Arbitrage is the practice of taking advantage of a price difference between two or more markets: striking a combination of matching deals that capitalize upon the imbalance, the profit being the difference between the market prices. Some agents were developing an interesting application of arbitrage strategy, capitalizing on the difference in commissions between agents and assisters. With assister enrollment payments fixed at $58 and the agent commission expected to be somewhat higher, the deal involved agents paying assister entities more than $58 for the referral. Similar arrangements between agents and grantees would be more lucrative for both sides of the deal because grantees have received a lump sum an are not paid by enrollment.

Because of the concern that financial arrangements between agents and grantees, Assisters or community-based organizations would increase the overall cost of marketing and enrollment assistance, which are directly reflected in health plans’ costs, Covered California is making a policy clarification, with the following recommendations:

Covered California encourages non-monetary partnerships among all groups offering enrollment assistance. With regard to financial arrangements that could increase overall marketing and enrollment costs, staff recommend adoption of the following recommendations:

1. Prohibit grantees and Assisters from accepting payment or other valuable consideration from agents for referrals and/or enrollment services; and
2. Prohibit agents trained and certified by Covered California from providing payment or other valuable consideration to grantees, Assisters and other community-based groups for referrals and/or enrollment services as a condition of program participation.

While some of us think applying for health insurance online is pretty cool, others can’t or won’t do it. That why the health insurance exchanges needs a good old-fashioned paper application. Unfortunately, the first attempt at a paper application for individuals and families was 21 pages long. Hardly consumer friendly. There were hoots and hollers. The length of the application was criticized openly by many in the industry, including the NAHU members at their annual DC conference in February.

Low and behold, within 3 months, the CMS has come up with a three-page application for individuals, while the application for families has been reduced by two thirds. CMS says “the consumer friendly forms are much short than industry standards for health insurance applications today.” Click the following link to view and/or download a advance copy of the new application. Ind Paper App.pdf

Consumers continue to lack awareness of how the Affordable Care Act will affect them. Up to two-thirds of the uninsured still say they don’t know what the ACA will mean for them. CMS has repeatedly said in recent weeks that brokers will play a crucial role in consumer assistance and education about the public exchanges for the uninsured and what ACA might mean for all Americans. CMS has said that broker training information will be available by August.

Peter Lee, Executive Director of Covered California said, “Come January 2014, Covered California will be open for business providing subsidies for millions of Californians”, but he didn’t promise it would be smooth. The truth is that the rollout is likely to be messy. This is a massive change, on a par with the launch of Medicare, that will take time to get right.

Keep in mind that I am a stong supporter of the ACA and Covered California in particular so I not some critic taking a potshot. But here are plenty of Obamacare critics out there and they will have a field day with the inevitable problems sure to accompany the launch. It will be difficult enough for consumers, agents, and insurers to maneuver through the launch period’s screw-ups, but all this will be happening amid a tough election year political fight, in which Republican opponents of health reform will renew their call to repeal the ACA, or at least roll it back.

We hope that some journalists will take the long view, but this is probably too much for which to hope. When the shit hits the fan next January, as it surely will, there won’t be many newspaper headlines taking the long view.

It seemed that the ACA was saying that insurance companies would be allowed to decline to offer coverage to small employers for failure to satisfy minimum contribution or group participation requirements under state law or the SHOP standards.

In a final rule published 3.27.13, the HHS clarified, saying: ” Upon further consideration of this issue, we have determined that small employers (less than 100 employees) cannot be denied guaranteed availability of coverage for failure to satisfy minimum participation or contribution requirements.”

The carriers will continue set minimum contribution or group participation requirements beyond 1.1.14., but HHS says, “…in the case of a small employer that fails 
to meet contribution or minimum participation requirements, an issuer may limit its offering of coverage to an annual open enrollment period, which we set forth in this final rule as the period beginning November 15 and extending through December 15 of each year.

Generally, the group market will have continuous open enrollment, except for small employers that fail to meet contribution or minimum participation requirements, for which the enrollment period may be limited to the annual enrollment period described above, from November 15 through December 15. This approach addresses concerns about adverse selection.

The Affordable Care Act (ACA) does little to answer questions like: “Why are we paying so much? Why do we spend nearly 20% of our gross domestic product on health care? Why do we spend more than the next 10 countries combined and not get better results than them.

