News, Analysis, Trends, Management Innovations for
Clinical Laboratories and Pathology Groups

Hosted by Robert Michel

News, Analysis, Trends, Management Innovations for
Clinical Laboratories and Pathology Groups

Hosted by Robert Michel
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Healthcare Consumers Opting for Lowest Cost Plans on Obamacare Exchanges, Putting Additional Pressures on Marketplace Insurers

Price transparency trend is altering decision-making in many aspects of healthcare and providing lesson for medical laboratory executives

Medical laboratory executives are well aware that price transparency is an increasingly powerful trend in healthcare. Now, as consumers increasingly opt for lower-cost options when making healthcare decisions, the 2010 Affordable Care Act (ACA) provides a notable example of this new reality, with consumers making cost, not choice, their top concern when selecting health plans through the federal health insurance marketplace exchanges.

A recent New York Times article reported that millions of people purchasing insurance in ACA marketplaces are motivated by how little they can pay in premiums, not the size of the physician and hospital networks, or an insurer’s reputation.

This economic reality may help explain why cost containment is a focus of healthcare reform bills currently under discussion in Congress. Whether you agree or disagree with the American Health Care Act (HR1628), the Republican Party’s plan to repeal and replace the ACA, it should be viewed in this broader context: Healthcare consumers are avoiding higher-priced healthcare plans in droves, and millions of younger Americans are finding the cost of coverage a barrier to entry. This is the challenge facing politicians of both parties, whether they will admit it publicly or not.

Obamacare Enrollee Numbers Dropping

A 2015 report by the Office of the Assistant Secretary for Planning and Evaluation in the Department of Health and Human Services, found that “the premium is the most important factor in consumers’ decision-making when shopping for insurance.” In 2014, 64% of people shopping in the marketplaces choose the lowest cost or second lowest cost plan in their metal tier, while 48% did so in 2015.

Perhaps more significantly, millions of people fewer than expected have enrolled in Obamacare. A CNN Money report noted that 10.3-million people enrolled in an ACA marketplace as of mid-March 2017, down from the 12.2-million who signed up for coverage when enrollment ended on January 31.

Mark T. Bertolini (left), Chief Executive of Aetna, and Joseph R. Swedish (right), Anthem’s Chief Executive, testified before a House committee hearing last fall. Major insurers are struggling to find a business model that works in the marketplaces created by the federal healthcare law. (Caption and photo copyright: New York Times/Jacquelyn Martin/Associated Press.)

Those numbers fall short of recent federal government projections for Obamacare and are dramatically less than original estimates. A 2015 report from Congressional Budget Office (CBO) projected marketplace enrollment would increase to 15-million in 2017, before rising to between 18-million and 19-million people a year from 2018 to 2026.

Shortly after Congress passed the ACA, the CBO projected that by 2016, 32-million people would gain healthcare coverage overall.

As a New York Times article pointed out, not only are young and healthy people selecting the cheapest ACA marketplace plans, but also many are opting to risk tax penalties and go without healthcare coverage.

“The unexpected laser focus on price has contributed to hundreds of millions of dollars in losses among the country’s top insurers, as fewer healthy people than expected have signed up,” the New York Times article noted.

ACA Marketplace Unsustainable, Says Anthem Chief Executive

Healthy younger people were expected to join the ranks of the insured and provide an essential counter balance that would offset insurers’ cost of care for newly insured unhealthy people. That prediction also has failed to materialize, forcing major insurance companies to re-evaluate their role in the marketplace or to exit Obamacare completely.

“The marketplace has been and continues to be unsustainable,” stated Joseph R. Swedish, Chairman, President and Chief Executive of Anthem, a Blue Cross and Blue Shield company, in the New York Times article.

In a CNN Money article, Anthem announced it would not participate in Ohio’s Obamacare exchange in 2018 and added that it was evaluating its participation in all 14 states where it currently offers plans.

“A stable insurance market is dependent on products that create value for consumers through the broad spreading of risk and a known set of conditions upon which rates can be developed,” Anthem stated in a press statement. “Today, planning and pricing for ACA-compliant health plans has become increasingly difficult due to the shrinking individual market as well as continual changes in federal operations, rules, and guidance.”

Inaccurate CBO Predictions Impact Clinical Laboratories and Pathology Groups

Anthem is not the only large insurer losing money selling insurance in the marketplaces. Humana and Aetna also this year scaled back their involvement with Obamacare, with Aetna citing $430-million in losses selling insurance to individuals since January 2014.

“Providing affordable, high-quality healthcare options to consumers is not possible without a balanced risk pool,” Aetna Chairman and CEO Mark T. Bertolini declared in an Aetna statement.

How this plays out may matter a great deal to the nation’s clinical laboratories and anatomic pathology practices. As noted above, in 2010, at the time that the Affordable Care Act was passed, the Congressional Budget Office estimated that as many as 32-million additional people would have health insurance in 2016 because of the ACA. The reality is much different. Less than a third of that number have health insurance policies because of the Affordable Care Act.

