Health Care Current library
Health Care Current: May 20, 2014
Is health care hitting the mark with young adults?
This weekly series explores breaking news and developments in the U.S. health care industry, examines key issues facing life sciences and health care companies and provides updates and insights on policy, regulatory and legislative changes.
By Bill Copeland, Vice Chairman, U.S. Life Sciences & Health Care Leader, Deloitte LLP
Young and looking for more: Is the health care industry hitting the mark with young adults?
Young adults age 19-34 comprise 38.1 percent of the uninsured population.1 In the media, they’re often characterized as uninterested, irresponsible and obsessed with their favorite social media app. Despite these characterizations, they’ve been a key target group for insurers, especially those participating in the health insurance exchanges (HIX). Health plans are seeking healthier, less costly enrollees to stabilize the risk pool and balance out spending on older enrollees. For the health insurance industry, the federal government and the states that developed their own exchanges, two key questions have come out of this first HIX open enrollment year: Did we do it right? If not, what can be done better the next time around?
Findings from Deloitte’s survey of young adults and health insurance paint a new picture of this population.2 According to the survey results, health insurance for a sizable segment of this age cohort is simply not affordable. On the whole, this group is cost-sensitive, and when faced with the complexities of choosing coverage, they lack a basic understanding of some important features that make it more affordable. Some may have made up their mind to not even shop for coverage―54 percent of those who remain uninsured never visited HealthCare.gov or one of the state exchange websites.
But, why is this surprising? Many are debt-ridden with some of the highest rates of student loans in history, face first-time employment following the worst recession the U.S. has seen since the Great Depression and have little disposable income. Knowing this, we begin to see how these characteristics have shaped their attitudes and behaviors toward health insurance coverage over the course of the first year of enrollment.
So, what does this population really look like and how do they make decisions regarding health insurance coverage?
They’re not invincible.
A majority of those who remain uninsured (did not purchase insurance) did so for two reasons: they can’t afford it (66 percent) and they do not see its value (46 percent).
Young adults who obtained insurance are aware that they’re not invincible: those who purchased it got it because they want to avoid paying medical bills if they get sick, pregnant or injured (67 percent). Admittedly, 45 percent decided not to see a doctor or medical professional when they were sick or injured in the prior 12 months because they believed it was too expensive. They also enrolled because it gives them peace of mind that they can get care if they need it (60 percent).
They don’t want bells and whistles.
Brand (43 percent) and provider networks (48 percent) matter less to this population than overall costs (75 percent) and good value (68 percent). These differences were even more pronounced for the older young adults (age 25-34).
They didn’t get the whole story.
Early ads and marketing strategies did a great job of raising awareness for certain aspects of the new law. This was critical for the first year. Most young adults coming out of the open enrollment season were aware that they faced a mandate for health insurance (78 percent) and a fine for not purchasing (74 percent) and they knew about the exchanges as an option for gaining insurance (75 percent).
But they didn’t get one of the most important messages: only half (55 percent) of all the respondents were aware that the federal government offers money to those with lower incomes to help them purchase health insurance.
Despite consistently being framed as the social-media obsessed generation, there was no dominant source of communication that they preferred. They turned the most to friends and family (42 percent) and health care providers (30 percent) as trusted sources for information. These channels won over media sources and entertainers such as celebrities and sports figures (9 percent). And, despite being traditionally viewed as the most tech savvy group, 28 percent gave up on enrolling after experiencing technical difficulties on the exchange websites.
Bottom line: young adults are looking for more.
They’re looking for products that are affordable and meet their needs. The same products and features that their older counterparts often look for (e.g., choice, broad networks) may not foot the bill for these young adults. What will the right product look like and will it meet their needs? We have some improvements to make if younger adults are going to be consumers of health care. Affordability will be critical to both lowering the barriers to adoption and increasing their understanding of what the value of good health is. What new, innovative designs, benefits and network considerations can be made to make products more attractive?
They’re looking for a better roadmap. The ads and marketing this first time around got their attention and raised their awareness, but young adults missed out on a key message that help is available in the form of subsidies. The messages also did little to help this population navigate the complexities of health insurance. Going forward, will the health insurance industry be able to engage this group so that they get the information they need in the format they need it? What multi-channel approaches will help make choosing and affording health insurance easier for them to navigate?
Hopefully this information will help shape a new level of discussion between the health insurance industry, policymakers, state and federal regulators and health care providers. If we want everyone to be insured, we need to give people a value proposition they are willing to buy.
P.S. In observance of the Memorial Day holiday, the Health Care Current will not be published on May 27, 2014.
