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Would Having More ‘Blues’ Make Us Happier?

Many of you residing in Iowa reading this post are probably covered by a Blue Cross and Blue Shield health insurance policy. Most likely your health plan is insured by Iowa-based Wellmark, Inc. or Wellmark Health Plan of Iowa.

Using data from the Iowa Insurance Division, a recent Des Moines Business Record article reported that both Wellmark plans “account for roughly 78 percent of the large group market in Iowa and 81 percent of the (Iowa) small group market.” Additionally, the individual market in Iowa has Wellmark companies accounting for 45 percent of individual health policies in the state.

Overview

For decades, Blue Cross and Blue Shield (BCBS) plans located in each state, Iowa included, did not compete with ‘sister’ BCBS plans in other states. Wellmark BCBS was, in essence, protected from competing with other Blue plans for Iowa business.

However, there was one large exception to this friendly competitive arrangement. Other Blue insurers can compete for large national-account business ONLY if the home state Blue plan chose to “cede” the client to them. As an example, if Hy-Vee, headquartered in Iowa, wished to use a larger BCBS plan, such as Anthem, Inc. – the largest of all BCBS plans – Wellmark would need to ‘cede’ this Iowa-based business to the desired Blue plan. Employers really had little recourse on fighting this arrangement, other than threaten to choose a non-Blue plan such as United Healthcare, Cigna, Aetna, etc.

It is important to mention that within the Blues system, if a large, Iowa-based organization is enrolled with Wellmark, they gain access to the BlueCard® PPO for their out-of-state employees – which offers any additional negotiated arrangements made by each state’s Blue plan. This is a big advantage to large national accounts, and has worked reasonably well for decades. However, if the employer was, for some reason, unhappy with the services provided by that ‘home’ Blues plan, they would need to apply leverage to move to another desired Blue plan outside that state. As a result, the pursuit for seamless customer service was rather ‘clunky.’

In 2012, a national class-action lawsuit was brought on behalf of employers and individual policyholders with Blue coverage. The lawsuit alleged that anticompetitive behavior among BCBS plans who conspired to divvy up markets and avoid competing against one another, consequently drove up customers’ prices.

Tentative Antitrust Settlement on Blues

In September, a tentative deal was reached whereby the BCBS Association agreed to pay $2.7 billion to settle the claims and curtail competitive practices that limited competition among all 36 BCBS insurers – which includes Wellmark, Inc. According to the Wall Street Journal, the deal is not yet final, as U.S. District Judge R. David Proctor of Birmingham, AL, who presides over the case, must approve the arrangement. Additionally, the boards from each of the 36 BCBS plans must endorse the settlement.

Under the draft settlement, each of the 36 BCBS insurers can no longer be restricted to a little-known rule that required two-thirds of each Blue plan’s national net revenue from health plans and related services come from Blue-branded business. This rule limited each company’s ability to expand and open new growth pathways for each insurer. Theoretically, each Blue plan could maximize profits both in and out of their assigned service areas, causing greater competition in new territories, if desired.

As for the $2.7 billion settlement, the BCBS Association and all 36 independent Blue plans have agreed to chip in money to settle antitrust charges. Presumably, the amount will be apportioned based on the size of each Blue plan.

What Will This Mean to Iowa and Elsewhere?

Assuming the settlement is approved by Judge Proctor and all 36 Blue plans, there could eventually be more consolidations between Blue plans and non-Blue companies. Additionally, the largest of Blue plans, Anthem and Chicago-based Health Care Services Corp., would likely expand into other territories that were otherwise off-limits to them in the past.

In addition to having access to Wellmark products, eligible Iowa-based employers would have access to other Blue plans desiring to enter Iowa. Wellmark, on the other hand, could expand into other states, hoping to grow new members and revenue. Conceivably, Wellmark could purchase other smaller Blue or non-Blue organizations, or possibly be acquired by a suitor.

With this settlement allowing more Blue plans to enter new territories or states, insurance premiums in those markets could possibly fall. But it’s unclear whether increased competition will push larger discounts from local hospitals and health systems. Over time, this settlement may prompt enough consolidations that some geographical markets could become less competitive, not more.

Healthcare providers, specifically the American Hospital Association and American Medical Association, will have keen interest in how this settlement will eventually affect the revenues and practices of their own respective members at the local level. Additionally, how will state and federal exchanges be affected by this settlement?

In the end, will having additional Blue plans competing in Iowa make us happier because of increased competition? I’m not quite sure. Any unintended consequences will need to be thoroughly assessed as this settlement plays out over time.

