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Health Insurers Discuss the Affordable Care Act’s Ongoing Impact 

Signed in 2010 by President Obama, the ACA is still a work in progress.

In our first Trade-Talk Roundtable discussion for 2015, New Jersey Business magazine sits down with five experts in the health insurance field to discover how the Patient Protection and Affordable Care Act is and will continue to affect their industry, the bottom lines of their business clients and the health of their employees. As most participants reveal: There is nothing affordable about the Affordable Care Act. However, among the benefits of the legislation is the fact that healthcare providers and payers are beginning to work together to rein in rising costs. They also say the act, often referred to as Obama Care, will not be repealed as a result of this past November’s federal elections, even though the Republican Party, long in opposition to the ACA, won control of the Senate and increased its numbers in the House of Representatives. The party simply does not have the two-thirds majority to override the president. However, our panelists say there will probably be continued debate and alterations to the act on issues such as the Cadillac Tax, the Medical Device Tax and other fees and regulations associated with the legislation. Signed by President Obama in 2010, the ACA still seems to be a work in progress.

New Jersey Business would like to thank the New Jersey Association of Health Plans, especially its president, Wardell Sanders, Esq., for hosting us at the association’s Trenton headquarters and helping us assemble this panel.

Meet the Panel:

MAG-RT-AltmanLarry B. Altman is vice president, strategic initiatives group, at Horizon Blue Cross Blue Shield of New Jersey. He is responsible for an internal consulting team that leads strategic programs throughout the company. Altman also oversees the Office of Health Care Reform, which drives Horizon’s preparations and responses to the ACA. This includes both implementation of all requirements of the law and planning for the changing market. Horizon is New Jersey’s oldest and largest healthcare insurance company with 3.7-million members across all lines of business. Altman holds a bachelor’s degree in economics from Princeton University and a master’s degree from the Yale School of Management.

MAG-RT-CernigliaChuck Cerniglia is vice president, sales and account management, for UnitedHealthcare of New Jersey. With more than 18 years of experience in the healthcare industry, Cerniglia specializes in sales, retention and new business development and distribution for small businesses across the state. He is a board member of the New Jersey Department of Banking and Insurance’s Small Employer Health Board and the Southern NJ Association of Health Underwriters. UnitedHealthcare, part of the UnitedHealth Group, a diversified health and well-being company, contracts with more than 800,000 physicians and healthcare professionals, and 6,000 hospitals and other healthcare facilities nationwide. In New Jersey, the company serves more than 1.5-million people.

MAG-RT-MartinJim Martin is CEO of Health Republic Insurance of New Jersey. The company began offering health insurance on the exchange last year. Prior to last November’s open enrollment season, it had 4,200 members in the state. Early in his career, Martin was CEO of an integrated healthcare delivery system. A firm believer in the absolute value of hospital and physician collaboration, he also established the first physician hospital organization in Rockland County, New York. Later, he worked as a freelance consultant for a behavioral health management consulting group in North Jersey, and joined Jersey City Medical Center, then part of Liberty Health, as its vice president for behavioral health services.

MAG-RT-MunozMike Munoz is senior vice president, sales and marketing, for AmeriHealth New Jersey. In his role, he oversees new business and retention for the entire sales organization across all market segments, including individual, small and large businesses, public sector, municipalities and self-funded. He is responsible for the development and execution of AmeriHealth New Jersey’s entire suite of products, and ensures that the company is compliant with healthcare reform per the ACA. Prior to AmeriHealth, Munoz was vice president of sales for the mid-Atlantic region and new business opportunities for Oxford Health Plans. Today, AmeriHealth New Jersey serves approximately 320,000 members.

MAG-RT-SandersWardell Sanders, Esq., is president of the New Jersey Association of Health Plans, the trade association that represents the major health plans in the state, including four Medicaid health plans. He became president of the NJAHP in 2006. Prior to joining the association, Sanders served for 15 years in state government. He was the executive director of the New Jersey Individual Health Coverage Program Board and the New Jersey Small Employer Health Benefits Program Board. These agencies are charged with regulating the individual and small group health markets. The NJAHP is a non-profit corporation created to serve its member health plans with a mission of fostering understanding in the value that health plans contribute to the state’s healthcare system.