1 Assistant Secretary for Planning and Evaluation, U.S. Department of Health and Human Services, “Overview of the Uninsured in the United States: A Summary of the 2012 Current Population Survey Report,” September 2012;
2 Methodology: The Deloitte Center for Health Solutions conducted a web-based survey of 500 randomly selected young adults age 19-34 years; with systematic controls for age, gender, race and ethnicity, health insurance status, household income, and geographic location. To be eligible for participation, respondents met the following criteria: resides in the U.S.; age 19-34 years; uninsured as of September 30, 2013; knows current health insurance status; knows current health insurance source if currently insured; and does not work for the federal government. The survey was fielded between April 9 - April 23, 2014. Data were weighted to be representative of non-institutionalized U.S. adults age 19-34 years. Weighting was applied to correct for bias from using quotas for the insurance groups and for differences between an online panel and the general population.
Implementation & Adoption
HCCI partners with three health insurers to provide price and quality information
Last week, the Health Care Cost Institute (HCCI) announced a partnership with three health insurers, Aetna, Humana and UnitedHealthcare, to provide price and quality information to U.S. health care consumers. HCCI, a non-profit, will publish the information through a publicly-available portal, expected to be available by 2015. According to HCCI, the portal will aggregate data on pricing from commercial insurers as well as Medicare Advantage (MA) and Medicaid health plans. The easy-to-use format will help:
- Consumers to understand cost and quality information to be used in their shopping experiences
- Employers to engage their employees more in managing their health care costs
- Providers to see timely information on cost and quality for both themselves and other providers
- Regulators to study market efficiency and cost drivers in health care
- Payers to understand and react to their customers’ needs as quickly as possible
Background: This announcement follows two recent information releases from CMS. Last year, CMS released information on the most common inpatient procedures, and last month, Medicare reimbursement information on more than 880,000 physicians was released. For more background on transparency in the health care system, read the April 22 Health Care Current.
Study: Health insurance coverage expansion leads to higher wages for young adults
A study published last month in the Journal of Health Economics found that extending health insurance to young adults through a source other than employer-sponsored insurance raises their wages. When scaling the impact of the ACA on wages, the study predicted wage increases for young adults by an average of 3.5 to 4.6 percent. Reasons the authors give for the increases include:
- Parental insurance: Men’s wages increase 0.07 percent and women’s 3.1 percent when they have access to their parent’s employer-sponsored insurance coverage.
- Labor force participation: Women age 22 and older could see a 1.2 percentage point decline in labor force participation while men age 22 and older could see a 1.7 percentage point decline in full-time employment due to an increase in access to health insurance coverage.
- Job mobility: Increasing job mobility can allow young adults to leave current jobs for others that may offer higher wages.
- Compensation: Employers offering health insurance coverage may offer lower wages than those that do not offer coverage. Extending coverage through other sources may allow young adults to sort through jobs and be able to pick ones that do not offer health coverage in return for higher wages.
Study results were gathered using the American Community Survey and Census data.
(Source: Dillender, Marcus. Journal of Health Economics, “Do more health insurance options lead to higher wages? Evidence from states extending dependent coverage,” July, 2014)
Report: What states can learn from CHIP outreach, enrollment, retention
When the Children’s Health Insurance Program (CHIP) was created, its primary objective was to reduce the number of uninsured children in the U.S. To that end, states set enrollment goals for their initial CHIP enrollment plans. States had to spend all of their federal block grant funding or risk losing it to other states, but they also were permitted to use up to 10 percent of their administrative budgets for outreach and marketing activities. In a recent issue brief, First Focus, a children’s advocacy organization, draws on states’ experiences with CHIP enrollment to highlight key findings and implications for coverage expansion through the ACA, including HIXs and Medicaid. Key findings include:
- Hard-to-reach populations: During the first several years of the program, states focused their messages on general awareness, enrollment outreach and explaining how it differed from Medicaid. However, after the first several years, states began to understand that certain populations were more difficult to reach than others and focused strategies on getting to these populations. Strategies for CHIP have included using community-based organizations and providers to get the word out and help with enrollment; ensuring that materials were culturally and linguistically appropriate; and simplifying and streamlining the enrollment process. In addition, the CHIP program has found that online enrollment does not work well for all populations.
- Data-sharing: The Children's Health Insurance Program Reauthorization Act incorporated Express Lane Eligibility (ELE), which allows states to rely on other agencies to determine eligibility for programs.