With that said, this will be one interesting situation to follow in the months (and years) ahead.

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How Will Election Results Affect the Healthcare Agenda?

On Saturday, November 7, four days following Election Day, the presidential race was called with Joe Biden becoming the 46th president of the U.S. The ‘blue wave’ of Democrats taking more seats in Congress did not happen, which will likely limit President-Elect Joe Biden from taking bold action on his key healthcare policies.

Below are a few thoughts on how the Biden presidency may affect healthcare policy for at least the next election cycle.

General Overview

With Georgia’s senate runoff on January 5, President Biden will most likely be contending with a divided Congress or a laser-thin majority for Senate Democrats. Biden would likely need to rely on the regulatory system to drive a bulk of his aggressive healthcare agenda. The Supreme Court could play a large role in Biden’s ability to put his agenda into practice. In addition to the Supreme Court’s new 6-3 conservative majority, there are far more conservative appeals court judges now than during Obama’s administration.

The COVID-19 pandemic and the eventual ruling by the Supreme Court on the Affordable Care Act will be on top of the immediate healthcare agenda. The federal government may take a more active role in responding to the pandemic and rely less on states to manage it.

COVID-19

Though lawmakers failed to pass another major stimulus package after months of negotiations before the election, talks are likely to resume. Biden will attempt to de-politicize the Centers for Disease Control, which was the world’s leading public health institution. Additionally, Biden could work to reconstruct international cooperation on fighting pandemics, something that has been missing since COVID-19 began. Providing consistent and evidence-based guidance to states and the public on how to mitigate the COVID-19 epidemic will also be extremely important.

Affordable Care Act (ACA)

The Supreme Court (SCOTUS) heard oral arguments yesterday, November 10, on California v. Texas. The decision may not come until next June, but the case will determine the fate of the Affordable Care Act. There are so many legal tentacles to this case that it will be difficult to predict the final outcome. Yet, despite SCOTUS’ conservative leanings, many are led to believe it will be unlikely the country’s highest court will strike down the ACA in its entirety. There are at least two key issues relating to any SCOTUS decision:

  1. MANDATE: Republican attorneys general challenging the law argue that, by zeroing out the individual mandate’s tax penalty, Congress has invalidated the law.
  2. SEVERABILITY: The key question is whether the mandate can be severed from the law if the mandate is no longer valid. If the justices rule it is not severable, the whole ACA would be invalidated.

Public Option

Given the likelihood congress will remain divided, primarily with the Senate leaning Republican, there’s no chance of passing Biden’s platform proposals for expanding health insurance coverage. Senate Republicans have zero interest in a public option for insurance exchanges or lowering the age for Medicare eligibility to age 60.

Depending on the outcome of the SCOTUS’ decision on the ACA, Biden may attempt to enroll more people in health coverage under the ACA marketplaces, by possibly creating a special enrollment period for uninsured people to sign up for coverage as well as increase spending on marketplace advertising and outreach. Allowing family members of people with low incomes to get marketplace subsidies is on Biden’s wish-list.

Market Concentration

The Democratic platform calls for a retroactive review of some mergers and acquisitions approved by the Trump Administration. Without needing congressional approval, the Biden administration can influence past M&A activity. Candidate Biden has pledged to aggressively use antitrust authority to tackle market consolidation in healthcare and scrutinize future acquisitions based on impacts to prices and competition, in addition to labor markets, low-income communities and racial equity. States, however, still have significant discretion over which deals are approved. This will be one area to watch under the Biden Administration.

Drug Prices

Both parties seem to be in agreement that skyrocketing drug costs of specialty drugs and new drugs coming on the market threaten to bankrupt the system. Yet pharmaceutical companies and their powerful lobbying efforts have a proven track record in preventing bold measures to address high drug prices. With a divided Congress, the work of lobbyists will probably be less demanding.

Price Transparency Rules

Regarding Trump’s transparency agenda, it is uncertain whether Biden would concur with the hospital and insurer executive orders. One possibility would be to let the lawsuits by the hospital groups and potential insurer lawsuits play out in the courts. Perhaps the deadlines for hospitals and insurers to adhere to transparency requirements could be extended into the future.

Summary

Having a divided government will greatly temper any aggressive healthcare initiatives a Biden Administration will have in the next two-to-four years. SCOTUS’ eventual decision on the ACA will greatly determine health policy direction in the years ahead.

Finally, for all veterans of all branches: Thank you for your sacrifice, your bravery, and the example you set for our country.

