Health Care's March Madness: Buzzer Sounds On Exchanges Deadline

The fourth anniversary of the signing of the Affordable Care Act (ACA) passed on March 23 without much notice or fanfare.

Instead, all eyes were on March 31, the final deadline for buying health insurance through state and federal health care exchanges – and the day that fines for non-participation kicked in.

Supporters and opponents of the ACA are on the edge of their seats, anxious to know the outcome: Exactly how many people signed up, will they pay their premiums and for how long will they do so?

Unlike March Madness, we won’t know how this dance ends for months to come. But like the NCAA tournament, the ACA has already had its share of victories and major upsets.

The Victories

As a result of health care reform, the number of uninsured or under-insured Americans will be lower in 2014 than in the recent past.

By April 1, the White House estimated it was on track to reach 7 million enrollees through the state and federal exchanges. An estimated 9 million more enrolled in Medicaid.

The majority of the newly enrolled will receive subsidies to help pay for coverage. Their coverage will include free preventive screenings, which should improve their overall well-being and contribute to lower health care costs in the future.

In addition, health care reform allowed more than 3 million otherwise uninsured young adults to gain access to coverage under their parent’s policy until age 26.

Another victory in government’s eyes is that those with “pre-existing conditions” – those who were unable to purchase individual insurance in the past – can no longer be denied coverage. Meanwhile, tens of thousands of women whose plans previously excluded maternity coverage can now obtain the prenatal care and delivery services they require.

And finally, individuals who once found it difficult to navigate the arcane individual health insurance market, and were frustrated by their limited options, can now go to an online exchange and select from a broad set of choices.  

The “Upsets”

For all the victories, other results have left many ACA fans upset and disappointed.

Despite the big push by supporters, it is estimated that only 15 percent of Americans eligible to enroll through the exchanges signed up.

In the 17 states that built their own exchanges, 20 percent of eligible individuals enrolled on average. Vermont led the pack at 54 percent. In contrast, the 27 states that defaulted to the federal exchange saw an average enrollment of only 12 percent.

And a mere 25 percent of individuals between 18 and 34 years of age decided to enroll, compared to the government’s target of 40 percent.

We can speculate that many younger individuals who stayed uninsured assumed they didn’t qualify for subsidies. Or, perhaps they believed the minimal penalty was a better financial choice than the fee they’d need to pay.

And for some in this group, purchasing health insurance this year seemed no more attractive than in the past, so they chose not to sign up. Others perhaps are waiting to see what will happen to the “skinny” catastrophic insurance options of the past before signing up for more comprehensive coverage.

In addition, the percentage of Latinos who signed up in year one was less than other ethnic groups and lower than projected. Language was likely a barrier for some. Few websites offered a Spanish-language portal or sufficient bilingual, bicultural “navigators” to assist non-English speakers with the enrollment process.

We can expect that many of these factors will change when the penalties for not enrolling increase and when previously wary individuals learn about the positive experiences of friends and family who enrolled successfully.

Medicaid also enrolled fewer people that originally hoped. Although the ACA expanded Medicaid eligibility for adults with incomes at or below 138 percent of the federal poverty level, 19 states opted not to accept the federally subsidies of this Medicaid expansion.

The reasons vary. Some states feared they could not afford the added cost of care once the federal subsidy decreased from 100 percent to 90 percent after two years. And others chose not to expand for political reasons.

But regardless of the reasons for these shortcomings, fewer people have health care coverage than if every state had expanded coverage and all exchange-eligible individuals had enrolled.

Bracket Busters

Amid the madness, what could have been the easiest victory proved disastrous.

The online federal and state exchanges were riddled with technological flaws. The antiquated state-based IT systems could not interface seamlessly with the patient-facing web portal. The complex process of linking different systems, combined with the high initial volume of inquiries, caused servers to jam and websites to crash. And some of the flaws in the fed’s online exchange continued, even up until the final buzzer sounded.

Across the country, people accustomed to the speed of a Google search and the simplicity of an Amazon purchase have been frustrated by the complexity of the online process and confused about their options.

Despite recognition that the technology had to work for the exchanges to be successful, businesses that specialize in this area were not brought in early enough or used at all. As a result, particularly in some states, the problematic IT issues discouraged many eligible applicants from completing their enrollment. As a result, many individuals remain uninsured who otherwise would be covered.

The Next Round

We now know a lot more about the ACA than we did when it was first enacted. And we have preliminary findings about the initial experience with the public exchanges. Still several substantial ACA outcomes remain up in the air.  

What Will Happen To Pricing?

Over the two next years, we will learn a lot about the “risk profile” of people who signed up through the exchanges.

Why does that matter? The success of the exchanges is dependent on “risk pooling.” Insurance companies limit the price of health care coverage for the sickest individuals by spreading the cost across a larger population.

As such, the “average” health of the group determines the price an insurer charges.

If more sick people than healthy people enrolled through the exchanges, the increased “disease burden” of the group will cause insurers to hike up prices in the future. But if enough of the newly insured are relatively healthy, they could help drive down the average cost.

It will take at least a year for insurers participating in the exchanges today to gain enough experience with these newly insured individuals. And it will take longer for those sitting on the sidelines to decide whether to participate.

But if the prices on the public exchanges rise too much, healthier individuals will seek alternative, lower priced solutions through the newer private exchanges and other insurance options.

Will Insurance Networks Continue To Narrow?

To contain costs, many insurance companies are planning to offer insurance plans with a smaller set of low-cost physician and hospital options – an approach referred to as a “narrow network plan.”

The California health insurance exchange initially included a list of the physicians and hospitals in each insurance product’s network. But they were quickly pulled down due to uncertainty and error. Most states didn’t even try to publish the information.

Some hospitals and medical groups were excluded from the exchanges due to their high costs. In response, they used the media to encourage patients to bypass the exchanges and purchase alternative products.

Some have taken legal action. Already, a law suit in New York forced one insurer to expand its network.

For price-conscious individuals, the size of the network may not be an issue as long as access to care isn’t compromised.

But just how narrow will these networks get before consumer backlash topples these products? That remains to be seen.

How Will The Newly Insured Adapt To Cost-Sharing Features?

There are four types of plans on the exchanges: platinum, gold, silver and bronze. Each represents a different balance of monthly premiums and payments at the point of care (deductibles and co-payments).

The silver plan was the most popular one purchased through the public exchange. It was structured to cover an average of 70 percent of the total cost of care in monthly premiums. It requires patients to pay on average 30 percent of the total expense at the point of care.

Did individuals who purchased insurance through the exchange understand the financial implications of a silver plan? It’s one thing to read or hear about a $2,000 deductible. But paying $2,000 out of pocket after an emergency room visit or MRI scan may very well trigger buyer’s remorse.

Has The Madness Just Begun?

Despite some of the problems with parts of the ACA and the exchanges, neither will disappear.

We predicted the road would be bumpy for the first few years. The early returns confirm that expectation. But over time we can expect the good to dominate, the bad to be addressed, and the ugly to become a distant memory.

We don’t know if the low health care cost inflation of the past four years will continue or return to the year-over-year increases of the past.

We will need to find out just how much consumers factor quality and reputation over price when selecting health care coverage. And we will see how rapidly the ACA will move American health care forward with modern technology, which has the potential to improve the efficiency and effectiveness of care delivery.

Rather than thinking of March 31 as the end of health care’s March Madness, we should recognize that only the early rounds are complete. The biggest games are still to come.

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