Health Care Current: November 11, 2014

Marketplace open enrollment forecast for year two

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.

Marketplace open enrollment forecast for year two: Six of one, half a dozen of the other?

I may be mistaken, but I don’t think that the results of the upcoming public health insurance marketplace open enrollment period will achieve the Congressional Budget Office’s (CBO) forecast for 2015. And as of yesterday, I seem to be in good company, because the U.S. Department of Health and Human Services (HHS) provided modest expectations well below the CBO estimates.

Approximately 7 million individuals were covered by Affordable Care Act (ACA) marketplace products as of October.1 Until yesterday, the CBO enrollment forecasts have been the de facto benchmark against which actual results have been measured. The CBO projected earlier this spring that in 2015, 13 million people will be covered by insurance products sold through state-based (SBM) and federally-facilitated marketplaces (FFM).2 Monday, November 10, HHS announced lower expectations, projecting that enrollment would reach a net of around 9 to 9.9 million in 2015.3

In my opinion, there are at least six reasons that could help explain why HHS lowered its projections and why the second open enrollment period might come up short:

  1. Narrower window. The open enrollment season for year two and beyond is only three months in duration, compared to six months in the inaugural year. A shorter season is likely to produce shorter results.
  2. Scant awareness and declining publicity. Survey research from a variety of sources demonstrates that many Americans continue to lack awareness of ACA mandates, benefits and concepts.4 Compared to year one, media coverage of ACA topics seems much more sporadic and subdued, so the public attention to the ACA could remain more modest this time around. This season, there is likely to be substantially less paid advertising and marketing, whether from the government or advocacy organizations’ budgets. As the ACA becomes less prominent in the national conversation outside of political diatribe, it’s likely to become more challenging to raise awareness about coverage mandates, the open enrollment process and schedule and other action-motivating topics.
  3. Challenging demographics. The uninsured disproportionately fall into demographic segments that are more challenging to reach and motivate to enroll in health insurance coverage (even if that coverage is at no or little cost). In 2014, 10 million previously-uninsured Americans joined the ranks of the insured, primarily as a result of marketplace subsidies and Medicaid expansion.5 In general, the 2015 “remaining uninsured” could be more challenging to enroll than the “class of 2014” was.
  4. Personal politics. “Obamacare” continues to be highly unpopular among many Americans.6 There could be a significant number of individuals and families (including many who would qualify for tax-subsidized marketplace coverage) that choose to not enroll in a marketplace product or program because of their personal views about “Obamacare.” I continue to be amazed that the Administration decided to embrace the term “Obamacare,” which is, in my opinion, not an effective brand among many segments of the population.
  5. Tight finances. Many Americans continue to experience financial challenges and find the cost of health insurance (and health care overall) to be unaffordable. Our survey of young adults and health insurance found that 66 percent of individuals age 19 to 34 who remained uninsured after the last open enrollment season did so because they found health insurance to be unaffordable. Only 55 percent of individuals were aware that the federal government offers money to individuals with lower incomes in the form of tax subsidies.7
  6. Likely attrition and high complexity. Some 2014 marketplace enrollees will choose not to re-enroll for 2015. There are many reasons why individuals and families might not continue to participate, and confusion may be one of them. While personal opinions about the ACA vary widely, there is one thing that everyone should be able to agree upon: the ACA is incredibly complex. Many Americans who would benefit from enrolling in a marketplace product might not because they were confused and/or frustrated by the sheer complexity of program rules, eligibility requirements, product choices, benefit designs, provider networks, enrollment processes, websites and customer service experience.

On the other hand, there are at least half a dozen good reasons why enrollment results could be better than HHS’s latest projections for year two:

  1. Improved technology. The website and other related enabling technology should be much improved this year. And many state websites should be far better prepared for this year’s open enrollment period than they were last year.
  2. New choices. There is a 25 percent increase in the number of issuers offering products on the marketplaces this year.8 This includes new offerings from some of the industry’s most well-known brands, such as Aetna, Blue Cross Blue Shield, Cigna, and United Healthcare.
  3. Good deals. Tax credit subsidies remain an attractive financial proposition for those who qualify (and who know about them). Even those who don’t qualify for federal subsidies may find cost-effective coverage on the marketplaces.
  4. Penalty avoidance. In 2015 the penalty for not having insurance will increase to $325 or 2 percent of income per single adult, whichever is greater.9 This is a significant increase over the penalty for 2014 and could motivate a number of uninsured individuals to shop for marketplace coverage.
  5. Employer retrenchment. Employers both large and small continue to scale back group health insurance coverage of employees, retirees and dependents. An increasing number of Americans who no longer enjoy employer plans could enroll in individual commercial insurance, including marketplace products.
  6. Lessons learned. Experience is the best teacher. The sometimes painful experience of the first open enrollment offered many lessons to government agencies, technology companies, advocacy groups, health plans, network providers, agents and brokers and individuals and families. Year two enrollment performance will likely be improved to some degree by the lessons learned during year one.