- Retention: The authors argue that CHIP has seen problems with keeping individuals enrolled in the program and new strategies could help states with expanded coverage options via the ACA. States can address complicated renewal processes by providing more assistance in person and through easily understood materials. Premium and premium lockout periods have been deterrents in the past, and states can address this by reducing or eliminating premiums and lock out periods. States can address the issue of low perceived value among enrollees by increasing provider reimbursement levels and providing incentives to practice in underserved areas.
(Source: Lewit, Eugene. First Focus, “Lessons from CHIP for Implementation of the Affordable Care Act: Outreach, Enrollment, and Retention,” May, 2014)
Report: Medicaid expansion and its potential risks to health insurers’ profitability
According to a report by Standard & Poor’s Ratings Services, Medicaid Managed Care Organizations (MCOs) are likely to see a growth in beneficiary enrollees resulting from the ACA Medicaid expansion. However, the analysts do not expect these companies to see large profits during the first few years of expansion. The report found that the industry’s overall operating margins will continue to be narrow, between 1 to 3 percent, in the first years of expansion. This is due to several reasons:
- New Medicaid enrollees: Enrollees gaining Medicaid coverage through the expansion are likely to be different from previous populations. Because they’ve mostly lacked insurance coverage until now, they could have a pent up need for health care, causing greater utilization rates. In addition, some plans are branching into higher-acuity segments of the Medicaid population, which comes with both the potential for higher revenue and greater risk.
- States’ transitions to managed care: States are moving large portions of their Medicaid populations over to MCOs and away from fee-for-service, which presents a significant opportunity for insurers. However, new MCO enrollees come with greater risk because there can be limited information for pricing rates. MCOs who attempt to cover these new populations need to be able to correctly predict and manage medical care costs in order to be successful.
- State funding: State budgets for Medicaid often fluctuate with political turnover and difficult economic times, and payments to MCOs can be volatile as a result.
Since October 1, 2013, more than 3 million individuals have enrolled in Medicaid. The Congressional Budget Office (CBO) originally estimated that Medicaid expansion would add 6 million new enrollees to the program by 2014 and rise to 17 million by 2016 should all states opt to expand. Despite the risk and challenges that could be involved in the first few years of Medicaid expansion, analysts predict that health plans will adjust and start to adequately assess actuarial risks, increasing their ability to operate profitably over time.
(Source: Standards & Poor’s Rating Services, “RatingsDirect: The Challenges of Medicaid Expansion will Limit U.S. Health Insurers’ Profitability in the Short Term,” May 9, 2014)
Study: MLR rebates to consumers for 2012 half those of 2011
Using data from health plan's filings for medical loss ratios (MLR) with CMS during 2011 and 2012, researchers from the Commonwealth Fund found that insurers paid smaller amounts during the second year than the first. In 2011, health plans paid out $1.1 billion as compared to 2012, in which they paid out $513 million. This reduction was the result of both a smaller number of insurers owing rebates to consumers as well as the size of the rebates they owed. Additional highlights:
- Corporate characteristics: Insurers that were for-profit (37 percent), publicly traded (36 percent), or not sponsored by health care providers (34 percent) were more likely to owe rebates to their members.
- Financial performance measures: Spending on overhead decreased by $1.4 billion during the second year, which increased the overall MLR increase by half a percentage point.
- Quality expenses: The ACA requires that expenses for quality improvement be part of medical claims instead of administrative expenses; however, in the second year, quality improvement expenses stayed under 1 percent of premiums.
- Industry contraction: Researchers found that in 2012, there was “modest contraction” in the number of insurers, but numbers of individual, small-group and large-group insurers remained around 500 companies for each market. Insurers in the individual and small-group markets saw a decline in numbers of 11 percent and 6 percent, respectively.
Overall, the researchers attribute the drop by half in total rebates to consumers to insurers being more compliant with MLR requirements. They also argue that there was not a substantial reduction in the choice available to consumers in the markets.
Background: The MLR provisions of the ACA apply to health plans offering plans in the individual and small group markets; plans must maintain an MLR of at least 80 percent and 85 percent, respectively. If health plans spend less than these percentages on medical care and quality improvement, they must send rebates to their enrollees the next year.
(Source: McCue, Michael and Hall, Mark A. The Commonwealth Fund, “The Federal Medical Loss Ratio Rule: Implications for Consumers in Year 2,” May 12, 2014)
On the Hill & In the Courts
HHS releases final rule on insurance exchange standards for 2015 and beyond
Friday, the U.S. Department of Health and Human Services (HHS) released a final rule for exchange and insurance marketplace standards for 2015 and beyond. The rule contains provisions that affect affordability, transparency and quality related aspects of the HIXs. Provisions in the rule include:
CMS releases MA and Part D final rule
Yesterday, the Centers for Medicare and Medicaid Services released a final rule that addresses the MA and Part D programs. Provisions included in the rule include “regulations to implement statutory requirements, improve program efficiencies, clarify program requirements, and improve payment accuracy for Contract Year (CY) 2015 in general.” Together, the provisions are expected to save $1.6 billion through 2024.
