In a football game I was watching on TV this season a coach decided to forgo an easy field goal which would have given his team the lead and go for a first down on a fourth and two yards to go. The announcer declared: “This is a bad decision even if they make the first down. If they fail they lose the game, if they make it they still have to find a way to score.” The team made the first down, fumbled the ball on the next play and lost the game.
Georgia’s apparent decision to suspend any planning to implement the Affordable Care Act resembles that coach’s decision. State leaders are betting that the Supreme Court will declare the entire Act unconstitutional this summer. If they are wrong the consequences may be more than a lack of control over the state’s health system. It may be both a reduction in access to care and increase in costs. If they are right then the issues confronting Georgia’s health care remain: a declining employment-based health insurance particularly among small and medium sized employers, an increasing number of Georgian’s uninsured or on Medicaid, and a continuing decline in the health of Georgian’s.
While state planning for implementation of the Affordable Care Act requires decisions on a myriad of issues that will affect care for all Georgian’s lets focus on risk adjustment for health insurance carriers as an illustration of the impact of a lack of state planning. The ACA requires a carrier pools together all plans they sold to small groups in Georgia, inside an insurance exchange or outside. The carriers entire small group book of business is then assessed for their average risk. Insurers with better risks (healthier enrollees) will give up some of their premiums to those carriers with a poor risk pool. There is a separate pooling and risk adjustment mechanism for the individual market.
For states who choose not to set up their own exchange and instead opt for a federal exchange, risk adjustment for small group and individual plans within and outside the exchange will be conducted by HHS using the federal methodology which has not yet been released.
For 2014, carriers will need to establish rates for each market (in- and outside the exchange, individual and small group) assuming that they attract an average risk pool. Their actuaries will be using their historic costs, factoring in the impact of ACA on both trend and enrollment, and obviously there will be a great deal of uncertainty. That uncertainty may cause actuaries to be very conservative, and thus push rates higher.
In addition to all of these risks, carriers will have to submit data to an all payers data base in order for HHS to do the risk adjustment. Since risk adjustment will occur across plans at the state level, the comparison of enrollment requires a common data set for Georgia plans. There is no experience in validating the data across payers in Georgia, meaning that there is a great deal of uncertainty about how the risk adjustment methodology will work when applied across carriers in Georgia. This additional layer of uncertainty is likely to lead to even higher premiums in Georgia.
The federal risk adjustment methodology will be released in October of 2012 with only a 30 day comment window on that model. Georgia carriers have an incentive to have a ‘dry run’ of how the model will impact their bottom line in time to make comments within that 30 day window.
In the planning process the state could create an all payers claims data base to use to test the federal methodology and to ensure that all carriers are capturing and reporting comparable data fields. The increase in information on both the process and outcomes of the risk adjustment process would reduce uncertainty and costs to insurers and consumers.
So one possible outcome is that the absence of a planning process means that on January 1, 2014 we are likely to see the Affordable Care Act implemented from a “cold start.” The result will be higher costs and more disruption in the financing and delivery of health care services. The other possibility is that ACA will be declared unconstitutional. In that case the state will still be faced with increasing costs to the state, and declining access to care for Georgians. Planning would have to begin to confront those issues.
Author’s Note: Pat Ketsche, Ph.D. contributed to this piece, although all errors and opinions expressed should be attributed to the author.