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Healthcare: An Unloved System

Headscratching, Counterintuitive, Revealing, Upbeat, and Frustrating Points About New Jersey’s Healthcare

By Julie Barker

The Affordable Care Act is 1,990 pages long. Passed in March of 2010, the ACA — or Obamacare, as it’s commonly called — was not just ambitious; it was systemic, imposing regulation on insurers, hospitals, medical practitioners, restaurants, tanning salons, pharmacies, the nation’s employers large and small, as well as on every taxpayer.

The law requires insurance companies to spend at least 80 percent of their premium dollars on health care or refund the difference. That’s a good deal for consumers, and already insurers have rebated more than $1 billion. Another benefit to the public, both insured and uninsured: Gradually, the government is prodding hospitals and doctors to shift from billing for each visit, procedure, and test to billing for quality outcomes.

Of course, not every aspect of the law has gained wide approval. And if it seems that the law changes annually, you’re right: Provisions will roll out for another six years. Also, there’s argument
about what insuring so many has cost. On the following pages, we look at the law’s impact on the wallets and well-being of New Jersey residents. Ready for some surprising insights? Here are five of them:

The Underinsured

INSIGHT #1 The best thing the ACA accomplished is to insure more than 400,000 previously uninsured New Jerseyans. But among the unintended consequences, a new class has been created, the “underinsured.”

The good news is that the ACA immediately helped two sets of people: The poorest of the poor who could not previously afford insurance, and those with health histories that insurers deemed too risky. The largest group of newly insured individuals comprises Medicaid recipients. Governor Chris Christie was one of the few Republican governors who exercisedthe option to accept the ACA provision that extended Medicaid coverage to people whose household income is less than 133 percent of the Federal poverty level. As of January 2015, new Medicaid recipients in New Jersey totaled 383,964.

But newly insured individuals had a severe shock in 2014- 2015, the first year of the ACA insurance marketplace. By selecting a plan based on low premium cost, many people with no prior knowledge of the ins and outs of co-pays and high deductibles found they couldn’t afford to use health care. Medical providers call these patients the underinsured. Individuals covered at work, too, are facing the high deductible dilemma. To deal with medical inflation’s effects on premiums, employers at renewal time are selecting plans with higher deductibles and/or co-pays. “Many businesses have also begun a ‘defined contribution’ method” of paying for employee benefits, says Joe Sensi, vice president employee benefits, Nottingham Insurance Agency. “[They’re] choosing a dollar amount the employer will pay instead of a percentage of the premium.” Thus, employees are picking up more and more of the cost of their insurance — and of their bills from doctors, hospitals, pharmacies, and laboratories. The framers of the ACA made compromises aplenty before the law went to Congress, where even more horse-trading occurred. And now a learning curve is hitting consumers and businesses hard.

Some providers describe a system going out of kilter, even as more people have the peace of mind that insurance can provide. There’s been a growth in use of urgent care facilities, says Laura Fabbro, who owns a Doctors Express Urgent Care Center franchise. She says self-pay patients “are looking for the most expeditious way to get better, see a provider, and move on.” The attitude she sees is, “ ‘I can’t take time off to see a doctor,’ or ‘I can’t have my child out of day care.’ ” The New Jersey Health Care Quality Institute describes itself as an independent, nonpartisan, multi-stakeholder advocate for health care quality in New Jersey. Linda Schwimmer, its president and CEO, says “about 85 percent of people who purchase on the Exchange in New Jersey are getting some level of subsidy to help them buy their plan. … But the way it’s now trending, there’s a great deal of cost shifting to employees and individuals and families.”

She believes that “some shifting of costs is probably good because it makes people more sensitive to spending and what they’re getting [when they’re] utilizing health care.… On the other hand, you don’t want to shift it so much that people don’t get the care and the medication that they need.” But how much can the average family afford to pay for health care? Robert Meehan, CEO of Health Republic Insurance,  says that 10 percent of a family’s adjusted gross income is pretty much the ceiling of what consumers can realistically spend, including premiums and out-of-pocket costs
like co-pays and deductibles.

Insurance Moves
INSIGHT #2 Insurers are dropping prices. 

Linda Schwimmer

“There’s a great deal of cost shifting to employees and individuals and families.” – Linda Schwimmer

The ACA introduced four levels of plans for health insurance: bronze, silver, gold, and platinum, and set cost sharing for each level. For example, a platinum plan will cover 90 percent of the typical health care expenses of a “standard” population, whereas a gold plan will cover 80 percent of those same costs, a silver plan will cover 70 percent, and a bronze plan will cover 60 percent. That leaves the insured individual to pick up the other 10 percent on a platinum plan or 40 percent on a bronze plan.