Pathologists and medical laboratory managers may want to consider how wrong that 2010 CBO estimate of coverage was. If the CBO’s estimate could be off by 66% in 2016, how reliable are CBO estimates when the federal agency scores the various “repeal and replace” bills that Republicans have proposed during the current Congress?

—Andrea Downing Peck

Related Information:

Federal Subsidies for Health Insurance Coverage for People Under Age 65: 2016 to 2026

Cost, Not Choice, Is Top Concern of Health Insurance Customers

Health Plan Choice and Premiums in the 2016 Health Insurance Marketplace

CBO’s Analysis of the Major Health Care Legislation Enacted in March 2010

Obamacare Enrollment Slides to 10.3 Million

Anthem Statement on Individual Market Participation in Ohio

Aetna to Narrow Individual Public Exchange Participation

Kaiser Family Foundation Study Predicts Big Increases in Obamacare Premiums for 2017; However, Narrow Networks Often Exclude Clinical Laboratories and Other Providers

Accountable Care Act has reduced the number of uninsured, but has failed to deliver lower costs for most Americans or employers

More big increases are coming to Obamacare premiums during 2017. This is an important development and, depending on how the new Congress decides to address problems with the Affordable Care Act (ACA), the consequences can be either positive or negative for clinical laboratories and anatomic pathology groups.

Large increases in healthcare premiums can have a trickle-down effect on clinical laboratories and pathology groups since health insurers tend to reduce reimbursements to providers when they are in a financial squeeze. And while the November election puts the future of the ACA in doubt, a recently released Kaiser Family Foundation (KFF) study adds further evidence that Obamacare (colloquial for the ACA) has fallen short of its goal of reining in healthcare costs while simultaneously expanding healthcare coverage to millions of Americans.

The KFF study shows premiums in the ACA’s Health Insurance Marketplace will continue to increase in many regions in 2017. Researchers blame the higher price in part to the phasing out of the ACA’s reinsurance program and the unexpected losses many participating insurers have experienced. (more…)

Higher Enrollment in Medicare Advantage Plans Means that More Local Clinical Laboratories and Pathology Groups Lose Access to these Patients

Health insurers offering Medicare Advantage plans are narrowing their networks and favoring the national clinical lab companies over local medical labs and pathology groups

Enrollment in Medicare Advantage health plans is booming. This development is not auspicious for local medical laboratories, hospital lab outreach programs, and anatomic pathology groups because the private health insurers operating these plans typically prefer to contract with national lab companies while narrowing their lab networks.

The mathematics of this trend are simple. As Medicare Advantage enrollment increases, the proportion of patients covered by traditional Medicare Part B fee-for-service shrinks. The consequence is that local labs have fewer Medicare Part B patients to serve and are locked out of providing medical laboratory testing services to Medicare Advantage patients. (more…)

Fee-for-Service Payment to Phase Out in Five Years? That’s the Recommendation of National Commission on Physician Payment Reform

Commission issues 12 recommendations to enhance physician and patient satisfaction, while creating a financially sustainable healthcare system

How quickly will fee-for-service disappear as a primary source of reimbursement for clinical laboratories, pathologists, hospitals, and physicians? If the recommendation of one credible group of physicians has its way, fee-for-service reimbursement could disappear in as little as five years.

This recommendation was made by National Commission on Physician Payment Reform as part of a report it issued in May. In its press release, the commission issued a call “for eliminating stand-alone fee-for-service payment by the end of the decade.” The group urges a transition over five years to a blended payment system that will yield better results for both public and private payers, as well as patients.” (more…)

Government Wants Seniors with Medigap Policies to Pay More Out-of-Pocket, but Health Insurance Association Gives ‘Thumbs Down’ to the Idea

Raising the out-of-pocket costs for Medicare beneficiaries with Medigap  policies not likely to be favorable for medical laboratories

If federal officials have their way, Medicare beneficiaries with comprehensive Medigap polices are likely to pay a greater share of the cost of their medical care. The goal is to reduce use of unnecessary medical services and save Medicare money.

For clinical laboratories and anatomic pathology groups, this may not be a welcome development. That’s because any requirement for labs to collect more money directly from Medicare beneficiaries will raise the cost of billing and collections—even as medical laboratories also see a rise in bad debt from Medicare beneficiaries, who are not accustomed to paying any money out-of-pocket for most of their medical laboratory tests.

May Be Some Good News for Pathologists

However, there is some good news for pathologists and clinical laboratory managers in this story. A credible source has warned the federal government that increasing the Medicare beneficiary’s costs will not reduce unnecessary utilization of healthcare services. Nor will it save the Medicare program any money. In fact, such actions may have the opposite effect!


The government is considering requiring higher out-of-pocket cost sharing from the 9 million seniors with Medigap policies to cut down on use of unnecessary medical services. The National Association of Insurance Commissioners contend, however, that this would raise Medicare costs over time. (Graphic by Kaiser Health News)