WRESTLING THE OCTOPUS Obamacare: A Sea Change

Bernard J. Wolfson Orange County Register (714) 796-2440 (newsroom) (562) 290-7210 (cell) bwolfson@ocregister.com

The Affordable Care Act, aka Obamacare

Two Principal Characteristics

• MONSTROUSLY COMPLICATED --Touches nearly every facet of health care system --Chock full of nuances, exceptions, technicalities --Regulations still being written and rewritten --Maddeningly confusing to ordinary consumers --Doctors, hospital execs, insurance agents struggle to understand it --Even confusing to officials with its implementation --Goal posts are constantly shifting, deadlines in constant flux

• HIGHLY CONTROVERSIAL --Too positive, you piss off the conservatives --Too negative, piss of the pro-Obamacare camp tasked -- Right down the middle, you piss off both -- Get ready for some very entertaining hate mail

• Very Good for Journalists Who Cover It --Readers (and editors) need and appreciate clear explanations --You’re likely the only one at your paper who can explain it --News is constantly breaking – you’ll be in the paper a lot --It’s a hot topic – your stories will get good play --Hence, job security (for the time being)

• Very Bad for Journalists Who Cover It --Too wide-ranging to do all the stories you would like

--Complexity, nuance incompatible with tight space requirements --If the people implementing don’t even get it, you think you will? --Everyone, even colleagues, will treat you like an insurance broker

Affordable Care Act for Dummies (Like Me)• Expanded Health Coverage

--Medicaid Expansion

--State and Federal Exchanges with Subsidies

--Employers W/Over 50 FTEs Must Play or Pay

Paying For It

--Wide Range of Taxes On Industry Players

--Cuts In Medicare/DSH Payments

--Penalties on non-Compliant Individuals, Employers

--Tax Surcharges on High-Income Individuals

--40% “Cadillac” Tax On High Cost Health Plans (2018)

• The Big Tradeoff --No more exclusion or discrimination for pre-existing conditions --No Gender Discrimination (Women Use More Health Care) --Most people required to buy insurance or pay tax penalty

• Other Provisions Benefiting Consumers --Dependents can stay on parents’ plans to age of 26 --Ten “Essential Benefits” Must be Included in All Plans --Health Plans Must Cover a Minimum 60% of Medical Costs --Annual limits on Out of Pocket Costs Paid by Insuree --No Annual or Lifetime Cap On What Insurer Pays Out --No Copay For Annual Checkup, Certain Preventive Tests --Financial Assistance for Low and Middle Income People --Shrinks Cost of Drugs For Seniors Under Medicare Part D

• Downsides For Some Consumers --New Plan Standards Means Higher Premiums For Many

--High Out Of Pocket Costs For Lower-Premium Plans

--High Co-Insurance For Specialty Drugs, MRIs, Scans, Lab Tests

--Young Pay More To Subsidize Older and Sicker People

--Many People Have Lost or Will Lose Health Plans They Like

--Narrower Doctor, Hospital Networks Restrict Choice

• Changes In Health Care Delivery, Payment --Shift To Paying For Medical Outcomes, Not Volume of Services

--Great Focus on Coordination of Care Among All Providers

--Carrots and Sticks for Saving Money, Meeting Quality Targets

--ACOs: Doctors, Hospitals Coordinate Care, Share In Savings

--Medicare Penalties/Bonused For Hospitals’ Quality Performance

--1% Medicare Cut For Hospitals With High Infection Rates

--1%-3% Medicare Cut for Excessive Hospital Readmissions

--Bundled Payments For “Episodes” Of Care

The Face of Obamacare in California

• An Alternate ACA Universe in California

--National Obamacare News Often Seems Irrelevant Here

--Covered California A Relatively Well Developed Exchange

--Rollout Smoother Than Federal, Many State Exchanges

--22% of All U.S. Enrollments In California (10% of Population)

--Enrollments Exceeding Targets For Full 6-Month Period

--Robust Advertising and Marketing – Increasingly Well Known

• But Still No Shortage Of Glitches --Super Long Wait Times If You Can Get Through At All

--Website Often Sputters, Kicks You Off, Displays Error Messages

--Online Enrollment Portal Offline All of Last Week, Weekend Too

--Doctors’ Directory Riddled With Errors, Offline Indefinitely

--Small Business Exchange Portal Taken Offline

--Backlogs in Processing Enrollments

--Didn’t Have Spanish Language Application For Months

--Poor Vetting Of Some Enrollment Counselors (Criminal Records)

--Logistical Issues Maybe Over-Reported But Worth Following

--New Signup Ahead Of Mar. 31 Deadline – Will System Cope?

