Implications of the Healthcare Exchanges for Oncology
Hollywood, FL—The complexity of healthcare exchanges has heads spinning. Attendees at the Third Annual Conference of the Association for Value-Based Cancer Care came away with a better understanding of the exchanges after a presentation by Matthew C. Palmgren, PharmD, President, Int’Ovation, Signal Mountain, TN.
Although Dr Palmgren helped craft the Medicare Advantage program—something of a forerunner to the exchanges—much of what he knows stems from his recently becoming a licensed insurance broker himself. “If I could participate in the exchanges, I figured I could really understand them better,” he said.
The individual exchanges for uninsured Americans will be open for enrollment on October 1, 2013, and will “go live” on January 1, 2014. Approximately 7 million persons are expected to participate. Each state will have its own exchange, or can partner with other states to form a regional exchange (although this seems rare at the moment). Multiple exchanges within a given state are also allowed, but there seems to be little interest in this option as yet, Dr Palmgren said.
Cancer Survivor Pre- and Post- Exchange
To personalize his description of the exchanges, Dr Palmgren described the insurance options of a theoretical patient with cancer before and after the establishment of the exchanges.
Mike is a 44-year-old bone cancer survivor who is self-employed and has an annual income of $38,000. In the traditional scenario, Mike applies to 9 health plans online and is offered coverage by 5 plans; 4 impose a benefits limit and no coverage for any cancer treatment, because of his preexisting condition, and 1 imposes higher cost-sharing for prescription drugs and doctor visits. All plans include a premium surcharge, averaging 70% of the base premium, because he is a cancer survivor.
“That’s called underwriting. That’s what companies do in the individual market,” Dr Palmgren said. With the exchanges, some of these restrictions and higher costs should disappear, he predicted, “and Mike will be able to divert some of the risk that he’s experiencing with healthcare costs.”
Under the new law, Mike goes online and enters his age, zip code, and income. He is notified that he is eligible for a small premium tax credit. There are 15 plans available in his area; these must provide coverage if he applies, and they are forbidden to exclude cancer care. Mike considers the quality and premiums of each, and uses a calculator to establish his future share of the costs, should his cancer return.
Mike enrolls in a plan with a premium of $260, with the tax credit, and his maximum out-of-pocket cost is $3900.
The Exchange Marketplace
The exchanges will allow consumers like Mike to compare health plans in terms of eligibility, availability, covered benefits, premium rates, cost-sharing, provider networks, and the plan’s financial information (including medical loss ratio). The plans will offer a calculator for estimating the actual cost of coverage, account premiums, and premium assistance specific to the individual member.
“All this information has to be out there for the member to view in order to understand what’s going on, and it should be in real time,” Dr Palmgren said. The aim is to provide prompt responses and resolution of questions and issues.
There will be 4 types of exchange plans, known as Bronze, Silver, Gold, and Platinum, which differ in terms of coverage, premium rates, out-of-pocket costs, and cost-sharing. They will all offer the required benefits and will compete on the basis of ratings (Figure).
“You are going to be surprised October 1 to see health plans you’ve probably never seen before, which is what we saw in 2006 with the Part D expansion,” Dr Palmgren predicted. “And in 2015, with the small employer-based plans coming on board, you’ll see an explosion.”
The requirements of the “in-exchange” plans are numerous. Most important, there is guaranteed issue and renewability of coverage, and a prohibition on excluding persons based on preexisting conditions. Premiums cannot vary based on health status or gender, and only limited variation is allowed based on age, geography, family size, and tobacco use.
There is a ban on lifetime and annual dollar limits on coverage of essential benefits. Preventive health services are covered without cost-sharing. Plans must also allow their members to participate in clinical trials related to the prevention, detection, or treatment of cancer and must cover the routine costs of trial participation.
The maximum out-of-pocket cost (not including the premium) will adhere to federal guidelines for health savings accounts: $6000 per individual; and $12,000 per family. The hope is that consumers will invest in health savings accounts and will have this money available, should they need it.
“Cancer will probably hit the maximum out-of-pocket for every one of these plans, and enrollees need to prepare for that,” Dr Palmgren said.
Outside of the exchange there are few requirements. Not all plans need to be qualified, and there are no federal or state premium subsidies. For the time being, “you can still continue to do business. ‘No change in coverage’ is true for now, even though you are not doing things that the in-exchange plans are mandated to do,” but there will be lack of access to state subsidies, Dr Palmgren added.
Exchange Plans Will Be Monitored for Adverse Selection
State boards will be monitoring the enrollee makeup of the plans, and will be empowered to decertify plans that demonstrate “adverse selection,” Dr Palmgren said.
“Let’s face it—this is an actuarial game in terms of how many high-risk patients you’re going to get, how many low-risk patients you’re going to get, how many elderly you’re going to get….Adverse selection is something they’re really going to look for, to make sure the bronze plan doesn’t get ‘adverse selected’ against,” he emphasized.
“We call that the death spiral, when it comes to insurance,” Dr Palmgren continued. “You get people into your plan whose premiums aren’t covering them. You can raise the premium 80%, but they are still high utilizers.”
The monitoring applies to in-exchange plans, but companies that are in the exchange can have their out-of-exchange practices examined as well for adverse selection. “You might see new companies that only have out-of-exchange plans, but the older companies—the Blue Crosses and the Cignas of the world—are playing in the exchange. If they’re playing in the exchange, they’re going to be monitored outside of the exchange to make sure they’re not pushing adverse patients into the exchange,” he explained.
Plan Transparency, Quality, and Cost
The exchange plans will be transparent in terms of their benefits, cost-sharing, and business practices. They must provide full, uniform, and detailed definitions and information relayed in understandable language. They must provide information about payment policies and the number of claims denied.
With regard to containing premiums, exchange plans will post online their premium increases and justification via actuarial analysis. The exchange can exclude plans with unjustified increases.
Exchange plans must report details of their implemented programs to the US Department of Health and Human Services, as a means of improving health outcomes, reducing hospital readmissions, improving patient safety, promoting prevention and wellness, and reducing health disparities. The plans must implement quality measures, which will be publicly disclosed and will form the basis of selecting providers for their networks. n