I hope that I’m wrong in my projection. Subsidized insurance products offered through the marketplaces – in combination with expanded Medicaid eligibility – offer by far the best available opportunity to reduce the nation’s (unacceptably) high number of uninsured.

On a personal level, I think a successful enrollment period would be good for our society, good for our economy, good for our industry, good for Deloitte’s clients and good for a lot of individuals and families who suffer the health, financial and emotional consequences of having no health insurance. Please join me in rooting for a great open enrollment…

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1 Wall Street Journal, “Obama Administration Says 7.3 Million Who Picked Health Plans on Exchanges Have Paid Premiums,” September 18, 2014,
2 CBO, “Updated Estimates of the Effects of the Insurance Coverage Provisions of the Affordable Care Act, April 2014,”
3 Elise Viebeck, The Hill, “HHS lowers ObamaCare enrollment expectations,” November 10, 2014,
4 Kaiser Family Foundation, “Kaiser Health Tracking Poll: October 2014,” October 21, 2014,
5 Finegold, Kenneth and Gunja, Munira Z. U.S. Health and Human Services, ASPE, “Survey Data on Health Insurance Coverage for 2013 and 2014, October 31, 2014
6 Politico, “Exit Polls: Don’t care for Obamacare,” November 4, 2014
7 Deloitte Center for Health Solutions, “Young Adults and Health Insurance: Not Invincible – But Perhaps Convincible,” 2014
8 HHS, “New Report: Health Insurance Marketplace will have 25 percent more issuers in 2015,” September 23, 2014,
9 Kaiser Family Foundation, “Individual mandate,”

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My Take

By Greg Scott, Principal, National Health Plans Sector Leader, Deloitte Consulting LLP



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U.S. Supreme Court to review King v. Burwell; 18 states urge Appeals Court to rule in favor of allowing the subsidies to continue

On Friday the U.S. Supreme Court announced that it would take up King v. Burwell, a case that argues the tax subsidies provided to individuals purchasing plans under the FFM are illegal. Many were unclear whether the Court would take the case up, because currently there is no split ruling among the lower courts. However, the Court can decide to review cases it deems to be important and of great significance. It is likely that the Justices deemed this case as significant, as it affects the availability of the health insurance subsidies for more than 4 million individuals who receive them through the FFM. As of today the Court has not set a timeline for when the case will be heard, but SCOTUSblog – a blog that follows the happenings of the Court – speculated on Friday that the case could be heard in the first week of March 2015.

Related: A similar case pending in the District of Columbia Court of Appeals, Halbig v. Burwell, also challenges the legality of ACA tax subsidies offered under the FFM (for more information see the October 7, 2014 Health Care Current). On Monday the plaintiffs in the case sent a request to the U.S. Court of Appeals to put the case on hold, citing the point that the Supreme Court will now hear the King case. On Friday 18 state attorneys general filed an amicus brief urging the District of Columbia Court of Appeals to affirm the constitutionality of the FFM tax subsidies, noting that millions of low- and moderate- income Americans would have to pay higher premiums if the courts agree that the subsidies are illegal. According to the states, a decision eliminating the ACA tax subsidies in the FFM could create a ripple effect, even in states that operate their own marketplaces, and disrupt the ability for the law to operate nationally.

(Source: Lyle Denniston, SCOTUSblog, “Court to rule on health care subsidies,” November 7, 2014)

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Implementation & Adoption

Midterm election results

Elections were held across the U.S. last Tuesday, the results of which mean that the Republican party will take control of both the U.S. House of Representatives and the U.S. Senate in the new year. In terms of gubernatorial races, the Republican party also won some states traditionally held by Democratic governors, including Maryland, Massachusetts and Illinois. It is unclear how the new Congress will approach health care policy and changes to current legislation. Some believe that lawmakers will attempt to repeal the ACA, and others believe that lawmakers will focus on making more incremental changes to unpopular parts of the law like the medical device tax and employer mandate to offer health insurance coverage. In a recent blog post, Sarah Thomas, Research Director for the Deloitte Center for Health Solutions, Deloitte Services LP, outlined some of the implications that this election could have in the upcoming months and year. In addition to tackling changes to the ACA, the Congress could take up other issues:

