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2017-07-28 / News

Uncertain market

Q&A on the impact of “repeal and replace” with Kurt Wrobel, Geisinger’s CFO and actuary
By r. brock pronko
Regional Business Analyst

Wrobel Wrobel On July 21, Pennsylvania Insurance Commissioner Teresa Miller announced the rate filings for 2018 individual market and small group plans. Insurers are seeking a statewide average increase of 8.8 percent for individual plans and 6.7 percent for small group plans. However, these rates could change depending on what happens with the Trump Administration and Congressional Republicans’ effort to “repeal and replace” the Affordable Care Act (ACA).

The anticipated 2018 rate hikes for the individual marketplace are considerably lower than last year when Pennsylvania insurers requested an average rate increase of 32.5 percent for individual marketplace plans and an average 7.1 percent increase for small group plans.

Companies have until the end of September to commit to participating in the ACA market for 2018. Due to the uncertainty surrounding the future of the ACA, Commissioner Miller stressed that the commitment to stability from the federal government is needed immediately.

“As it stands, our insurers are committed to the individual market and the population it serves, but they desperately need certainty from the federal government,” said Commissioner Miller.

“Congress and the Trump Administration should take ownership of their power in this situation and use it to help the millions of people in individual markets across the country rather than looking for another way to sabotage the Affordable Care Act.

“If Congress and the Trump Administration do not make a long-term commitment to insurers to preserve the rules that are currently in place, they alone will be responsible for raising prices for consumers and risking insurers exiting the market.”

To help unpack the lower rates and forecast the impact on insurance rates if the Senate’s Better Care Reconciliation Act of 2017 or something similar is passed, Pennsylvania Business Central spoke to Geisinger’s Chief Financial Officer and Actuary, Kurt Wrobel.

PBC: Why have Pennsylvania insurers asked for lower rates next year for the ACA market?

Wrobel: Last year, the Pennsylvania insurance department worked closely with the industry to more correctly link the premium rates with the actual risk of the insured population, so that has born out with the more modest increases we are seeing now statewide.

At the beginning of the ACA, a whole new population entered the health insurance market, which neither Geisinger Health Plan (GHP) nor other insurers in Pennsylvania had any experience with.

The risk corridor provision of the ACA held that if GHP’s pricing assumptions proved to be incorrect, we either had to pay into the program if we overcharged or receive funds from the program if we undercharged.

That provision turned out to be significantly underfunded and the new subscribers -- some of whom had never had health insurance before -- utilized health care provider services a lot more than insurers anticipated. Since insurers only received a fraction of what they expected to be paid as part of the program, they had to make up the difference by asking for steep rate hikes in the individual market last year.

PBC: The biggest objection to both the House and Senate “repeal and replace” bills heard from numerous healthcare organizations, from the AMA to the AARP, has been the steep cuts in Medicaid. What’s your take on the Medicaid cuts?

Wrobel: Medicaid has been a cost- effective program and has worked well for over 20 years in Pennsylvania. In fact, I started my career at a firm where we provided consulting to the state of Pennsylvania on the Medicaid program.

Defunding a policy and program that has worked so well is obviously a concern. The other concern is simply providing coordinated care to individuals, which we believe is important and Medicaid is a big part of allowing us to do that. So, we are certainly concerned about the Medicaid cuts being proposed.

PBC: The uncertainty surrounding the future of the ACA and President Trump’s and other Republican’s threats to “let it implode” has caused some insurers to withdraw from some counties, or in the case of national providers, from some states. For example, Fayette County in the southwestern Pennsylvania now only has one insurer. Has this uncertainty impacted the markets GHP serves?

Wrobel: We have not withdrawn from any markets. Our approach to the exchanges is that we’re very much in this for the long term. Just as a provider organization, we’ve been here over a hundred years, so when we look at these programs it’s not just in one cycle. We’re concerned about the long term and we are particularly concerned about the long-term health of the people of Pennsylvania.

When you approach it with that orientation, whatever comes out of Washington, we’re going to continue providing care to the people in our surrounding communities and we’re going to take that long-term approach just as we did with the exchanges.

PBC: Like the House bill, the Republicans’ “repeal and replace” Senate bill seems to have stalled due to internal disagreements. What do you think is the best way forward?

Wrobel: I think it’s important for us to get beyond the discussions on the financial side. That’s been the focus of both Republican bills. A lot of these more arcane insurance discussions they’re having in Washington are focused on finances and curtailing healthcare spending so they can get on to tax reform. It’s our hope at Geisinger that we can move on to why we’re really here, which is to provide cost-effective quality care to the people of Pennsylvania. So, we’re anxious to get the point where providing the best care possible becomes the main focus of healthcare reform rather than the year-to-year increases and other things such as cutting Medicaid, because that’s where the focus should be.

We first need to figure out how to best take care of our people and then we can figure out how to fund that care. To the extent where we can get some stability in the insurance market, which we’ve had this last year, we can again move in

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