FDA draft guidance released to establish drug trial process to demonstrate biosimilarity
The U.S. Food and Drug Administration (FDA) published draft guidance to help sponsors with designing and using clinical pharmacology studies to support decisions about whether or not a therapeutic biological product is “biosimilar” to its reference product. The guidance pertains to products that require pharmacokinetic (PK) and pharmacodynamic (PD) data to support biosimilarity demonstration, such as therapeutic biological products. According to the guidance, three key concepts are essential to develop proposed biosimilar products:
- Exposure-response assessment: To support a demonstration of biosimilarity, a well-designed study will evaluate the similarities and differences of clinical PK and PD profiles between the proposed biosimilar product and the reference product.
- Evaluation of residual uncertainty: FDA will evaluate all of a sponsors’ data using a risk-based approach and will do so in a stepwise manner. FDA will determine whether additional studies are needed by measuring the amount of residual uncertainty that remains after each step.
- Assumptions about analytical quality and similarity: Sponsors should perform extensive analysis of the biosimilar product’s quality attributes to those of the reference product to determine whether they are not similar, similar, highly similar or highly similar with fingerprint-like similarity.
Background: This guidance is one in a series that the FDA plans to draft to implement the Biologics Price Competition and Innovation Act of 2009 (CPCI Act). The CPCI Act was enacted as part of the ACA to establish an expedited pathway for FDA licensure of biological products that are biosimilar to products already approved on the market. According to the guidance, biosimilarity is defined as “highly similar to the reference product notwithstanding minor differences in clinically inactive components and that there are ‘no clinically meaningful differences between the biological product and the reference product in terms of the safety, purity, and potency of the product.”
MPHA requests guidance from CMS on health insurance providers tax
Last week, the Medicaid Health Plans of America (MPHA) sent a letter to CMS Administrator, Marilyn Tavenner addressing concerns about the health insurance tax that was contained in the ACA. Arguing that the fee is an excise tax, and not one that is deductible by the Internal Revenue Service, the group believes that there is a “gross up” to factor in. MPHA believes that in order to remain in accordance with rate-setting standards that are actuarially sound, the insurance tax and the gross up should be included in capitation rates that are paid to health plans. In addition, MPHA argues that many states and plans are confused about how the tax will be handled in payments to plans. To that end, in the letter, MPHA urged CMS to make it clear to health plans and states that the tax should be “factored into the rate-setting process and covered in payments to plans.”
Background: MPHA is a national trade association that represents Medicaid managed care plans that contract with states. The group represents 117 health plans in 33 states and the District of Columbia and reaches more than 18 million Medicaid enrollees.
Around the Country
Virginia, Washington, and Indiana release health insurance rate filings for 2015 plan year
Only a little more than a month after the end of 2014 open enrollment for the HIXs, several states are beginning to release rate filings from health insurers who are re-upping their plans for the 2015 enrollment year. So far, Indiana, Virginia, and Washington state have released proposed rate changes for plans being sold on the HIX for 2015. Highlights:
- Indiana (federally-facilitated): Through one insurer, approximately 29,000 of the more than 132,000 enrollees would see a rate increase of more than 9 percent in their premiums.
- Virginia (federally-facilitated): More than 216,000 Virginia residents enrolled for insurance through the HIX for 2014. Approximately half of those individuals are insured through one insurer, which has proposed to increase premiums by an average of 8.5 percent; however, some would see higher rate increases of up to 16.6 percent and some lower, at 0.5 percent.
- Washington (state-based): Washington enrolled more than 163,000 in its exchange, and rate filing increases have ranged from less than 1 percent to more than 11 percent. One insurer, however, has proposed rate reductions averaging 6.8 percent for the 2015 year. In addition, the state has seen two new entrants for the 2015 year; their participation has yet to be approved by the state.
Background: According to the National Conference of State Legislatures, as of May 2013, 43 states and the District of Columbia, Guam, Puerto Rico and the U.S. Virgin Island had effective review for all insurance markets and issuers. The federal government operates rate review for six states and two territories in the U.S.
