Insurers May Be Down on the ACA’s Exchanges . . . but they should be careful what they wish for

Last month, Aetna announced that it would drastically reduce its participation on the Affordable Care Act (ACA) exchanges in 2017 because of larger-than-expected losses: it will go from 15 states to four. This follows similar decisions by UnitedHealth Group and Humana. As a result, more than one third of the exchanges next year will have only one participating insurer, so no competition at all. As early as May, even before the insurers’ announcements, analysts were predicting double-digit premium increases in 2017.

Why is this happening?

The Obama administration, as well as stalwart supporters in the policy community, have rushed to assure us that nothing much is happening: some bumps along the way were to be expected in such a grand experiment, and the Department of Health and Human Services (HHS), working with other stakeholders, will make it right.

Maybe.

Keep in mind that the whole point of the ACA was to placate private, for-profit health insurers, the group that destroyed Hillary-care in the 1990’s. (Remember Harry and Louise?) The companies did not want to lose their customers in the individual market — the healthy and the wealthy — and those customers, who had qualified for insurance, wanted to keep it.

But before the ACA, something like 40 million Americans had no access to health insurance, let alone healthcare; many more were underinsured. People demanded better. Centrist Democratic leaders — today we would call them the political elite — were determined to show that everyone could be adequately covered by commercial health insurers competing in a private market. So they filled the ACA with features designed specifically to make the new system attractive to commercial insurers.

First and most important, the federal government subsidized premiums for those with incomes under 400% of the federal poverty level ($97,000 for a family of four in 2016) — taxpayer funds that went directly to insurers. In addition, the ACA included three different programs to protect insurers from unusually costly patients (and simultaneously to prevent companies from cherry-picking healthy customers). These were known as the three ‘R’s: reinsurance, risk corridors, and risk adjustment. Only risk adjustment, under which insurers with a higher proportion of healthy customers compensate those with a sicker cohort, is permanent; the other two programs expire at the end of the year.

In exchange for these protections, insurers were required to offer every plan at the same price to all customers — that is, all plans were community-rated, with limited adjustments only for age and smoking status. No more pre-existing condition exclusions — patients with chronic illnesses could be charged no more than healthy customers. This is far and away the most popular feature of the ACA.

Nevertheless, 3 years in, insurers are complaining of losses, and voting with their feet. To reverse the downward momentum, HHS is tweaking risk adjustment, and adding a program to reimburse costs over $2 million for a single individual (to be shared among insurers).

ACA supporters have more ideas: greater outreach to eligible young, healthy people; higher penalties for failure to enroll; fewer required benefits; narrower networks. Insurers would like to adjust ratings upwards by, for example, charging the oldest customers five times more than younger ones, instead of three times more; or obtaining government reinsurance for especially costly patients; Hillary has suggested higher taxpayer-funded subsidies, and perhaps a “public option”.

Many of these measures would increase the cost of exchange policies and/or reduce their value. But the current policies are not great insurance: premiums are high. In 2015, 86% of enrollees received subsidies. Only 2% of eligible families who did not qualify for subsidies enrolled. Moreover, many families cannot access the benefits they have paid for because of high out-of-pocket expenses, especially deductibles.

The average deductible for a silver plan in 2015 was $2,994 — this in a country where 46% of families could not manage $400 for an emergency without borrowing the money or selling something. The federal limit next year for out-of-pocket expenses (including deductibles and co-pays, but not premiums) for a family is $14,300.

Under the ACA, the goal for insurers is to price their policies low enough to attract the healthy, but high enough to cover the costs of the sick. But even with giant computers, Big Data, and armies of actuaries, that may not be possible. It is certainly not the standard insurance business plan.

Commercial insurance works by charging individuals enough to cover their risk (with something left over for profit). High-risk people often cannot buy insurance at all. No one sells ordinary flood insurance to homeowners in a flood plain. We have Medicare for elderly and disabled people because they couldn’t get private health insurance. Insurers want to keep their healthy customers, and let someone else — high-risk pools, charity, the government — take care of anyone who gets sick.

But remember this: health insurance is not healthcare. Insurers are simply middlemen: if they disappeared — or were paid simply to track claims — and replaced by a Medicare-for-all system, everyone could still access healthcare. It is not clear that the value added by the industry is worth the cost, estimated at $350 billion. Spending that money directly on healthcare could improve our health, and eliminating public subsides to private insurers would reduce the deficit.

Insurers who are dissatisfied with the ACA: Be careful what you wish for.