The February 20th, 2013 issue of Time magazine was entirely devoted to one story - Bitter Pill: Why Medical Bills are Killing Us by Steve Brill. The 24,000 word article “follows the money” to reveal how hospitals, the drug companies and some doctors game the system for huge profits. Download article -> Biter Pill

One answer is that health care is a seller’s market and we’re all buyers - buyers with little knowledge and no ability to negotiate. It’s not a free market. Hospitals and providers charge prices that bear little relationship to costs. They charge what they want to and we have to pay.

We like our villains, our scape goats, someone or something to blame it all on. Usually we pick on the insurance companies, easy targets, but they are buyers like we are, albeit with some negotiating position. If Brill’s piece has a villain, it’s something I never heard of - the Chargemaster, a mysterious internal price list for all products and services that every hospital in the US keeps. Charge master is responsible for indecipherable hospital bills with highly inflated prices, like an Alcohol Prep Pad for $7 each. This is the little square of cotton used to apply alcohol before an injection. A box of 200 can be purchased online for $1.91.

If there is a hero, it’s Medicare. It turns out that Medicare does more than Obamcare to bend the medical cost curve. That’s because the government program, by law, can only pay hospitals and providers the approximate cost of care. Hospitals say they lose money on Medicare, but they don’t.

The ACA does contribute to lower healthcare costs over the longer term by providing more transparency and competition on the payor side. On the provider side, the ACA supports Affordable Care Organizations (ACOs), new models that integrate hospital and physician services to achieve greater accountability and coordination of health care. California’s health care policy wonks are working to track the development of integrated approaches to the delivery of care and financing to determine how ACOs would work in the public sector (community clinics and public hospitals) as well as the private health care marketplace.

The following are excerpts from a recent article by David Lazarus, LA Times.

Republican lawmakers are stll determined to roll back Obamacare, deny coverage to millions, limit treatment for the poor and essentially hand Medicare over to private insurers.

Obamacare is not perfect. It will not cover everyone and it doesn’t do enough to reduce medical costs. But here’s what it’s accomplished so far.

• Created a system to extend coverage to about 30 million of the roughly 50 million people in this country now without insurance.
• Provided coverage to about 2.5 million young people who are able to remain on their parents’ insurance policies until age 26.
• Laid the groundwork for preventing insurers from denying coverage to people with preexisting medical conditions or from canceling people’s policies after they get sick.
• Set in motion an overhaul of insurance reimbursements to reward doctors for keeping people healthy rather than profiting only when people require costly tests or hospitalization.

Not only would the Republican budget plan take away all these advances, but it would also drastically cut spending for Medicaid, the insurance program for low-income people. The Urban Institute estimated last year that the GOP’s approach could reduce Medicaid enrollment by half.

Funds Running Low

The Center for Medicare and Medicaid Services (CMS) to ordered California to suspend enrollment in the Pre-Existing Condition Insurance Plan (PCIP). This enrollment suspension applies to applications received by the state of California after March 2, 2013. The demand for the PCIP program has outstripped expectations. CMS has announced this nationwide suspension of enrollment to assure that there are sufficient funds available throughout 2013 to continuously cover people currently enrolled in PCIP through the period when the program is already scheduled to end in December.

There are only two exceptions to this suspension:

1. California will still enroll people after March 2 if the individual is currently enrolled in a PCIP program in another state and they move to California
2. California will continue to screen applications submitted after March 2 to see if the individual qualifies for the state’s own high risk pool, the Major Risk Medical Insurance Program, MRMIP

The current PCIP enrollees will remain covered and will receive services through December 31, 2013.

PCIP was established as a temporary program for people who were unable to secure coverage in the insurance marketplace. Starting January 1, 2014, there will no longer be a need for PCIP because the Affordable Care Act does not allow insurers to deny individuals with pre-existing conditions or charge them higher rates than those without such conditions. Also, the California Exchange, “Covered California” will be open for business in January for both individuals and small businesses to buy affordable health benefits plans.

This Affordable Care Act represents sweeping changes for how the middle class will get insurance. Whether or not you qualify for premium subsidies, also called “Advanced Tax Credits”, becomes a primary concern for consumers looking for a way to afford mandatory health insurance.

Your 2012 tax return is key to determining if you’re eligible for any financial assistance. Using the information from his 2012 return, a tax advisor at H&R Block advised his client that she would qualify for a significant tax credit and would have to pay pay only about $65 a month in for health insurance after the subsidy. If she skips coverage, H&R Block warned her, she faces a $95 tax penalty next year and $356 the following year.