  • The budget: The Continuing Resolution that is currently funding the government is set to expire on December 11, before the new Congress is in office. There are several ways that the current Congress (in its “lame duck” session) might resolve this issue, and that is likely to play out over the next several weeks and months.
  • The perennial physician payment issue in Medicare: Current legislation only extends the ‘patch’ that prevents large cuts to physician payment under Medicare through March 2015. Last year the Congress tried to enact major reform to this payment system, but in the end was unable to find the funding to support the policy changes. Last week, however, immediately following the results of the election, several lawmakers began addressing the topic, urging the current Congress and president to resolve the issue in the near term with a solution rather than another patch.

Last week after the elections, CNN conducted an exit poll on 11,522 voters to find that they are in disagreement on the ACA and its policies to date: 47 percent thought the ACA went too far; 26 percent felt it did not go far enough; and 22 percent felt that the law is just about right. In addition to electing new governors and new members of Congress and state legislatures, several ballot initiatives are salient for health care:

  • In California voters rejected a ballot initiative that would have allowed the state insurance department to block premium rate increases in health insurance coverage. Some lawmakers believe that the initiative, if it had passed, could have weakened the state’s health insurance marketplace.
  • In South Dakota voters approved a measure to allow any qualified provider that meets conditions for participation to be considered an in-network provider by health plans. 62 percent in the state voted in favor of this measure, also known as an “any willing provider” law. Last month America’s Health Insurance Plans reviewed similar laws across the U.S. to find that they may lead to an increase in health care spending and negatively impact quality of care. For more information, see the October 7, 2014 Health Care Current.

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HHS: The number of uninsured dropped by more than 10 million from 2013 to 2014 due to the ACA

A recent report by HHS found that as of June 2014, about 10.3 million uninsured adults ages 18 to 64 obtained health insurance coverage. This represents a more than 5 percentage point drop in the uninsured rate, from 20.3 percent to 15.1 percent. The estimates included new enrollees in Medicaid and the Children’s Health Insurance Program (CHIP) and the health insurance marketplaces. All race/ethnic groups saw gains in health coverage, but the largest drop in the uninsured was among the Latino population, who were most likely to be uninsured before 2014:

The results came from Gallup-Healthways’ Well-Being Index survey. The HHS report indicated that government surveys from the National Center for Health Statistics and the U.S. Census Bureau normally provide the best information on health coverage, but their data only goes through March 2014 and does not capture the enrollment surge that occurred toward the end of open enrollment.

(Source: Finegold, Kenneth and Gunja, Munira Z. HHS, ASPE, “Survey Data on Health Insurance Coverage for 2013 and 2014,” October 31, 2014)

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Study: Specialty drug spending per Medicare beneficiary increased by 47 percent from 2007 to 2011

A study published in the latest Health Affairs analyzed spending trends among Medicare beneficiaries age 65 and older to find that spending on specialty drugs among people who used them increased by 47 percent from 2007 ($2,641) to 2011 ($8,976). Researchers analyzed a random sample of Medicare claims, including those for standalone prescription plans and Medicare Advantage plans, during a five-year study period. Spending on specialty drugs increased as a share of total Medicare spending, from 6.7 to 9.1 percent during this time period.

Notably, while spending increased, the share of people using these drugs declined from 5.5 to 2.8 percent of beneficiaries from 2007 to 2008, leaving a very concentrated population of Medicare beneficiaries that use drugs to treat complex health conditions. Oral cancer agents and immunomodulators were the primary drivers of the rise in specialty drug spending. People taking specialty drugs tended to have higher out-of-pocket (OOP) spending than non-users; annual total cost sharing for beneficiaries that used specialty drugs from 2007 to 2010 increased by 51 percent from $1,551 to $2,347. However, the ACA’s provisions to reduce OOP spending in the donut hole helped people taking specialty drugs; the authors found that as a result of that provision, OOP spending dropped 26 percent between 2010 and 2011.