Q: What has been the impact of the Affordable Care Act (ACA) on your industry and company?

Cerniglia: The ACA brought a ton of changes and opportunities to our industry and to UnitedHealthcare, whether to meet the standards for essential health benefits, the deductible caps, conforming to (actuarial) values or making changes for maximum out-of-pocket limits for our plans. In New Jersey, we didn’t have to conform to the removal of pre-existing limits because some of those provisions were already in place. But over all, [the act] is giving us a chance to modernize our healthcare system. … And so far, it is going well.

Sanders: You have to recognize that less [change] occurred in New Jersey than in the rest of the country. A lot of ACA [insurance market] features have been around here for more than 20 years. We have had a guaranteed issue individual market since 1993. We have had limitations on pre-existing conditions. We have had minimum loss ratios [in which] insurers have to demonstrate that 85 cents or 80 cents of premium dollars go back to hospitals, doctors and pharmaceutical companies as claim payments.

Munoz: I would say [ACA implementation] has been a little disruptive. The implementation and testing time was not as long as it needed to be. The challenge is in understanding the new environment and understanding how to communicate effectively to the new [users] in the market.

The most challenging part for most individuals and groups is the substantial cost associated with the implementation. The cost is being directly passed onto the consumer. There are taxes associated with the implementation, and fees with participating on the exchange.

Altman: The healthcare system in New Jersey and nationally was facing huge challenges for many years. That is why we got healthcare reform, or the ACA. There are three main challenges: access to coverage; the cost for consumers, businesses and government; and quality. Overall, I think the ACA focused on the first piece, which is access. A lot more people are covered in New Jersey and nationally through the exchanges and through the expansion of Medicaid. That’s good. At the same time, there is a lot of work to be done in addressing the issues of cost and quality, which we, as a society and industry, are working hard to address.

Sanders: The ACA was disruptive. Regarding the rating rule changes in the small employer market, there were a lot of businesses in the 2- to 50-employee range that just got walloped [in terms of cost]. When you get rid of gender rating, it creates winners and losers, and you certainly hear from the losers. It wouldn’t be unusual to hear someone getting a 50 percent rate increase.

The other thing is that businesses and people like predictability, and we had a real lack of predictability in the ACA roll out. There were a lot of last minute changes and wasn’t even close to ready for prime time. And the rules [insurers] had to live by – they would build their rates and business models and then, all of a sudden, the rules would change.

Additionally, many of the insurance provisions in the ACA were really dealing with access to care. While the law has the term “affordable” in it, the delivery on that [affordability] is the biggest challenge we face. There are some good things in the act, such as pushing changes in delivery models, but the subsidies mask the true cost to consumers. The act didn’t really reduce costs. Someone is paying for that.

Q: Is there any sense that things are falling into place? Are things more predictable for businesses right now?

Cerniglia: It’s a little bit more predictable due to the fact that most of the change that had to take place, already took place. In 2015, you are not going to see as many changes to the plan designs. Most of that is behind us.

Altman: There are a few new things, one is the Small Business Health Options (SHOP) exchange. It was not operational, in a real sense, last year. There are also things coming down the pike over the next several years that will affect employers. There are different rules for different size employers, and right now 2 to 50 employees is considered the small employer market and above 50 is considered large. That cut off is going to shift to 100 employees in 2016. So companies in the middle range are going to be subject to a different set of rules. It’s something people should plan for.

The other thing is the Cadillac Tax, which will go into effect in 2018. This will be a tax penalty for companies that offer very rich benefits.

Q: We have this 40 percent Cadillac Tax. What do you see employers doing in dealing with that cost?

Cerniglia: There may be some employers out there who are willing to pay it just to provide [a high] level of benefits to their employees. But I think you will see employers trying to continue to buy down the benefits to lower costs.

Munoz: The tax is going to create an environment where there will be more of a shift to dropping coverage because employers just can’t afford to [pay the tax]. The reality of what it means to an employer financially is substantial in comparison to anything that has been put together today, be it the enhanced benefits, the additional taxes or the change in rating methodology.

I do think there is some momentum on the federal level to look at the tax and hopefully do something about it.

Sanders: One area where you may see [an impact] is the State Government Health Benefits Program. Taxpayer-funded public employees tend to have relatively rich plans. So this is a big deal for [state] government because the potential tax impact to its program can be quite significant.