When insurers priced their products for 2016, they had usable data from the first full year of operating on the Exchange, New Jersey’s Health Care Marketplace. Some of the guesswork about risk was thus eliminated, and pricing is actually coming down.

Meehan says Health Republic Insurance has priced its 2016 plans about 10 to 20 percent lower than in 2015. “The starting costs in 2014 were probably too high,” he says. “I think we got better at what we do.” That said, Meehan contends that health insurance premiums in all markets will still exceed the annual increase in the Consumer Price Index because “the escalating cost of health care is an issue.”

Another change for insurers, says Ryan Petrizzi, vice president of consumer markets and product development at AmeriHealth New Jersey, is they are having “partnership conversations” with providers, moving away from “fee-for service- type conversations that you had traditionally.” The resulting agreements aim to bring costs down.

AmeriHealth New Jersey in 2013 created a suite of co-branded health plans with Cooper University Health Care, which featured tiered insurance networks (see Glossary, page 25) in three counties: Camden, Gloucester, and Burlington. The success of that product spurred AmeriHealth New Jersey to offer tiered plans in Atlantic and Cape May counties (with the Shore Medical Center and the Cape Regional Medical Center), and Monmouth and Ocean counties, with Meridian Health. Depending on the plan, member copays are as low as $10 when visiting their primary care physician.

This month Horizon Blue Cross Blue Shield of New Jersey is introducing a tiered plan, called OMNIA, which gives consumers access to 61 hospitals and 39,000 providers at about a 15 percent price reduction off the company’s other broad network plans. If the patient chooses a tier-one hospital (of which there are 34 in the state) or a tier-one provider (encompassing 24,000 doctors and other health care providers), the discounts are even better. Horizon’s strategy is to attract consumers who have gone without insurance by offering lower premiums and out-ofpocket savings when they use their benefits. The idea is to help keep people well and out of emergency rooms and curb the rate of chronic illness, both of which drive up costs. “This is our short- and long-term solution to driving health care costs down in New Jersey,” says Michael Considine, vice president for small group and consumer markets.

The product is available for businesses of all sizes and for the individual market. The premium is less expensive than Horizon’s standard silver plan (Advantage), and members choosing the OMNIA Silver plan and seeking care at Tier 1 doctors and hospitals will have no coinsurance and no deductible (except $500 for ER visits) for their medical care.

Click to enlarge the glossary

Click to enlarge the glossary

Mergers for Different Motives
INSIGHT #3 Consolidations and mergers aren’t expected to raise costs, say some experts.

Many a physician office, particularly a primary care/family medicine practice with two or three doctors, has closed, the physicians deciding to work for a hospital or a large medical practice rather than go it alone. The trend to consolidate has hit health care delivery systems of all types. A recent example involves Robert Wood Johnson Health System and Barnabas Health, which have agreed to merge, subject to the New Jersey AttorneyGeneral’s review. The resulting system will include 11 acute care hospitals and more than a dozen other facilities. Richard Freeman, CEO of RWJ University Hospital Hamilton, says the reason is the need to have a presence in multiple locations. Also, he adds, the hospital will be able to partner with insurance companies to offer patients broader technology, broader data collections, and broader research.” Hamilton has partnerships with about 90 percent of its physicians. They remain selfemployed, but with the merger,
“we can bring them access to partnerships with health insurance companies, manufacturers, research, and medical records,” says Freeman. In any discussion of mergers and small medical practices, the topic of medical records arises.

New Medicare rules require practitioners who administer to patients with that type of insurance to complete measurement programs that rely on Electronic Health Records. But many small offices have found the cost of implementing a new system as well as the training required to use it to be prohibitive. Beyond that, the shift from fee-for-service medicine to value-based medicine has created a need for sharing information on how well certain procedures work and how much a particular intervention can reduce hospital readmissions or can keep chronic conditions in check. Larry Downs, CEO of the Medical Society of New Jersey, a professional organization of physicians, says it’s a pursuit of data-informed quality medicine, in part, that drives consolidation. “In women’s health, oncology, and urology, we’re starting to see large specialty practices and alliances form where they can reduce variation in care and improve quality.”

Ryan Petrizzi

“The conversations that insurers and providers are having have changed. We’re having more of these partnership conversations.” – Ryan Petrizzi

So-called clinically integrated networks — like the one Capital Health Hospitals created, called LINC — let the hospital system and a group of doctors sign an agreement so they can work together legally without a partnership agreement, employment contract, or a buyout. For instance, LINC makes investments in data systems, so the physicians get resources to participate in the Medicare
Shared Savings Program. When either the doctor or the hospital pinpoints savings, Medicare shares half of the savings with the hospital, and Capital Health will share the savings with the LINC physician practice. “It’s not like we want to grab up all the primary care physicians [PCPs],” says David Dafilou, vice president and chief administrative officer of the clinically integrated network at Capital Health, where the PCP network is growing.