Caroline Poplin, MD, JD, is an attorney and internist in Bethesda, Md. She is a former staff internist for the National Naval Medical Center, and currently practices medicine part-time at the Arlington Free Clinic in Virginia. She also Of Counsel & Medical Director at Guttman, Buschner & Brooks PLLC.

GBB Opens an Office in Wilmington, Delaware

GBB is delighted to announce the opening of its office in Wilmington, Delaware. Founding Partner Justin Brooks said: “The launch of our Delaware office will enhance our capabilities and ability to serve both institutional investors and corporate clients.” GBB also serves as Delaware local counsel in appropriate representations.

GBB Partners will join Emory Law faculty for annual trial techniques advocacy program

Reuben Guttman, Traci Buschner and Justin Brooks of Guttman, Buschner & Brooks PLLC will join the 2016 faculty of Emory University School of Law’s Kessler-Eidson Trial Techniques Program to be held April 30 through May 6.

GBB partners join an elite group of more than 120 jurists, practitioners, and legal scholars from across the United States and foreign jurisdictions, including Mexico, to teach in the prominent program which, over the course of three decades, has launched some of the nation’s leading trial lawyers and judges.

“We are very selective in choosing faculty,” said Emory Law professor, and Emory Law Center for Advocacy and Dispute Resolution director, Paul Zwier. “The group of faculty that will convene in Atlanta this year includes people who are at the top of their game – and who also have the teaching skills to train the next generation of trial advocates.”

When founded in 1982, the program was modeled after the National Institute for Trial Advocacy’s program for teaching practicing lawyers. Emory Law’s program is the largest in the country and is recognized as one of the nation’s finest. The American College of Trial Lawyers has twice conferred on Emory’s program the Emil Gumpert Award for excellence in the teaching of trial advocacy.

“Emory Law has been one of the nation’s leading producer of trial lawyers, and this program – along with our course offerings in advocacy – is a big part of that,” said Zwier.

The program’s teaching methodology focuses on integrating the second-year law student’s knowledge of substantive evidence with practical trial skills through a “learn-by-doing” format. Trial experience is supplemented by a textbook, lectures, and discussions. During two sessions in the spring semester, students develop theories for particular witness examinations, decide on appropriate approaches to bring out the facts consistent with their theories, prepare witnesses, and conduct direct and cross-examinations using current courtroom technology in the use of exhibits. This is followed by an seven-day intensive learn-by-doing class in which participants will engage in a “Daubert” hearing to determine whether an expert witness will testify at trial. Two days later, students will conduct a jury trial with high school students from the Atlanta area serving as jurors. By the end of eight days, more than 290 students will have collectively tried more than 70 jury trials and participated in more than 70 Daubert hearings.

Founded in 1916, Emory University School of Law is an American Bar Association (ABA) nationally accredited law school. Consistently ranked as one of the premier law schools in the United States, Emory Law offers exceptional doctrinal and practical legal education with signature programs in advocacy, transactional law, technology and IP law, law and religion, and vulnerability studies.

Justin Brooks selected as a Rising Star by SuperLawyers.com

Guttman, Buschner & Brooks PLLC is pleased to announce that founding partner, Justin Brooks, has been selected as a Rising Star by SuperLawyers.com in the category Top Rated Business Litigation Attorney. Mr. Brooks primarily represents relators in qui tam litigation under the False Claims Act and other federal and state statutes and corporate clients in a wide variety of complex commercial and employment litigation. He also provides employment and compliance counseling to companies, represents institutional investors in shareholder derivative and corporate governance litigation, and represents employees in employment litigation of all types. Learn more about Justin Brooks here.

Traci L. Buschner

tbuschnerTraci L Buschner
Founding Partner

(202) 800-3003
tbuschner@gbblegal.com

Practice Areas
Labor and Employment
Litigation
Corporate Governance

Government Experience
State Prosecutor

Education
University of Louisville (J.D., 1995)
Miami University (1990)

Admissions
The District of Columbia
The Commonwealth of Kentucky
The U.S. District Court for the
– District of Columbia
– Eastern District of Kentucky
– District of Maryland
– District of Columbia Circuit

Boards/Memberships
American Association for Justice’s (AAJ) Qui Tam Litigation Section
Trial Lawyers Association of Metropolitan Washington, D.C.
American Constitution Society
Taxpayers Against Fraud
Emory University Law Faculty, Trial Techniques Program, 2011, 2012, 2014