Churning in Health Care Coverage 


by Don McCanne, M.D.


Think back to twenty years ago. Think of the health care coverage that you had then. Do you have the same coverage now? Unless you are over 85 and on Medicare, it is very unlikely that you do.


In 2008, when politicians were promising that with their health reform plan you could keep the coverage you have if you so desired, I wrote the following as an explanation of why that was unlikely:


You may have changed jobs, likely more than once, and lost the coverage that your prior employer provided. Your employer may have changed plans because of ever-increasing insurance premiums. Frequently your insurer introduces plan innovations such as larger deductibles, a change from fixed-dollar copayments to higher coinsurance percentages, tiering of your cost sharing for services and products, reduction in the benefits covered, dollar caps on payouts, and other innovations all designed to keep premiums competitive in a market of rapidly rising health care costs. You may have lost coverage when your age disqualified you from participating in your parents' plan. You may have found that health benefit programs have been declining as an incentive offered by new employers. Your children may have lost coverage under the Children's Health Insurance Program when your income, though modest, disqualified your family from the program. Your union may not have been able to negotiate the continuation of the high-quality coverage that you previously held. Your employer may have reduced or eliminated the retirement coverage that you were promised but not guaranteed. Your employer may have filed for bankruptcy without setting aside the legacy costs of their pensions and retiree health benefit programs. You may have decided to start your own small business and found that you could not qualify for coverage because of your medical history, even if relatively benign, or maybe your small business margins are so narrow that you can't afford the premiums. You may have been covered previously by a small business owner whose entire group plan was cancelled a renewal because one employee developed diabetes, or another became HIV infected. Your COBRA coverage may have lapsed and you found that the individual insurance market offered you no realistic options. You may have retired before Medicare eligibility, only to find that premiums were truly unaffordable or coverage was not even available because of preexisting medical problems.”(1)


Most of these possibilities remain, though two improvements are that insurers can no longer deny coverage because of preexisting conditions, and they can no longer place a cap on coverage. Other than that, what has the Affordable Care Act (ACA) introduced that would ensure greater stability of coverage? Unfortunately several measures in ACA will further reduce stability by increasing churning between various forms of coverage or even exposing individuals to gaps in coverage.


Very few people today have the same employment their entire careers. Most experience changes in employment, changes in income, and some will change their careers. The most stable coverage has been through employer-sponsored plans, but as explained above, there are many reasons that coverage through your work will change.


For those not covered through their employment, ACA offers options of Medicaid and CHIP for some lower-income individuals, and it offers private plans through the government marketplaces (exchanges). Eligibility is based on income and whether or not the employer is required to offer plans. Changes in income can cause churning between Medicaid and marketplace plans. Changes in employer responsibility can cause churning between their plans and Medicaid or marketplace plans. Family coverage may be split because of eligibility of the children for CHIP coverage.


Two major innovations in insurance coverage have created more serious adverse consequences of churning – high deductibles and narrow networks. Both of these allow insurers to offer more competitive premiums, but at the cost to patients of affordability and access.


Although Medicaid limits out-of-pocket costs for most participants, modest increases in income can disqualify individuals from Medicaid and bump them into a marketplace plan. The plans that most people select have very high deductibles. Although cost-sharing subsidies are available for lower-income individuals, they are not enough, and there are no cost-sharing subsidies for those with modest incomes (over 250% FPL). Thus income changes can expose patients to financial hardship simply because the deductibles in the plans that they are shifted to are too high.


The private insurance plans that participate in the marketplaces have narrowed their networks of physicians and hospitals in order to extract more price concessions from the providers that do participate. (2) The adverse impact of churning here is obvious. Whenever a person is required to change plans for whatever reason – income change, employment change, age change, etc. – a change in networks is also required. Since the networks are narrower now, the probability of having to change physicians or hospitals increases. This can result in loss of continuity of care through your primary care professionals, or, worse, it can disrupt ongoing care of chronic conditions such as malignancies, serious psychiatric disorders, or care of complex disorders provided by centers of excellence.


Employers are now following suit by increasing deductibles and by narrowing their provider networks. (3) Some are even turning their health benefit programs over to private insurance exchanges, using defined contribution vouchers - transferring to their employees the responsibility of paying for future inflationary increases in health care costs. (4)


A recent study by the UC Berkeley Labor Center predicts that in one year, one-fourth of California Medicaid beneficiaries will leave the program because of eligibility changes, and almost half will leave California’s ACA exchange. (5) Some of these individuals will move into other programs, but some will become uninsured.


ACA allows hardship exemptions, especially for people who clearly do not have enough funds to pay for their share of the plans. An astounding 24 million people will qualify for these exemptions – permission to remain uninsured without having to pay a fine. (6) Is that any way to treat the most vulnerable amongst us? Churning in and out of hardship exemptions is yet another perversity that ACA brings us.


Churning is inevitable in a model of health care financing that is fragmented between various private insurers and government programs, with varying eligibilities. If we had a single payer national health program – an improved version of Medicare that covered everyone – churning would not exist. It is too bad that our politicians and policymakers decided to cater to the interests of the private insurers rather than to meet the health care needs of the people.  Maybe after enough people experience financial hardship and impaired access to care, the public will be ready to advocate for an improved Medicare for all.


References:


1.  McCanne, D.  Now the Churning Begins, April 2, 2014, Quote of the Day

http://www.pnhp.org/news/2014/april/now-the-churning-begins


2.  Terhune, C. Insurers limiting doctors, hospitals in health insurance market, Los Angeles Times, September 14, 2013,

http://www.latimes.com/business/la-fi-insure-doctor-networks-20130915,0,6433104,full.story


3.  PwC Health Research Institute, Medical Cost Trend: Behind the Numbers 2014, June 2013.

http://www.pwc.com/en_US/us/health-industries/behind-the-numbers/assets/medical-cost-trend-behind-the-numbers-2014.pdf


4.  Aon, Employers Will Continue Sponsoring Health Benefits for Employees and Retirees, but Deliver Those Benefits in New Ways, February 19, 2014

http://aon.mediaroom.com/2014-02-19-Aon-Hewitt-Research-Employers-Will-Continue-Sponsoring-Health-Benefits-for-Employees-and-Retirees-but-Deliver-Those-Benefits-in-New-Ways


5.  Dietz, Miranda et al, The Ongoing Importance of Enrollment: Churn in Covered California and Medi-Cal, April 2014, UC Berkeley Labor Center,

http://laborcenter.berkeley.edu/healthcare/churn_enrollment.pdf


6.  Jost, T. Health Affairs Blog, October 16, 2013

http://healthaffairs.org/blog/2013/10/16/implementing-health-reform-the-state-of-the-exchanges-income-verification-and-more/


1,218 words


One-liner: Despite its promises, the ACA has increased volatility of health insurance coverage even as it reduces the value of coverage. 


Abstract: Although insurers can no longer deny coverage because of pre-existing conditions, the ACA has greatly decreased stability and value of coverage, with increasing churning of coverage in both private and public markets. This blog shows us many ways that we can lose or need to change coverage, ranging from changes in employer-sponsored coverage, insurers’ requirements, the exchanges, or Medicaid.