efforts started in 2011 and 2012. Significant building started in the fall of 2012. I was locked into my unhappy place to do Exchange network design and provider configuration in the second week of January, 2013 and stayed there until November 2013.
I don’t think the work load would be as severe as launching the Exchange in the first place. But I know it is more than a 10 week project.
However there is an easy punt. States could legislate that for the 2018 Benefit Year, the essential health benefits for the state are the same as they were for 2017. At that point, 2019 EHB’s could be debated with enough time for insurers to actually build something.
Baud
How does that fit in with erasing the lines around the states?
zach
Some state legislatures would do this. Many would cave to lobbying by wanna-be scammers asking for near-zero EHB.
Marcopolo
Thanks for the continuing informative posts. In case anyone else want to use it, the argument I made yesterday to my R senator’s office was enacting this POS bill will cause more American deaths each year and every year going forward than all the terror attacks from 9/11 till now. Then I asked the intern if they were aware how many tax dollars we’d spent fighting “terrorism” over that time. I think it’s a great way to talk about our national priorities.
And may everyone have a lovely morning!
David Anderson
@zach: Insurers don’t want to race to the bottom. A Gresham Law situation is a stable non-optimal equilibrium that leaves a lot of potentially profitable buyers not buying.
Yes, cranks, charlatans and scammers will advocate for no EHBs but not insurers.
daveNYC
@Baud: The race is faster and the bottom is lower.
David Anderson
@Baud: That is not in the bill. If state lines are erased like they were for credit cards pre-2009 CARD ACT, then we see a short bidding war among Southern and Plains States to write the worst possible regulatory climate bills to get all of those JOBS!
Baud
Does this really work with the change in the subsidy structure?
Baud
@David Anderson: Haha. So yet another Trump promise thrown under the bus! At least this one is a good one.
Barbara
The change in the subsidies means that states that want to protect purchasers will have insurance that is unaffordable to many people with the meager subsidies on the table, and the states that are willing to entertain bare bones plans will have customers who will be calling the state insurance department nonstop because their insurance won’t pay for anything when they actually need it. And this is all separate and apart from the massive cuts to Medicaid, both the expansion and non-expansion population. For the first time in living memory David Brooks has actually provided a cogent take down of what is going on here.
https://www.nytimes.com/2017/03/24/opinion/the-trump-elite-like-the-old-elite-but-worse.html?ref=opinion&_r=0
JPL
This was in the NYTimes yesterday
link
Who would have thought that insurance companies would create affordable scam policies given the chance.
Barbara
@JPL: I don’t know what insurers are going to do, but the bona fide health insurers that are currently in the market are unlikely to sell these kinds of policies under their current brand. Anyone who understands insurance would understand the difficulties with doing things this way immediately.
JPL
@Barbara: I agree, but they will offer a plan that people can afford. It might be some type of catastrophic coverage.
Barbara
@JPL: If state law allows them to offer that kind of plan. Most states don’t actually allow health insurers to offer that kind of plan. Maybe markets have changed, but around 20 years ago — post Clinton health reform — catastrophic plans were seen as a solution for consumers, but consumers wouldn’t buy them when state law was changed to make them available. Most people discount the possibility of catastrophes in their own lives, just as most healthy people discount their own need for health care services.
ETA: That’s why most policy makers understand the need for a mandate. The mandate isn’t intended to be punitive, it is intended to overcome the psychology of denial that is rooted in a need to be optimistic in order to take some level of risk to survive.
Betty
Can we just agree that these people don’t know what they’re doing? After all, health care is complicated, I’ve heard.
Barbara
@JPL: Just adding to the preceding comment that so much of what is being discussed — catastrophic coverage, high risk pools, even interstate sales of insurance, have all been discussed for going on three decades, and most have been tried at the state level and they have barely moved the needle or not moved the needle at all in terms of providing greater access to health care for people who need it. These are not policy innovations.
JPL
@Barbara: Yup!
Frank Wilhoit
@David Anderson: Insurers want to segment risk (this is why the entire sector is “incentive incompatible”) and risk segmentation inevitably leads to a race to the bottom. Regulatory action can (should/must; the ACA mostly does) define “the bottom” to be a place that is acceptable to inhabit, but the bottom, wherever it is constrained to be, is where we end up.
The distinction between crooks, scammer and insurers will vanish under the new regime. Most customers’ subjective experience has been that it vanished long ago.
cervantes
Is it not a problem that they also want to allow sales across state lines? That would render state EHBs meaningless.
les
I’m not the expert, but I can’t see the great state of KS doing that. How many states required coverage of pre-existing conditions before ACA? Or had anything like the current EHB’s? A majority of states are “governed” by folks just like the granny starvers in Congress. If cross state passes–and that’s definitely where the Freedumb Caucus is, how long do you think it will take South Dakota to eliminate essentially all requirements? And how many consumers know about anything but price?