For customers who want help with getting health insurance, H&R Block refers them to insurers affiliated with the Blue Cross and Blue Shield Assn., an industry group that represents both Anthem Blue Cross and Blue Shield of California in the state. That partnership stands to give those insurers valuable leads on potential customers.

Although the Blue Cross and Blue Shield logos are present, there is no mention inside H&R Block’s offices of Covered California, the new California health insurance marketplace.

This could be the first evidence of the competition that is likely to develop between health insurance carriers and the exchange. On the one hand carriers are motivated to “partner with the exchanges in a marriage of necessity and on the other hand do what they can to retain or gain market share.

Covered California, is planning to spend about $250 million on marketing statewide to establish its brand name and make it a prime destination for consumer information. Peter Lee, executive director of Covered California, said he welcomes the information H&R Block is providing before the state’s marketing ramps up this summer closer to when enrollment begins. “We will be exploring relationships with tax preparers because they offer a great way to provide one-on-one assistance,” Lee said. “But we don’t want to be too far ahead of when people can enroll.”

Here’s an early look at what the health insurance marketplace online application process will look like. A demonstration copy was released for comment by the feds last week. It will be used as the online application for federally-facilitated State Marketplaces and will also serve as the model that may be used by Covered California and other state-operated marketplaces. This application is a big improvement when compared to online applications in use today by health insurance companies and online retailers.

Real-Time Verification

With integrated electronic verification, the information the applicant enters will be integrated with data from other sources including the IRS, Social Security, and the Department of Homeland Security.

Smart Application

Because this application is a dynamic tool, certain questions appear only for appropriate applicants. For example, only female applicants are asked about pregnancy. Another example is that only people between the ages of 18 and 22 are asked if they are full-time students.

Household Size

Verifying household size is a complex task, but because the application is dynamic, information is requested only once. The applicant must identify anyone on his or her federal income tax return, including spouse, children, and live in partner if they have children together who need health insurance. Tax filing, employment and income information is verified for each household member.

Income Verification

When federal income tax data is available the applicant’s income data from his last federal income tax return in 2012 is already displayed and serves as a reference point to help determine his or her estimated income for the year in which he wants insurance coverage.

Eligibility for Tax-Credit

Once the applicant’s household size and income is known, the system can determine if the applicant is eligible to receive a premium subsidy and cost-sharing reductions to help pay premiums. Next, the applicant is asked whether he or she receives or could receive affordable employer-sponsored coverage through his job. Assuming the applicant does not, the system puts him or her on the path to receive advance payments of the premium tax credit.

Eligibility Confirmation

The applicant receives congratulations, a list of programs for which he qualifies and what his next steps are. Applicants can print the eligibility page and have their eligibility determination saved to their electronic account. With the application process complete, the applicant can enroll in a qualified health plan and apply his tax credit right away.

The ACA says that someone with access to affordable employer-sponsored coverage cannot get a premium subsidy from state exchanges in 2014, unless the cost of the employer-based health care coverage for that employee exceeds 9.5 percent of the worker’s household income. The IRS ruled last week that the calculation of affordability will be based on the cost of employee-only coverage, not family coverage.

Many Families Priced Out

This is highly disappointing ruling. Estimates made in 2011 by respected research organizations suggested that some 2 million to 3.9 million non-working spouses and dependents would be harmed by the strict ruling. It could leave millions of Americans with modest incomes unable to afford family coverage under their employers’ health insurance but ineligible for subsidies to buy coverage in the Exchange. A Kaiser Family Foundation survey found that in 2012, employees’ annual share of insurance premiums averaged $951 for individual coverage and $4,316 for family coverage. Under the I.R.S. rule, such costs would be considered affordable for an employee with a household income of $35,000 a year — making the employee’s spouse and children ineligible for a premium subsidy on a health exchange, even though that family would have to spend 12 percent of its income for the employer’s family plan.

Exempt form Penalties

The IRS said in a proposed rule also issued today that most families in such a situation won’t have to pay a penalty if they choose not to buy insurance coverage. This helps some, but it still leaves families that can’t afford health coverage either through an employer or on their own without the subsidy they need. There will be a substantial number of families who are priced out of needed health care,