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Finalized Price Transparency Rules for Insurers

Happy post-election day! Time to take a breather, right?

We are living in uncertain and contentious times. Actually, this is a bit of an understatement.

With Tuesday’s election, in addition to another erupting episode of the COVID-19 pandemic and see-saw economic news, one pertinent healthcare story was relegated to the third page of last week’s Wall Street Journal.

The story? “Health Insurers Face Price Transparency Rule.”

As directed by President Trump’s executive order in June 2019, the Department of Health and Human Services (HHS), Department of Labor, and the Department of Treasury issued on October 29, 2020, the final rule for American consumers to have healthcare price transparency when shopping for hundreds of ‘shoppable services’ beginning on or after January 1, 2023. Insurance companies and self-funded employer health plans will be required to post in-network and out-of-network rates negotiated with providers, in addition to developing online price transparency tools to help assist patients with cost-sharing information.

Under the final rule, by January 1, 2023, insurers and employer payers will need to make available a list of 500 shoppable services through an online tool. And one year later, all other items and services must be added to those self-serve tools. Negotiated rates will also need to be machine-readable files showing rates for in-network providers and historical payments and charges to out-of-network providers.

This rule affects most non-grandfathered group health plans or health insurance issuers offering non-grandfathered health insurance coverage in the individual and group markets. A non-grandfathered health plan is one that was put in place after March 23, 2010, the date the Affordable Care Act (ACA) became law. A good primer on grandfathered vs. non-grandfathered health plans, can be found here.

The recent rule affects insurance companies, while this same executive order generated a final rule in November 2019 that requires hospitals to disclose the rates they negotiate with insurers and post the payer-specific negotiated rates online in a searchable and consumer-friendly manner for 300 of the most popular services. Hospitals are required to comply this coming January 1. The final rules on hospitals appeared to have survived challenges and lawsuits by hospitals.

Executive Orders

Developing healthcare policy via executive orders is akin to building a house on sand, it can prove to be short-lived. Once issued, executive orders remain in force until they are canceled, revoked, adjudicated unlawful or simply set to expire. It is typical, for example, that a new president reviews in-force executive orders while in the first few weeks in office. In the short term, executive orders may possibly be effective, however, when one-fifth of the economy evolves around healthcare, more substantive approaches are necessary to ensure long-term certainties.

Will Transparent Pricing Work in Healthcare?

Persuasive arguments have been made by hospitals, insurers and some economists that transparent medical prices will not change the fundamental problems baked into the existing healthcare system. After all, they argue that Americans seldom search for the cost of any given medical procedure, but rather, are most concerned that their desired doctor and hospital are in the health plan’s network of providers. They have even argued that price transparency “would confuse patients.” Advocates for price transparency claim otherwise.

Without question, seeking real medical prices is similar to searching for a needle in a haystack, and most people are disheartened with the process and eventually give up because the ‘system’ was not designed for ‘true’ payers to price and quality shop.

I will stand by what I wrote in a December 2019 blog on this topic:

“By itself, real prices made public will not solve the inherent problems that persist throughout the healthcare system, but price transparency is a good first-step to have. Clearly, it is not the sole remedy to a ‘system’ that requires massive incremental fixes. The push for healthcare ‘consumerism’ has been admittedly slow. However, it is likely that consumerism will find new legs due to third-party entrepreneurs and technology companies who will find disruptive ways to make pricing a relevant decision-making tool for many patients. All purchasers want the best value in the healthcare being purchased.”

The healthcare ‘system’ we have to date is doing what it was designed to do, but it’s time to reboot a system that desperately needs a new blueprint that accentuates intended consequences and minimizes costly (and sometimes deadly) adverse consequences.

For the record…

President Trump’s executive order for hospital price transparency does not at all suggest that he has an overall healthcare policy that would replace the Affordable Care Act. The fact is, he doesn’t appear to have a specific vision that addresses the holy trinity of healthcare: 1) coverage, 2) quality care, and 3) affordability. Platitude statements that his eventual healthcare plan will be “beautiful” does not cut it, and frankly is both disingenuous and empty. We need more, much more.

For price transparency to be meaningful in the future, providers will need to charge prices that will cover their costs. Additionally, providers will need to have a comprehensive understanding of how variable and fixed costs are allocated to the care they deliver, allowing them to make informed decisions on how to price their services to the more cost-conscious consumer.

With this ray of hope, try to enjoy your post-election life. And remember, stay safe!

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