So many old rules in health care and insurance no longer seem to apply.
I keep stumbling upon situations, where, what used to be up is now down and what used to be down is now up.
No one seems to know for sure how things will settle out under the new reality created by Obamacare and the even more unpredictable reactions to the law by health care companies, employers and, most especially, you and me.
I’ve started using the term “weightlessness” to describe this state we’re in. Picture the astronauts on the international space station, floating through a room, flipping at will, as likely to settle on a wall or on the ceiling as on the floor.
That’s what life is like under Obamacare now—for physicians, hospital administrators, insurance executives, benefits brokers and employers.
Here are a few examples:
1. I wrote last week about how a chunk of workers, even at large employers with generous benefits, would actually get a better deal on health insurance from the Obamacare exchanges than from their employers. So their employers are starting to consider whether they should deliberately make health benefits unaffordable for those low-wage workers, so they can qualify for Obamacare’s tax-subsidized insurance.
That could be good for both employers and employees. The effect on taxpayers, which would switch from granting a tax credit to employers to instead granting it to the employees, is unclear.
2. Even though insurers were certain that price would be king on the Obamacare exchanges, that hasn’t led most customers to buy the plans with the cheapest premiums. Through January, 76 percent of Hoosiers buying in the exchanges have picked the higher-premium silver and gold plans, with only 24 percent picking bronze plans.
“There are a few geographies where we believe we are gaining share despite lower price competition which points to the value of our local market depth, knowledge, brand, reputation and networks,” WellPoint Inc. CEO Joe Swedish said during an January conference call with investors.
It’s possible that’s a result of older and sicker patients being the earliest buyers on the exchange, and that as healthier people buy coverage, they’ll gravitate to the low-cost bronze plans. But that hasn’t happened yet—which, as I wrote on Friday, has proved wrong hospitals’ concerns about the super-high deductible bronze plans.
3. Conventional wisdom has consistently held that insurers, in order to have a prayer of being profitable on the exchanges, need to sign up lots of young and healthy customers. But that’s not actually true, according to this analysis by Seattle-based actuarial firm Milliman Inc.
It found that Obamacare’s risk adjustment mechanisms—known as the 3Rs—would actually overcompensate insurers this year for patients that are older and sicker, as well as for newborns and women of childbearing years.
Milliman calculated that, at least in 2014, those groups that used to be money losers for insurers would now be profit makers, while the formerly profitable patients would be money losers.
Does your head hurt now?
The practical importance of this insight is minimal, since two of the three risk adjustment mechanisms are revenue neutral, and the one that isn't phases out in three years. That means, if the population in Indiana is older and sicker than anticipated for the long-term, there isn’t any extra money, overall, to divide among insurers. So unless one insurer happens to attract all the older patients, there won’t be much advantage gained from this provision.
But it is a sign that the path to prosperity is no longer primarily about avoiding the patients that actually need health care.
Charlotte MacBeth, CEO of Indianapolis-based MDwise Inc., said her company isn’t trying to capture the most attractive slice of patients—however that’s defined—but is instead focusing on managing the health of its customers as a way to minimize losses.
“We are not out marketing or trying to capture a certain type of membership category based on risk scores,” MacBeth wrote to me in an email. “MDwise will rely on a well-run complex care management program to help manage patients with the highest risk for a bad outcome.”
4. Hospitals and physicians are conceding, quietly, that their former methods for achieving financial success aren’t working anymore. Ramping up access and supply of lucrative procedures won’t cut it. They actually have to provide less care in order to achieve a profit margin from payments that aren’t rising.
As I wrote last month, hospitals in Chicago are doing exactly that—with some success. Indianapolis hospitals are further behind but moving that direction.
Another case in point, physician groups are actually embracing what’s called the permanent doc fix in Congress, even though it would increase their Medicare reimbursements just 0.5 percent per year—and allow up to 10 percent of their payments to hinge on a performance framework that is far from road-tested and will only pay bonuses to some doctors by cutting payments to others.
“The cure is actually worse, and potentially more expensive, than the disease we have now,” Jeff Goldsmith wrote in a withering analysis on The Health Care Blog of the proposed fix to what is called the Sustainable Growth Rate, or SGR. “This is because the proposed legislation casts in concrete an almost laughably complex and expensive clinical record-keeping regime, while preserving the very volume-enhancing features of fee-for-service payment that caused the SGR problem in the first place.”
So let’s review. Rich benefits are no longer so attractive, sick patients are no longer money losers, and hospitals and doctors are now health care preventers rather than health care providers.
This is the bizarre world to which Obamacare has brought us. I’m still not sure whether all this change is good or bad or a mix of both.