California’s Uninsured By Age

Covered California Enrollment by Age Thru Jan. 31

Age Subsidy Eligible Unsubsidized Total

Less Than 18 29,940 4.8% 18,734 18.3% 48,674 6.7%

18 to 25 68,351 10.9% 8,322 8.1% 76,673 10.5%

26 to 34 92,948 14.8% 19,250 18.8% 112,198 15.4%

35 to 44 100,185 16.0% 18,684 18.3% 118,869 16.3%

45 to 54 155,494 24.8% 18,676 18.3% 174,170 23.9%

55 to 64 179,201 28.6% 18,349 18.0% 197,550 27.1%

65 and Older 91 0.0% 185 0.2% 276 0.0%

Grand Total 626,210 102,200 728,410

Race/Ethnicity Of Enrollees Through Jan. 31

White: 42.6%

Asian: 23.7%

African American: 2.7%

Latino: 21.4*

Mixed Race: 6.2%

*-Up from 18.7% as of December 1

Source: Covered California Monthly Enrollment Report

• Who Is Enrolling and Is It the Right Mix? --Not Enough Latinos Or Young People So Far --Some Momentum Among Latinos, Could Help With Young Because Of Big Overlap --Ideal Percentage of 18-34 Year Olds In Exchange Is at Least 36% --Death Spiral Theory: High-Cost Patients, Premiums Rise, Young Stay Away --Three Moderating Factors To Help Contain Premiums: Risk Adjustment: Health plans with lowest cost enrollees compensate those with the highest

cost enrollees (individual and small group plans, inside and outside exchange). Risk Corridors: Insurers get payments from government to balance out unexpected losses;

must pay government back for unexpected gains. Exchange plans only. Ends after 2016. Reinsurance: $20 Billion Tax on Insurers to Compensate Those with Very High Cost

Enrollees. Program Ends 2016. --So There is Some Breathing Room If Not Enough Young, Healthy Sign Up Right

Away --Skeptics Say Difficult To Increase % Of Young Substantially More --Tax Penalty Not Enough? $95 or 1% in 2014; $695 or 2.5% By 2016 --Peter Lee Expresses Optimism That % of Young Will Rise Over Time

--Some Studies Show Minimal Impact On Premiums 1st Years if Below Target

Nothing New If Premiums RiseThey’ve tripled since 1999

• Is ACA Enrolling Uninsured People?

--Some Surveys Say No, But No Real Data So Far

--Disastrous Exchange Rollout, Rejection of Medicaid Expansion

--CBO Cut Forecast of Newly Insured to 25m from Over 30m

--Ca:Latinos The Largest Group of Uninsured – Enrollment Lagging

--No Clear Data On Actual Medi-Cal Signups; Only Whose Eligible

--Up To 4 Million Californians Still Uninsured in 2019

--1 Million of them Because They Are Undocumented Immigrants

--Many Uninsured Hard to Reach: Internet Access, Language

--Many Uninsured May Lack Bank Accounts (How Pay Premiums?)

Uninsured Don’t Love ACA

Exchange Story Ideas• Enrolling Young People, Latinos, Other Ethnic Groups --Great human interest, multi-cultural stories: Get out in the community, spend a day

at enrollment centers, follow a person or people over time as they make their decisions. Get to know their health concerns and attitudes towards health.

• How Many Newly Uninsured, How Many Just Switching --Hard to get at except anecdotally: talk to insurance companies, individuals,

enrollment counselors, insurance agents, read polls on uninsured• Readiness of Exchange as Mar. 31 Deadline Nears --Stories about glitches, bottlenecks, delays – or that everything is working better

than in December. Licensed insurance agents will be great sources here. And your own eyes and ears (log onto the website and phone the call-in center frequently).

• Will Premiums Rise in 2015 Because Of High-Cost Patients? --This is for later in the year. Consult rate filings with DMHC and CDI. Insurance

agents a great source here too.• Did Risk Adjustment Work? Which Insurers Won, Lost? --A state agency will calculate costs for all insurers. Are data reliable?

Consumer Experiences With New Plans

• High Cost of Specialty Drugs, MRIs, Lab Tests --How is it affecting people with chronic or life-threatening diseases who needs lots of tests or

drugs that cost $100k a year? Good sources include: Consumer advocacy groups, disease-specific foundations, insurance agents, pharmaceutical data crunchers such as Avalere or IMS Health.

• Narrow Provider Networks: People Scrambling To Get Access --Lots of confusion out there. Conflicting information on which doctors and hospitals are in and

out of networks. Negotiations ongoing, so networks constantly changing. Case study of Hollie Young, breast cancer patient who spent weeks looking for a new oncologist and medical team. Sources: insurance agents, consumer groups, disease-specific foundations, medical groups, hospitals, insurance companies.