“We know we need PCPs in the community, and they’re telling us that it’s becoming difficult for them to make ends meet. They are looking for opportunities where they can simply be a doctor and
leave some of the administrative stuff to the hospital.” At the New Jersey Policy Perspective, which conducts research on policy issues, Senior Policy Analyst Ray Castro, Sr. says clinically integrated networks provide economies of scale, but the trend to consolidation can still result in higher prices for the public. “It depends on how it’s done. I think it’s way, way too early in New Jersey” to know how that will play out.

Schwimmer also cautions that it’s too early to see results, but says: “Traditionally in health care, bigger has meant more market power, which has meant increases in cost. But that was before the shift to shared savings.”

Patient Centeredness
INSIGHT #4 A combination of big data and low tech is transforming health care.

Whether it’s a co-pay or coinsurance or deductible, one way or the other patients are always reaching for their wallets today. If the health care system can reduce duplication of care or the number of times a patient lands back in the hospital with the same ailment, that will benefit the patient, his employer, and ultimately all patients with similar health care patterns. In an environment where
successful care and doctor reimbursement are intertwined, and where the patient can improve his health by simply checking his own weight or blood pressure, “you absolutely need to have data, and you need to have analysts, RNs, coaches, and ancillary providers who are helping the patient meet these goals,” says Capital Health’s Dafilou. “All of that costs money.”

Job titles like care coordinator and patient navigator are increasingly appearing in practices where a high number of patients have chronic care issues. Medina Community Clinic, for instance, employs a patient navigator at the Rescue Mission in Trenton to link a patient first with a PCP at the Henry J. Austin Health Center and then with a Medina Specialist who provides treatment in his or her own offices on a volunteer basis. Patient-centeredness, says Schwimmer, “is really low-tech, high human touch. Those simple interactions are hopefully going to make care a lot better for people and also have the nice side effect of reducing cost.” Not everyone believes the development will result in an affordable, high-quality health care system in this country. Terry Shlimbaum, head of Summit Medical Group’s primary care service line, says, “Although I love the model—I think it’s where we need to be—I’m not sure it’s going to translate into cost containment. And if it
doesn’t, then I don’t know what’s going to happen.” But he adds, “I’m optimistic that it will.”

Transformation Takes Time
INSIGHT #5 The biggest tests of the ACA are still to come.

Beginning in 2011, baby boomers began reaching the Medicare threshold at a rate of 8,000 per day. By 2014, there were 53.8 million beneficiaries, and the generational shift to seniors
will continue until 2029, testing every part of the system. Meanwhile, the ACA is facing its own tests. In two years’ time, the Federal government will reduce its funding of the state-run insurance marketplaces. “It’s really a question for New Jersey how they’re going to fund [their Exchange],” says Freeman.

And if a Republican wins the White House in 2016 and is supported by a Republican Congress, the ACA could be greatly weakened or invalidated by legislation — or another court challenge. The worst effect of the ACA, Schwimmer says, has been “the political polarization. Because health care has always been an emotionally charged issue and it’s always been contentious between doctors and hospitals or doctors and insurance companies… There were always disputes, but itwasn’t so partisan.”

The requirement that every American must have health insurance or pay a fine each year isn’t as straightforward as it sounds. For instance, small employers were able to keep offering the coverage they had for two years, but they must switch to providing an ACA-approved plan in October 2016.
Employers offering individual health plans worth more than $10,200 or family plans worth more than $27,500 will be subject in 2018 to a so-called Cadillac tax of 40 percent. (“More of the plan designs than people understand would be hit with the tax,” warns Michael Considine of Horizon BCBS.)

The Affordable Care Act is “an incredibly  complex law,” says Meehan of Health Republic Insurance. “I wish the law had concentrated more on trying to bring us together as Americans and trying to rationalize what it is we want in health care. What it really did was concentrate on the insurance markets and try to make the current plans more affordable to Americans — not necessarily a bad goal, but what it left off the table was questions like, ‘Where are we going?’ ”

It’s a valid question. New Jersey is fifth in the country in terms of what it spends per person on health care. Is that sustainable? Few would argue yes. But a transformation of that entire system is well underway.

Joe Sensi

(Click to enlarge) – Q&A with Joe Sensi, Vice President Employee Benefits, Nottingham Insurance Agency

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