(Source: Trish, Erin, Joyce, Geoffrey, and Goldman, Dana P. Health Affairs, “Specialty Drug Spending Trends Among Medicare and Medicare Advantage Enrollees, 2007-2011,” November 2014)

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Administration to issue regulations around hospitalization coverage in large-employer health plans

A notice to employers and large group plans issued jointly by HHS and the U.S. Department of the Treasury revealed that the Administration will soon issue regulations regarding benefit packages that fail to offer substantial coverage for inpatient hospitalization and/or physician services. The regulations will indicate that these types of plans do not meet minimum value (MV) requirements under the ACA. The notice was issued after stakeholders raised concerns about the reliability of the MV calculator, a tool that helps employer-sponsored group plans determine whether plans meet MV requirements. Because the MV calculator was based on typical self-insured employer-sponsored plans, which have typically included inpatient hospitalization and physician services as benefits, it may not have accounted for unconventional plan designs with limited hospitalization or physician coverage offered by some employers.

Analysis: Large employers are not required to offer the essential health benefits package, but they must offer a plan with an actuarial value of at least 60 percent. These new regulations will emphasize that employers cannot rely on the MV calculator to avoid offering coverage for hospital and physician services. While the Administration is focused on ensuring that large employers are covering hospitalization as a benefit, many, if not most, large employers are already doing this. The regulation could impact a very small number of large employers that have identified this as a loophole to the pay-or-play mandate. However, many employers that are seeking to get around the future mandate of offering coverage could be using other strategies; this regulation could indicate that the Administration is beginning to focus on additional ways that employers are getting around the penalty. Still, others believe that the employer mandate to offer coverage could be one of the first provisions of the ACA that will either be delayed or removed by the new Congress in 2015. Some stakeholders have argued that the compliance and administrative costs associated with the mandate are significant and that removing the mandate would relieve employers from this cost burden. The American Hospital Association (AHA) released a statement the same day as the announcement saying that it was pleased with the Administration’s move to require hospital coverage. AHA had been vocal about its concerns about large employers’ limiting or dropping coverage of hospital services.

(Source: Internal Revenue Service, “Notice 2014-69: Group Health Plans that Fail to Cover In-Patient Hospitalization Services,” November 4, 2014)

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On the Hill & In the Courts


FDA’s CBER approves first “breakthrough” biologic vaccine for meningococcal disease

Last month the U.S. Food and Drug Administration’s (FDA) Center for Biologics Evaluation and Research (CBER) approved a drug that had been reviewed through the breakthrough designation. The breakthrough designation was created by the FDA Safety and Innovation Act of 2012 as a way to evaluate and quickly get to market drugs that the agency finds may significantly improve public health. The drug has become the first vaccine that prevents meningococcal disease caused by Neisseria meningitidis serogroup B in people ages 10 to 25.

The approval marks a first for CBER, as no other drug has been approved through the center using the breakthrough designation. Most requests for the breakthrough designation have been sent through the Center for Drug Evaluation and Research (CDER) rather than CBER. CBER has seen increased requests to use the breakthrough designation recently, following low interest at the beginning of the program. In fiscal year 2014 CBER received 26 requests to use the designation, and CDER received nearly 100. If a drug or biologic receives breakthrough therapy designation, the FDA provides more intensive guidance on the development of the drug, including advice, frequent communications and faster turnaround of reviews.

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Survey: Arkansas’s Medicaid ‘private option’ helps reduce uncompensated care by 56 percent

Earlier this month the Arkansas Hospital Association, together with the Arkansas chapter of the Healthcare Financial Management Association, released survey findings on uncompensated hospital care in the state. According to the survey results, unreimbursed care dropped from $122.6 million in the first half of 2013 to $53.9 million in the first half of 2014, a 56 percent reduction. The two organizations surveyed 46 Arkansas hospitals, or 65 percent of the state’s 71 general, acute care hospitals. The hospitals provide 80 percent of hospital patient services and revenue in the state. Additional findings include:

  • Emergency room visits increased by 1.8 percent, but the number of emergency room patients without insurance dropped by 35.5 percent
  • Hospitalizations increased slightly, less than 1 percent, but the number of hospitalized patients without insurance dropped by 46.5 percent
  • Outpatient visits increased by 5.8 percent, but the number of outpatient visits by uninsured patients dropped by 36 percent

The report concluded that the state’s Medicaid expansion was the main driver in helping to expand insurance coverage to uninsured Arkansans and reduce financial losses to hospitals in the state. Specifically, Arkansas hospitals reported that they incurred $57.5 million in costs caring for individuals covered by the private option; they expect to receive $58 million for that care. As of October 1, 2014, approximately 211,000 Arkansans gained coverage under the private option, and an additional 38,000 gained coverage through the health insurance marketplace.

