Healthcare accessibility will become a major priority of the Biden Administration. High job losses due to the COVID-19 pandemic have had a direct impact on health coverage, with as many as 14 million Americans losing their insurance this year as the unemployment rate peaked at 14.7 per cent. To counter this and help people access healthcare, President-elect Biden has proposed expanding the Affordable Care Act (ACA), introducing a public option, and reducing the Medicare eligibility age.
But what will these approaches to improving healthcare accessibility mean for healthcare insurance companies (payers) and providers?
President-elect Biden’s published platform and team of healthcare advisors are clear indications that he will strengthen the ACA through increased premium assistance and more funding for ACA programs. If the ACA remains intact after the Supreme Court hearing on the case, we expect the following key changes:
Biden proposes basing subsidies on the cost of a “gold” plan with an 80 percent actuarial value, instead of the current determination on the cost of a “silver” plan with a 70 percent actuarial value. This means that a 40-year old making $50,000 would go from paying $522 per month for the second-lowest cost gold plan to paying $354 per month, a saving of $168 per month. Biden also aims to reduce the share of income that subsidized households would be expected to pay for their insurance, capping it at 8.5 percent for all Americans. These two changes are intended to make the ACA marketplace plans more attractive for consumers to buy a plan by reducing costs.
Additionally, Biden will also bring back administrative funding to ACA marketing and ACA’s navigators, which assist consumers in picking plans. This is meant to bolster consumer participation in the marketplace and stabilize insurance risk pools.
As Biden’s changes look to stabilize and strengthen the ACA marketplace, the subsidies would boost enrollment and lower premiums. This is an opportunity for payers to increase their participation in the marketplace.
They’ll need to assess their competition in individual marketplaces and determine which, if any, new state markets to enter. In markets where they already participate, payers would need to conduct financial analysis on benefit plans and profits to decide if they want to provide additional plan options. Taking these actions will be critical to gain market share in a stronger individual marketplace.
Providers can expect an uptick in seeing insured patients, whether through marketplace insurance coverage or Medicaid expansion plans. But revenue analysis will be essential to understand the overall financial impact based on the current payer mix of the patient profile.
Based on this analysis, providers will need to develop a strategy to successfully navigate shifting reimbursements. Large hospital systems would benefit from both an overall organization analysis and individual hospital analyses to determine where the greatest impact will be and what resource or operational changes are necessary. Meanwhile, small hospitals could analyze their market to determine how much of their local population would become eligible for the increased premium assistance. This would opportunities to grow revenue as a result of a greater private payer mix.
President-elect Biden campaigned for the creation of a public insurance option like Medicare for customers on the individual market. The public option would be available to those who lack insurance, those who purchase insurance through the exchanges, and low-income individuals in states that have not expanded Medicaid under the ACA. We expect the public option would be cheaper than private insurance, although private insurance costs could reduce due to competition from the public option.
However, this faces a considerable challenge to implementation as there needs to be enough support in Congress to get a public option approved. The Obama administration tried to add a public option in the ACA, but while the House passed a version of a public option, it didn’t make it through the Senate. We can expect to see a similar scenario to play out again , particularly if the Senate remains a Republican majority after the Georgia Senate run-off in January.
Private health insurers would face greater competition from a public option plan as it would cost less and would have massive negotiating power. So, private insurers would have real incentives to enhance their current product offering, building insurance plans that compete on price, service and quality. If private insurers are unable to compete effectively, the public option could draw substantial enrollment away from private plans.
Private insurers could also advocate for changes in legislation to help them compete, such as allowing bundling of health, life, casualty, disability and other products, as well as selling across state lines.
Providers would expect to see their payer mix change, with public payers increasing their share. But private insurers pay higher prices than the public option would for covered services – today, commercial insurers pay 2.4 times more than Medicare for hospital-based care, because Medicare imposes set fees through regulation.
Providers need to assess potential cuts in reimbursement, and what their participation in the public option would look like, such as if participation in the public option would be linked to participation in Medicare. Financial projections will be critical to understanding the revenue impact and developing a strategy to balance any reductions, such as offering new services or entering new markets.
One of the goals of Biden’s plan is to lower the age of eligibility for Medicare from 65- to 60-years-old. This would require an act of Congress but, if passed, would greatly expand the number of people eligible for both Medicare and Medicaid. The likelihood of this being passed depends on whether Senate Democrats can obtain control of the chamber because any change to the Medicare eligibility age will not garner much Republican support.
The lowering of the enrollment age for Medicare presents new opportunities for commercial payers as 20 million more people would become eligible. Many healthcare plans are already expanding heavily into Medicare Advantage, and any extension of Medicare to more beneficiaries could boost this.
Payers should take advantage of new rules that allow Medicare Advantage plans to offer more benefits to seniors. They would be wise to offer broader coverage of telehealth and address social determinants of health that provide low cost and $0 coverage of several different benefits. Private health plans could also attract consumers by offering more plans with monthly premiums as low as $0 within their service areas by designing a plan that balances benefit offerings with costs and capitation rates.
Medicare at 60-years-old could be a business opportunity for physicians and hospital systems. Whether this change adversely affects providers depends on their payer mix. Medicare traditionally pays a much lower rate than commercial plans, so providers with a lot of commercial payers for patients aged 60 to 65 could see reimbursement fall. However, providers that serve a high number of uninsured patients, and safety net hospitals, could benefit.
Bringing seniors onto Medicare sooner would also bring greater focus on preventative healthcare. Providers would be able to have an earlier age focus on clinical and population-based investments in preventative care for high-risk groups. Extending Medicare coverage would bring robust preventative coverage to those over 60 and help prevent expensive diseases and health interventions later in people’s lives.
Millions of Americans have lost their employer-based health insurance during the coronavirus pandemic, specifically 3.3 million non-elderly adults lost their employer-based health insurance, and 1.9 million became uninsured. As President-elect Biden takes office, healthcare accessibility and coverage will take center stage. We expect immediate actions to reinstate aspects of the ACA and bolster it. However, larger policies that impact coverage, such as increasing Medicare eligibility and the introduction of a public option, will be a slow burn as they go through legislative and governmental channels. Whatever aspects of President-elect Biden’s plans become a reality, however, there will be opportunities for healthcare providers and payers alike.
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