New Jersey hospitals avoided at least $100 million in costs through Partnership for Patients
The New Jersey Hospital Association (NJHA) published a two-year update on its Partnership for Patients initiative. In 2011, CMS chose NJHA as one of its 27 hospital engagement networks (HENS) with the two goals of keeping patients from getting sicker and helping patients heal without complications. The hospitals were focused on reducing hospital-acquired conditions by 40 percent and reducing complications during transition so that hospital readmissions would decrease by 20 percent. The findings include:
- Hospital-acquired conditions: Overall, New Jersey hospitals saw a double-digit reduction, with a 58.7 percent reduction in adverse drug events, a 37.1 percent reduction in pressure ulcers, and an 83.8 percent reduction in infections following knee replacements.
- Readmission rate: Hospitals in New Jersey reduced their 30-day readmission rate by 8.7 percent, from 21.6 percent down to 19.8 percent.
- Adverse events: NJHA projects that these reductions have averted more than 9,000 adverse events for patients who were hospitalized between 2012 and 2013.
- Savings: NJHA projects that anywhere between $102 and $125 million in health care savings was produced by the program.
The program is based on several partnerships and collaborations that work to drive and sustain quality improvement in patients. The 62 participating hospitals use patient and family engagement and focus on driving efficient care across the continuum. Partnership for Patients is run by CMS and encompasses more than 8,000 partners nationwide. Currently, 82 sites are in operation across the U.S.
Report: Hispanic residents in Texas more likely to find ACA beneficial than White residents
Last week, Rice University’s Baker Institute and the Episcopal Health Foundation published a report finding that, compared to White residents, Hispanics in Texas are three-times more likely to be uninsured. This was the case both before the opening of the exchange (September 2013) and toward the end of open enrollment (March 2014). The study surveyed Hispanics and non-Hispanic White adults in Texas during these two time periods to assess their health insurance needs and how the ACA was meeting them. Highlights of the study include:
- Issues paying medical bills: Compared to Whites, Hispanics had more trouble paying medical bills during both periods. Further, affordability of medical bills improved for Whites during this time period, dropping from 21.2 percent down to 16.6 percent, while it remained largely the same over this time period for Hispanics.
- Expectations: Prior to HIX enrollment, Hispanics were consistently more optimistic than Whites about being able to access and afford health care as a result of the ACA. At the same time, Whites had lower expectations about the ability of the ACA to improve their circumstances and did not see the need for change.
- HIX enrollment: Survey results from the second period (March 2014) showed that 4.3 percent of Whites had enrolled in an insurance plan through HIX compared to 10.2 percent of Hispanics.
Approximately 6 million Texans are uninsured, and 39 percent are Hispanics. The second HIX enrollment period may help reduce the coverage gap between Hispanics and Whites.
(Source: Rice University’s Baker Institute and The Episcopal Health Foundation, “Issue Brief #4: The Affordable Care Act and Hispanics in Texas,” May 7, 2014)
Smartphone transformed into eye care medical device PEEK
The Portable Eye Examination Kit (The PEEK) is a medical device that harnesses the power of mobile health (mHealth) technology to provide eye care to populations living in rural communities. Developed by a team in Kenya led by an ophthalmologist, PEEK utilizes a smartphone’s camera and flash with a 3D printed clip-on adapter to take a picture of the eye. This allows practitioners to conduct a number of standard eye tests. Tests are then geo-tagged using the phone’s built-in GPS, made into a patient record and transmitted to a doctor for analysis. With access to necessary medical information, health care experts are then able to provide diagnosis and tailored treatment plans for patients living in rural communities. The device operates on solar power and is less costly than hospital-based eye equipment. An estimated 80 percent of the 39 million people with preventable and treatable blindness could benefit from this device.
Heart disease on a chip technology could be another step toward personalized medicine
Scientists from the Harvard Stem Cell Institute, the Wyss Institute for Biologically Inspired Engineering, Boston Children’s Hospital, the Harvard School of Engineering and Applied Sciences, and Harvard Medical School have partnered to merge stem cell research with “organ-on-a-chip” technology. Using this combination, they have successfully grown human heart tissue that carries an inherited cardiovascular disease. The researchers focused their work on Barth syndrome, an X-linked cardiac disorder that is caused by the mutation of Tafazzin, one single gene. Barth syndrome is currently untreatable and causes problems with heart and skeletal muscle functions, mostly in boys. The researchers manipulated cells from the skin of two patients into becoming stem cells and then used the stem cells to grow on chips that had been lined with extracellular matrix proteins, mimicking their natural environment. As a result of this process, the scientists were able to determine that patients with Barth syndrome had weaker contractions and irregular tissue assembly. Future uses of this type of research could help in the growth of personalized medicine.