Related: The program uses federal funds to provide premium assistance for low-income individuals to purchase coverage through the state’s marketplace. In August the U.S. Government Accountability Office sent an analysis of the private option to the HHS concluding that HHS approved Arkansas’s waiver without ensuring it met federally mandated budget-neutrality criteria. See the September 16, 2014 Health Care Current for more information.

(Source: Arkansas Hospital Association, “Uninsureds’ costs plunge, hospitals say private option is credited; patient tally up, survey finds,” November 1, 2014)

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Around the Country


Report: Market share and negotiation power affect premiums in the marketplaces, not always the size of provider networks

A recent report by the Urban Institute, with support from the Robert Wood Johnson Foundation, examined which hospitals were included in plans on the health insurance marketplace in six cities across the U.S. and explored hospital network variations. The results showed that almost all insurers offered plans that included highly ranked hospitals in their networks; all hospitals in specified cities were included in at least one marketplace plan; and premiums seemed to be less affected by network sizes and more by market share and negotiation power. Furthermore, researchers found that access to information on provider networks within each plan was difficult to find, making it hard for the average consumer to compare plans prior to purchasing them. Specific findings include:

(Source: Peters, Rebecca and Holahan, John. The Urban Institute, “Narrow Networks, Access to Hospitals and Premiums: An Analysis of Marketplace Products in Six Cities,” October 2014)


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Researchers look to preschools as a novel biosurveillance tool

Researchers at the University of Michigan have pilot-tested a novel, web-based biosurveillance system in child care centers and preschools to track illness trends and illness-related absences. Children age five and younger often get sick earlier and more often than the rest of the population, so studying infectious disease trends in this population may be a useful surveillance method. Biosurveillance is a critical tool to detect disease outbreaks early and mobilize resources; current efforts that involve child care centers are typically paper-based and inefficient.

The researchers implemented a web-based biosurveillance program,, created for child care centers/preschools, in four centers beginning in December 2013. Staff were trained to use the website to report any ill child that required immediate pick up from the center by a parent or guardian, needed isolation and observation, or had an absence reported by the parents. Seven categories of illness were reported: fever, influenza-like illness, conjunctivitis, gastroenteritis, cold symptoms, ear infection and rash. Other data captured the child’s age range and whether or not medical care was required. No confidential or identifying information was collected. Reports were generated by the website and sent automatically to the health department weekly or more often if there were spikes in illness. Data were summarized using descriptive statistics.

In the pilot’s 3.5-month timeframe, a total of 188 individual episodes of illness were reported from the childcare centers. Daily analysis of data revealed an unusually large spike of gastroenteritis cases among participating centers over a two-day period, which was comparable to the county-wide gastroenteritis spike among schools reported three weeks later by the local public health department. The researchers presented results from their findings at the American Academy of Pediatrics National Conference & Exhibition in San Diego last month. One of the researchers, a pediatric emergency physician, noted that if child care centers are reporting symptoms of a contagious illness, other centers can start taking precautions early on (emphasizing hand-washing, encouraging flu shots, etc.) to prevent the spread of illness.

The advantage of using web-based surveillance in childcare settings is the ability to rapidly and efficiently report on evolving patterns of infectious disease among a vulnerable population. Future studies include expansion of web-based programs into more sentinel childcare settings to determine if outbreak detection might occur earlier compared to current methods used by local and state surveillance systems.

Analysis: In the November 4, 2014 Health Care Current, Harry Greenspun, MD, discussed recommendations that could help improve the U.S. health care system’s approach to population health surveillance and management and the need to engage and inform consumers to make this happen. Dr. Greenspun noted that the health care system needs to become an intelligent, responsive and adaptable one with certain critical capabilities that include collaborative development of policies and updated workflows, and optimization of data collection and sharing. As this pilot study illustrates, early warning signs of new or changing diseases come from a variety of sources, including childcare centers. Spikes in over-the-counter medication purchases, reduced public transit usage, Internet searches, weather events and more are also early indicators that the system should be able to use. Analytics capabilities could encompass a broad range of data to give health officials a clearer sense of potential threats.

The researchers of the University of Michigan study emphasized that if childcare staff had early warnings of an outbreak, they could help engage and inform parents and caregivers to do simple things that may reduce the spread, such as be extra vigilant about hand washing and prioritize scheduling flu shots for their family. In order to help programs such as maximize their potential, there could be a concerted effort to make the data actionable and educate and inform the community about what they can do to help prevent disease outbreaks and protect their families.

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Breaking Boundaries


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