• New Policy Cancellations To Hit In 2015, During Election Year

• Small Employers Renewed Will Face Big Premium Hikes in 2015

• On The Bright Side: Many Are Able To Buy Insurance For First Time --Talk to advocacy groups (Health Access, Young Invincibles), enrollment counselors, agents

Covered California Websites• www.coveredca.com: The consumer website for Covered

California. Contains the (defect-riddled) portal for enrolling online, links to insurance agents and enrollment “entities”, the shop and compare calculator for viewing health plan options and benefit details and determining eligibility for federal subsidies. Also contains press contact information and all press releases issued by Covered California.

• www.hbex.ca.gov: The exchange’s administrative/regulatory website, which contains all minutes and documents from board meetings, regulations affecting coverage, proposals and information on Covered California contractors. Also has link to forecast assumptions Covered California uses in setting marketing strategy and measuring enrollment progress. Well worth digging in on occasion and seeing what gems you turn up.

EMPLOYER MANDATE

• Employers with 50 or more FTEs must offer insurance to 95%• If not, $2,000 penalty for each employee minus first 30• Insurance must be affordable and meet Obamacare standards• If not, penalty of $3,000 for each employee w/exchange subsidy• Employer mandate delayed once from 2014 start to 2015• Recently delayed again: employers with 50-99 reprieve to 2016• Companies 100 or more must offer only to 70% in first year• Obamacare building on employer coverage when it is declining

Pct. Offering coverage by size

Percentage of All Firms Offering Health Benefits, 1999-2013

SOURCE: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2013.

EMPLOYER STORY FODDER• How Will Mandate Affect Bottom Lines?

--Big costs for employers offering for first time; Extra costs for employers who offer coverage but may need to cover more people, or make it more affordable or upgrade benefits to comply with Obamacare.

• Some Firms May Drop Coverage, Send Workers to Exchanges

--Move could be better for employees who qualify for subsidies. Those without subsidies probably would be worse off.

• Which Companies Will Cut Hours To Minimize Number Who Qualify?

--Some school districts and public agencies have done this

• Many Workers, Getting Employer Coverage For First Time, Better Off

• Employer Wellness Programs Incentivized Under Obamacare

• Private Exchanges In Which Employers Give Employees Fixed Sum

HOSPITALS UNDER THE ACA• Hospitals Already Under Pressure Before ACA

--Declining Reimbursement, Medicare Cuts, Federal Sequester

--Trend Towards Consolidation, difficult for smaller hospitals

--Increasing concentration of doctors with fewer hospitals

• ACA Likely To Reinforce The Trend Towards Consolidation

--More Medicare Cuts To Help Pay for Health Coverage Expansion

--Declining Inpatient Revenue As Readmissions Discouraged and Focus of Care Shifts To Outpatient, Post-Discharge Care

--Pay for Outcomes Rather Than Volume of Services Reduces Payments

--Medicare Penalties For Readmissions, Infections Takes a Bite

--Focus on Coordinated Care Reinforces Need for Affiliations With Medical Groups, Nursing Homes, Home Health Care Agencies

--Harder For Smaller Hospitals To Compete In This Environment

Fodder For Hospital Stories

• Which Are The Strong and Weak Hospitals In Your Area?

--You could analyze the financial situations of local hospitals. OSHPD data very useful here. You can talk to hospital executive, hospital analysts, doctors who practice in hospitals and are willing to talk.

• State Attorney General Investigating Hospitals-Doctors Deals

--Which local hospitals have “affiliated” with lots of medical groups, and what does --Which local hospitals have “affiliated” with lots of medical groups, and what does this mean for the market, competition?this mean for the market, competition?

• ACO’S: Hospitals, Doctors Partnering Under ObamacareACO’S: Hospitals, Doctors Partnering Under Obamacare --If there are ACOs in your area, are they achieving savings and quality goals? Day in --If there are ACOs in your area, are they achieving savings and quality goals? Day in

the life of a patient under the care of an ACO. the life of a patient under the care of an ACO.

• How Are Your Hospitals Facing the Future Of Health Care?How Are Your Hospitals Facing the Future Of Health Care?

--Beefing up outpatient services? Hiring case managers to help meet quality targets? --Beefing up outpatient services? Hiring case managers to help meet quality targets? Partnering with nursing homes, home health agencies?Partnering with nursing homes, home health agencies?

Medicare Readmissions Penalties• Inpatient Payments Cut For Excess 30-Day Readmissions• Maximum Cuts Were 1% Last Year, 2% This Year, 3% Next• Readmissions Counted For Heart Attack, Heart Failure, Pneumonia• Next Year Hip and Joint Replacement To Be Added To the Mix• Opponents Say Unfair: Too Much Outside Of Hospital’s Control• Proponents Say It Is Fostering Better Provider Cooperation, Care• Case Study: Orange County’s Hospitals