The Fact of the Month
Here’s something to talk about when you are discussing plan design options with your clients.
People like to cite high insurance premiums and expensive prescription drug costs when talking about the rising cost of medical care in this country when really, hospitals are much more of a problem. According to a new Rand study, hospital spending represents 44 percent of privately insured people’s health expenses. Another recent study published in the journal Health Affairs shows that between “2007–14 hospital prices grew substantially faster than physician prices. For inpatient care, hospital prices grew 42 percent, while physician prices grew 18 percent. Similarly, for hospital-based outpatient care, hospital prices grew 25 percent, while physician prices grew 6 percent.
The Big Three
Each month GPAHU identifies three top public policy or legal developments that could impact our members and their clients. Here are this month’s big three!
Pennsylvania Health Insurance Exchange Leadership Announced
Earlier this month, the Wolf Administration announced the incoming leadership of the new Pennsylvania Health Insurance Exchange Authority. The Exchange Authority is the entity that will create, manage, and maintain Pennsylvania’s new state-based health insurance marketplace. The Authority’s Executive Director will be Zachary Sherman, who currently serves as the director of HealthSource Rhode Island. The Administration revealed the members of the Authority’s Board of Directors as well. Appointments to the Exchange Authority’s Advisory Council, which will include a representative appointed by the Pennsylvania Association of Health Underwriters will be forthcoming
The next step is for the Senate to take up the legislation. Senators Mike Rounds (R-SD) and Martin Heinrich (D-NM) have sponsored a companion bill with 61 co-sponsors, including Pennsylvania Senator Robert Casey. It is essential that Pennsylvania’s other Senator, Pat Toomey, knows about our organization’s support for the full repeal of the excise tax. So please click here to send him a message by utilizing NAHU’s Operation Shout platform.
Act 42, signed into law on July 2, 2019, requires the Commonwealth to set up this Authority and establish an online individual health insurance exchange marketplace operated by the state. The state-based exchange will allow consumers to enroll in coverage starting during open enrollment for 2021. The new law also requires the state to create a state reinsurance pool to backstop high individual market claims. The Commonwealth must apply for a federal Affordable Care Act (ACA) Section 1332 waiver to fund the program, and the Pennsylvania Department of Insurance will manage both the pool and that process.
Act 42 specifies that the governor will appoint four voting Exchange members, and one voting member each will be appointed by the speaker of the house, the house minority leader, the senate pro tempore, and the senate minority leader. In the future, all board appointments will be for a four-year term, but initially, terms are staggered.
- Paula Sunshine, Independence Blue Cross
- Sheryl Kashuba, UPMC Health Plan
- Tia Whitaker, Pennsylvania Association of Community Health Centers
- Antoinette Kraus, Pennsylvania Health Access Network
Speaker of the House Appointment:
- Mark Nave, Highmark
House Minority Leader Appointment:
- Jessica Brooks, Pittsburgh Business Group on Health
Senate Pro Tempore Appointment:
- Todd Shamash, Capital Blue Cross
Senate Minority Leader Appointment:
- Laval Miller-Wilson, Pennsylvania Health Law Project
The Exchange Authority board also includes the agency heads from the departments of health, human services, and insurance. These are:
- Dr. Rachel Levine, Department of Health, Secretary
- Teresa Miller, Department of Human Services, Secretary
- Jessica Altman, Pennsylvania Insurance Department, Commissioner
Surprise Billing Legislation – Moving in Harrisburg but Stalling in DC?
One of our association’s top policy priorities is “surprise billing legislation.” These measures protect people who go to an in-network healthcare facility but later receive an expensive medical bill from an out-of-network provider. Earlier this summer, it seemed like bills on this topic were moving quickly in both Harrisburg and Washington, DC. GPAHU legislative team members met with federal and state representatives in our area this summer to encourage expedient action. At the state level, that message seemed to get through, but Congress is another matter.
In Harrisburg, the House Insurance Committee made surprise billing legislation its top fall priority. They are holding stakeholder meetings to help advance this issue over the next few weeks. PAHU is participating by providing comments on draft language and representation through our lobbying firm, the Bravo Group. One concern is that some lawmakers crafting the state-level language favor an arbitration approach. This would be applied when providers object to being paid a median in-network rate for the services in question. PAHU and NAHU generally oppose this approach, as it is less efficient and can be more costly.
In Washington, lawmakers could link one of the many pieces of surprise billing legislation under consideration to a must-pass revenue bill. Unfortunately, right now, that course of action is looking less than likely. During the August recess, provider and hospital groups, and the equity companies that fund them launched a massive advertising and grassroots campaign questioning the structure of the bills under consideration. Those objecting to the legislation claim that insurers will set the price that is paid to providers, thereby lowering their revenue. Another potential obstacle is partisan electoral politics. Many high-ranking politicians on both sides of the aisle support surprise billing legislation, but just as many have raised concerns about potentially giving the other side a “win” in advance of a contentious election season.
GPAHU and PAHU will continue to work with our state and federal representatives on this issue. As opportunities come up for our chapter to advance this cause, GPAHU will be sure to keep our members informed.
A New Premium Tax Finances Delaware’s Reinsurance Pool
The same legislation that created Pennsylvania’s new state-based health insurance exchange also requires the Commonwealth to apply for a federal ACA Section 1332 waiver to create a state individual market reinsurance pool. Pennsylvania plans to fund its share of pool costs using fee money collected from the carriers who participate in the exchange. However, Pennsylvania is not the only state in our area that is in the process of creating a state-wide reinsurance pool to backstop high individual market claims. The state of Delaware was also recently approved to start one in 2020. Unlike Pennsylvania, our neighbors to the south will fund their pool with a new state premium tax on all fully-insured health insurance products.
The total cost of the Delaware reinsurance pool is projected to be almost $27 million. The state anticipates that they will ultimately receive $20 million in pass-through ACA funding from the federal government to pay for most of the pool’s costs. To pay for the pool claims initially, and to cover any shortfalls, the state established a new premium tax. The tax will increase the price of all fully-insured health insurance coverage sold in the state in 2020 on forward. However, once Delaware gets the pool up and running in 2020, projections show individual market health insurance premiums could be 14 percent lower than what they would have been without it.
Delaware modeled its new tax on the federal fee on fully insured coverage known as the HIT Tax. In the past, Congress has suspended the HIT tax for a year at a time. So, Delaware law specifies that in any year the federal tax is suspended, then Delaware will assess each health insurance company for 2.75 percent of premium revenue. When the federal HIT tax is in place, the state tax amount will be 1 percent of premiums. As of right now, the federal HIT tax is scheduled to be in effect again in 2020. That means Delaware business and individual consumers of fully-insured coverage will pay an additional 1 percent in premiums to cover the cost of catastrophic claims next year.
The other neighboring state with a reinsurance pool is New Jersey. Last year the Garden State used general revenue funds to pay for its share of pool costs. Once New Jersey begins to collect penalty fees from its state-specific individual mandate in 2020, they plan to direct the related revenue to the reinsurance pool.
Check This Out!
If you want to better understand how business leaders view healthcare and how it could influence your clients, check this out!
The Pennsylvania Chamber of Commerce has a monthly podcast called All Business. While the show is always informative, this month it is particularly relevant for GPAHU members. PA Chamber of Commerce Insurance’s Chief Operating Officer, Brian Orsinger, gives his insights on where health insurance for businesses is going, and his vision for PA Chamber Insurance’s continued and growing success. Click here to listen to this month’s episode.