The Dreaded Strike Three for Obamacare: Corrupted Exchange Data and Inaccurate Insurance Policies

While the prescient Disease Management Care Blog was among the earliest to identify the threat of an Obamacare-induced insurance "death spiral," it missed spotting the potential fallout from a delay of the individual mandate.

As shrewdly pointed out in this Politico article, health insurance timelines require at least three months of claims experience to inform future rate setting.  Once that actuarial work is done, it then has to go through the states' Insurance Departments for approval.

In other words, if large numbers of Obamacare customers are allowed to sign up after March 31, 2015, insurance companies won't know what to charge their customers on January 1, 2015. 

While overcharging can be remedied by customer rebates, it remains to be seen how accommodating Washington DC will be if the insurers undercharge. That means negative cash flows, raiding surpluses and facing the ire of their investors and Boards of Directors.

It's baseball season, so think of the death spiral as a potential strike one, and inaccurate rate setting as a potential strike two.

Which brings the DMCB to a dreaded strike three. If it happens, the health reform brand could be irretrievably tarnished.  It could also and sink the current version of Obamacare.

Strike three would be a critical mass of inaccurate insurance policies.

If reports like this and this are even remotely representative of the back-end of Obamacare enrollment, the relative trickle of individuals who are successfully navigating the exchanges are getting commercial polices that depend on a very vulnerable reconciliation process involving many moving parts.  That includes information from the "hub" as well as user-based data entry. As noted in this report, commercial insurers are being forced to manually "clean up" the information prior to issuing their exchange-generated policies.

The DMCB suspects that a "garbage in, garbage out" adage may apply. Thanks to sheer number of inputs, clean-up mistakes are going to be inevitable.  And it will get a whole lot worse if the healthcare.gov web site gets only partially fixed. 

While a few mistakes are acceptable in large risk pools, more than a few could be huge problem at three levels:

1. At a business level, where a core competency of insurance companies is to cover their enrollees and only their enrollees. Insurance companies are really good at knowing who is and who isn't insured for a covered or non-covered service with or without a variety of co-insurance arrangements.  It's more than just getting it right, it goes to the core of their business model. If enough policies are inaccurate, it could bring the finances of some smaller health insurers to their knees.

2. At national health policy-making level, where a critical mass of insured customers with premiums and subsidies mismatched to the risk could destabilize the market and distract our political leaders. Think about the customers who assume a service is covered, providers who expect to get paid accurately, balance sheets that don't reflect the truth about claims expense as well as IBNR and regulators who will need to sort it all out.

3. At an Obamacare "brand" level.  Think about all those unfriendly and anecdotal news reports about vulnerable patients who ended up legitimately - if mistakenly - paying more out of pocket for care, or persons mysteriously lacking insurance, or hospitals and doctors being unable to get paid. It could ultimately track back to the HealthCare.gov web site that everyone will loves to hate.

The worst part is that the White House has done such a masterful job of bullying the insurers that it's unlikely that they'll want to rock the boat by going public with any notification that their enrollment data is corrupted.  Mr. Obama will naturally claim that he wasn't in the loop and his loyal aides will deflect blame elsewhere.

Strike three, and we may not even see it coming.

Bullying Health Insurance Actuaries

"Gotcha!"

Years ago, the Disease Management Care Blog proudly showed the consulting health insurance actuaries published data like these and these. It naively expected the actuaries to agree that disease management had resulted in cost reductions and that the programs should be favorably factored into the managed care insurance plan's premium pricing for the coming year.

The response of the actuaries was "no."

Disease management not only did not factor into their trend analysis, they decreed that the programs' costs needed to be loaded as an additional administrative cost. The worst part of dealing with their obstreperous math was that the health insurance plan was actually paying them to deliver this bad news.

Which is why the DMCB believes that anyone who believes that actuaries' relationships with health insurers are riddled with conflicts of interest is amateurishly misinformed.  To wit, Senator Franken (D-MN) recently scored a political "gotcha"against the Society of Actuaries when they had the temerity to predict that health insurance costs in the individual market could go up by 32%. While it is true that their consulting services generate fees that are paid by their insurers, their hard-nosed recommendations are hardly ever welcome in the industry, their fees are not linked to health plan profitability, states have regulated actuarial consulting input for decades and, to add insult to injury, customers like the DMCB have to pay their fees for unwanted news.

At one level, the DMCB welcomes members of the U.S. Congress to its world.  The job of the independent actuaries is to present inconvenient truths about future health care trends and premium pricing.  At another level, the DMCB is concerned that Frankenesque-style bluster and bullying could force health insurance actuaries to underprice insurance and destabilize the market just when Obamacare is getting out of the blocks.  We deserve better.

The Fight Over Community Care of North Carolina's Claims of Savings Continue

Nothing like academic fisticuffs to capture the Disease Management Care Blog's interest. The well timed punch that exposes a methodologic weakness.  The counter punch that quotes past research.  The bob and weave of spin and framing.  Misquoting blows below the belt. Statistical pokes in the eye.  The DMCB says it's better than foreign politicians brawling, Kill Bill sword fights and lurid professional wrestling.

Which is why it's enjoying a big dust-up over the Community Care of North Carolina's medical home initiative in the "Letters to the Editor" section of the January 2015 issue of American Journal of Managed Care (AJMC).

Regular readers may recall this early 2009 DMCB alert about the CCNC's actuarially derived claims of savings with its medical home.  Al Lewis of the Disease Management Purchasing Consortium eventually caught-up the the DMCB with his own three-fold roundhouse of a punch directed at CCNC that was published in August 2015 AJMC:

1. Claims of $250 million in avoided hospitalization costs on a baseline 2006 cost of $114 million is very unlikely,

2. Outside data indicate that Medicaid admissions in the state only fell from 36 to 34 per thousand, which also makes any claim of hundreds of millions in savings suspect, and

3. Two neighboring states without a medical home initiative experienced the same modest declines in hospitalizations without the same savings.

Well, the actuaries involved in the original Community Care report have jabbed back:

1. The baseline that was used was an actuarial projection of what costs would have been, based on prior trends, not 2006

2. The observed savings were never ascribed to avoided hospitalizations

3. The medical home initiative had been in place for many years, which could explain its impact.

The CEO of Community Care also penned his own counter-strike.  He argues:

"Evaluating complex programs is a difficult and evolving science, but [the] approach to estimating CCNC’s impact is reasonable, measured, and up to the latest standards in the field. Its analysis plays by the same actuarial rules as everyone else—including disease management vendors calculating a return on investment and insurance companies setting rates."

.The rest of the letter uses terms like "disturbing," "facile" "erroneous" "mistakes" "misrepresents" "circular references." Ouch.

The DMCB fully expects the spat to continue and looks forward to enjoying its ringside seat.  In the meantime, it's sticking to it's original point from more than 3 years ago: the CCNC analysis was an opaque actuarial analysis that was never subjected to the scrutiny (and editing) from independent peer review.  If it had been, the reviewers would have spotted many of Mr. Lewis' concerns and forced the authors to be more transparent with their methods.

Lesson learned.