Q: What changes are you implementing due to the ACA in terms of new products and services?

Cerniglia: This year, we introduced the Garden State Network, a health plan with a New Jersey only network designed for New Jersey employers. With the Garden State Plan, UnitedHealthcare members have access to New Jersey hospitals and providers across the state. By providing New Jersey employers a health plan with a focused network, we are giving them another option in their effort to reduce costs.

We also added two accountable care organizations this year, the Optimus ACO (accountable care organization) and the AtlanticCare ACO. UnitedHealthcare members who seek care at these facilities will benefit from coordinated care where the focus is on better care and better health at lower costs.

Munoz: Among other things, we have entered into relationships with provider partners. We rolled out our Cooper Advantage Network, which enabled people to have a cost advantage by utilizing Cooper University Health Care physicians and facilities. Going into 2015, we have expanded that with two other hospital systems: Cape Regional Medical Center and Shore Medical Center in Cape May and Atlantic counties, respectively. Our view is that healthcare, in this new environment, is becoming more local.

We felt it was important for us to recreate the way we deliver care to individuals. We found no better way to do this than to work hand-in-hand with providers and become partners with them to jointly develop products and develop strategies. They are taking on the responsibility of managing patients more effectively. From our standpoint, the future of controlling costs really has to do with partnerships between us and providers.

Cerniglia: I would say our relationship with providers definitely is changing. We are working more collaboratively to provide the highest quality care at the greatest value. That is why we have been entering into ACOs. Nationally, UnitedHealthcare has 27 Commercial ACOs, 167 practices in patient centered medical homes (PCMHs) and more than 500 total ACO partnerships. So you can expect to see UnitedHealthcare entering into more accountable care partnerships in New Jersey.

Altman: We are hearing a lot about the need to slow rising costs and improve quality and the patient experience. In recognizing that, Horizon offers consumers and businesses the choice to save money when selecting their providers and hospitals among Horizon’s statewide networks. On the exchange last year, and this year, Horizon offers an Advance plan, which features lower premiums and a smaller number of network physicians. For hospital care, purchasers of this product still have access to Horizon’s statewide network of hospitals, but they’ll pay less out of pocket if they select among a smaller subset of cost-effective, quality hospitals that we created for the Advance plan. So, the Advance plan provides an incentive for people to use the more cost-effective hospitals, which then translates into lower premiums for the employer or the consumer, whichever the case may be.

We also partner with our healthcare providers: physicians, hospitals and other providers. One of the innovations that has become more promising is the PCMH concept, which puts the primary care doctor back in the middle of the patient’s care and coordinates that care. It’s all coming from the primary care practice instead of the insurance company. We have more than 500,000 people across the state who are currently in PCMH practices. We offer our product to employers, with incentives and lower premiums for people if they choose to get their care coordinated through a PCMH.

In a different direction, we have rolled out a private exchange offering for employers, which is really a way to let small- or medium-sized businesses provide their employees with a choice. Employers can set the level of how much of the premium they can pay. If employees want to buy more expensive plans, they can choose that.

Martin: Last year was our first opportunity to offer health insurance to the New Jersey population. We are a co-op, maybe the first ever health insurance co-op in the state. Being that last year was our first, we went with the best advice we could get as to what the population was looking for and what we were expected to be able to do. We had a challenge in terms of enrollment. We didn’t quite meet the targets we were looking for by way of price and product plan. We heard a lot from the broker community and from the populations during the course of the year and they identified some of the challenges they saw with our plan. First of all, it is very New Jersey centric. We know that if you live in counties near Philadelphia or New York, you tend to seek healthcare services from providers [across the border], so we built that into this year’s plan.

Another thing we did is offer a teladoc telemedicine program free of charge to our members. Anybody who has a medical concern and is not inclined to go to the ER, but is wondering whether they should go – and it is after hours – can dial a number and get a New Jersey-licensed physician. If they are smart-phone oriented, they can, for example, show the physician the rash on their arm and the physician can write a prescription and reach out to the primary care physician and make sure care is coordinated.

Q: How does wellness fit into the whole equation with people being more accountable for their own health? 

Munoz: We have been preaching that for years because what drives the overall expense is utilization. You can have 20 percent of your people driving 80 percent of your costs at the end of the day. What we have tried and decided to do as an industry is focus on wellness. We have a Commit2Wellness program that provides incentives to individuals to practice healthier lifestyles. This is a key component to any future success beyond payment reform, beyond the ACA models put in place … it is really people taking personal responsibility to do what they are supposed to do.

Altman: There is definitely a need for consumers/individuals to take on more personal responsibility. The employers are also recognizing the value of healthy employees … they are at work – not sick – and productive. It is both the employees and their families. We know that employees have family members who are sick … that also takes away from productivity.

Q: Why have some insurers agreed to participate in the exchanges and others haven’t? 

Sanders: The New Jersey Association of Health Plans (NJAHP) represents all major [health insurers] in the state. Some have not chosen to get in at this point. I would say that this is an investment in the individual market. Businesses like predictability and it was hard to predict that in the very first year. You didn’t really know what the population was going to look like, how many people were going to sign up, the rules were still in flux as to what the market would look like. We are still not there yet, but as it gets more predictable, and folks understand what the marketplace looks like, it will become more attractive.

Cerniglia: In 2014, UnitedHealthcare entered four exchange markets. We took a prudent first year approach in looking at the exchanges to make sure we made the right decisions, entered the right markets, and make sure it was sustainable. In 2015, we are entering 23 exchange markets, including New Jersey. We will have a full offering of all the metallic levels; we will have six plans available on and off the exchange.

Munoz: We viewed Amerihealth as being a company that only focuses on New Jersey employers and individuals, so we needed to participate in order to be active in this environment. We also saw this as an opportunity. If we are not going to participate actively in one of the biggest opportunities in the state, it would be counter intuitive to what we do as an organization in trying to be meaningful in the way we operate.

Altman: For Horizon, it was an easy question. We are the biggest and oldest health plan in the state. We serve all the markets in the state from individuals up through the largest employers. So we view this as an important part of our business. Like my colleagues, we are looking forward to seeing how the second year rolls out.

Q: There seems to be high deductibles in the exchange plans. How are employees reacting to this?

Munoz: People are looking at costs. From my standpoint, we have a high deductible program and we tried to couple it with a health savings account (HSA) component. So, you are accessing your HSA piece of it first, prior to getting to the deductible piece of it. Most of the HSA programs are covering that.

Cerniglia: One thing I can say about high deductible plans is that they have been around for a while, even before the ACA was rolled out. They still are some of our top selling plans, but one thing I have noticed in being new to the exchange is that many individuals may not have realized what they were purchasing. They know they wanted a low premium plan, but they didn’t realize they had this high out-of-pocket deductible cost after they purchased it. I think that high deductible plans are here to stay and many small employers embrace it because of the lower cost in premiums. They use vehicles like HSAs or health reimbursement accounts (HRAs) to help fund those deductibles.

Sanders: What is forgotten sometimes is that the ACA also has a subsidy program for cost sharing. If a resident has an income below 250 percent of the federal poverty limit, they may be eligible for cost sharing relief subsidized through the federal government. So the folks who are at lower income levels are not experiencing the same high out-of-pocket issues if they are eligible for the cost sharing subsidy.

The second part is that much of the expansion and growth in New Jersey was on the Medicaid side. As of September, it is up by some 350,000 covered lives from the end of 2013. So it went from 1.3 million to 1.6 million. Medicaid plans have little or no cost-sharing. When we think about folks in the lower income brackets, they are protected under both Medicaid and the subsidy program.

Q: In addition to the ACA, out-of-network provider costs play a role in premium increases. How is your company responding in ensuring that premiums are affordable and consumers have access to needed in-network services?

Altman: We heard earlier that New Jersey is a high health cost state. One of the reasons is the out-of-network situation. There are certain circumstances in which consumers use out-of-network providers, whether physicians or hospitals, and they are liable for the actual bill at exorbitant prices. We advocate that consumers be aware of, and that all policy makers understand, the impact of out-of-network costs. Sometimes people have no control [or have no idea of what is happening]. For example, someone goes to a hospital that is in network, but it turns out that one of the physicians who treats them is out of network. This is the “ologist” problem. I think we have made a lot of progress as an industry in addressing that, and working with hospital partners.

Sanders: As a comparison, there is a law in New Jersey that says in a state of emergency, like Superstorm Sandy, you cannot raise your costs by a certain amount. After Superstorm Sandy, the state went after bad actors, like certain gas stations and hotels. State law recognized that, in some cases, there were no market forces to control costs. We have this situation in healthcare today, in the ER and with “ologists.” Consumers don’t get an opportunity to shop. They become captive. This is when government has to step in and say, “We need to balance the outliers and rein in this conduct.” This problem is unique in New Jersey, and we should be able to resolve it. It requires some government intervention.

Martin: I would add that Ward and his staff have done a good job in pointing out this issue to everyone. The education of consumers, especially small businesses, plays a big part in this.

Q: New Jersey is participating in the federal exchange, but overall, how is the state handling the changes in this new environment?

Munoz: Initially, there was some conversation about having a state-run exchange. From our standpoint, just based on some of the experiences other state exchanges have had in getting up and running … I think New Jersey probably made the right decision in taking the federal route, and it has done a good job in managing things. It has had a very open dialogue with the carriers and the association in making sure we work through the issues. They have been a good partner through the whole process.

Sanders: At the risk of not being on the same page as my bosses, the association originally advocated for a state-based exchange. But some states spent tens of millions of dollars in setting up exchanges that they had to shelve because they didn’t work. So having waited may not have been such a bad decision for New Jersey. In some cases, it wasn’t even that vendors were wrong or weren’t doing a good job, you just had all these states creating very brand new boards, throwing volunteers together and giving them 17 months to put together this enormous undertaking. That is hard for an established business or entity to do, let alone a collection of general volunteers. So in retrospect, we stumbled into a good solution.

Q: The employer mandate is on the horizon. How are you helping clients prepare for this?

Martin: Education, information and roll-out sessions. Putting as much information as possible on our web pages for people to access in anticipation of how well they will deal with the mandate.

Cerniglia: The employer mandate is a tough decision for employers: Whether to pay or whether to play. We put together a broad range of marketing materials so that employers can make an informed decision. It has gotten to the point where employers can figure out how much the penalty is going to be. There are calculators they can use to input the number of eligible employees they have and figure out the minimum essential cost and coverage and things such as that to help them make an educated decision.

Q: With the result of the November national elections, do you think we will see changes to the ACA? 

Altman: My sense is that nothing is going to change what is affecting the open enrollment season. So it’s full steam ahead with the products available through the exchange, the subsidies and the tax credits. None of that will change in the immediate term.

We will continue to see a lot of discussion and debate, but it would seem very unlikely that there would be fundamental changes, like a repeal of the law. We probably will see some issues raised in places where the law could be improved, like some of the fees, taxes and regulations that are increasing costs. For example, one of the ways the law is funded is a tax on health plans. All of those taxes and fees eventually get passed to the consumer because that is what happens with taxes. It’s an additional operating expense. It is not improving the service or product, so I think there are opportunities there.

Sanders: A consulting firm was hired to conduct an analysis on the insurer tax. Nationally, $8 billion was collected in 2014 and it scales up over the next couple of years. In New Jersey, the tax will average about $500 million a year. The impact of the tax over a 10-year period would be $5 billion in New Jersey. This is just one tax. There are also fees to run the exchanges, and that is on top of state-based taxes. There are about 10 different assessments in state law that fund different programs. When you look at your premium dollar, a good chunk pays for taxes and fees and assessments.

Altman: The other big thing on the horizon is that the Supreme Court has agreed to hear a case on the constitutionality of the subsidies on the federal exchanges. There could be a ruling on this next spring.

What will happen is totally unpredictable, except to say there are positive aspects of the law: getting more people covered, addressing rising costs; improving quality, engaging consumers … those are all good trends that started before the ACA. Even if the ACA is changed in some way, I believe those trends will continue.

Munoz: I think the train has left the station and it is way down the track. I think you won’t see a repeal of the ACA. I think you will see some fundamental changes in some of the things that are outliers, like the Cadillac tax. They will probably go after that aggressively because it is so meaningful to so many people. I do think there are some issues that can be addressed, and the law could be refined to make it more palatable for people across the board.


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