Visualizing the U.S. Healthcare Delivery System, Before, During, and After the Affordable Care Act

Before they act to repeal, replace, or repair the Affordable Care Act, the Trump administration and GOP legislators should understand how the U.S. healthcare system currently works.

This is what our healthcare delivery system looks like today:

U.S. Healthcare Delivery System Under ACA
Adapted from: E. Baranoff, D. Baranoff, T. Sager, and B. Shi, “What US Health Insurers’ Data Show for ACA ‘Repealers,’” The American Journal of Accountable Care (September 2016).

This is what it looked like before the ACA:

U.S. Healthcare Delivery System Before ACA
Adapted from: E. Baranoff, D. Baranoff, T. Sager, and B. Shi, “What US Health Insurers’ Data Show for ACA ‘Repealers,’” The American Journal of Accountable Care (September 2016).

And how it might look in the future:

post-aca

Notice what all three graphs have in common?

Health Insurers as Financial Intermediaries

Health insurers are at the center of the U.S. health care system, a position they are likely to maintain under any repeal/repair/replace scenario. Health insurance companies serve as the system’s financial intermediaries, meaning they act as the middlemen between those who seek healthcare and those who provide it. Money flows from consumers/patients/employers/governments to health care providers through health insurers.

Many people think the main role of health insurers is to act as gatekeepers to the health care system. Health insurance companies do manage access to health care services through their ability to approve or to disapprove payment for services (based on approval guidelines which may be dictated by private contracts or government regulation). But this secondary managed care role has grown out of the their primary role as financial intermediaries.

Health Insurance Markets

The U.S. health insurance marketplace is actually five different markets, each covering a different segment of the insured population.

In future blog posts we will delve into each of these segments in greater detail.

They are:

  • Group Health Insurance / Employer Coverage

  • Federal Employee Health Insurance

  • Individual Health Insurance (includes ACA Marketplaces)

  • Medicare

  • Medicaid

The first three markets (Group, Federal, and Individual) are administered almost entirely by health insurance companies (this includes third-party administrators of self-insured group plans). But health insurers can also act as intermediaries in the Medicare and Medicaid markets. While Medicare is considered a single payer system, Medicare beneficiaries can choose to be covered by a  Medicare Advantage plan (also called Medicare+Choice or Medicare Part C), with premiums paid by the Medicare Administration. Medicare Advantage plans are primarily managed-care plans, like HMOs and PPOs, administered by private health insurers. Medicaid beneficiaries may also receive coverage through managed care plans. Medicaid managed care providers (insurers) contract with state Medicaid agencies to provide care for a set amount per member per month, with the premiums covered jointly by the Federal and State governments.

State Regulation

In the U.S., insurance regulation is primarily the purview of the states. How the states came to regulate the insurance industry will have to be the subject of a future post. You can also see what we wrote about the subject way back in 2003. State insurance regulation includes licensing, financial oversight, consumer protection, and rate-regulation. Before the passage of the  Patient Protection and Affordable Care Act (PPACA) of 2010, aka the Affordable Care Act (ACA), aka Obamacare, the federal government had made limited headway into insurance regulation. Federal oversight of the insurance industry expanded with the passage of  PPACA, along with the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. But state governments still serve as the primary regulators of insurers operating in their states.

The consequences of state regulation are pretty obvious. Today, despite federal requirements for who and what services health insurers must cover, insurance companies still have to be licensed separately in every state where they operate. They cannot sell insurance across state lines (as some ACA replacement plans would like  to allow them to do). Under the ACA, some states set up their own  health insurance exchanges, while others (often for political reasons) chose to provide coverage through the federal marketplace. At this point we actually have four different types of ACA marketplaces (See below).

state-health-insurance-marketplace-types-healthreform2

How well each of these state insurance markets operate is similarly varied. The steep premium increases (cited repeatedly by House Speaker Paul Ryan), affect some states much more than others. Likewise, the number of insurers offering marketplace plans vary by state. Next, add Medicaid expansion (32 states participate as of Jan. 2017) to this kaleidoscope of coverage.

current-status-of-the-medicaid-expansion-decisions-healthreform

 

 

 

No, the new Texas insurance law does not require homeowners to file storm-related damage claims before September 1st

104679181-GettyImages-840260824.530x298

It started with an email, forwarded from a friend in Austin, containing the following:

EFFECTIVE FRIDAY, the laws governing insurance claims in Texas will change to your detriment. To take advantage of current law, which is more favorable to you the consumer, YOU MUST FILE YOUR CLAIM, IN WRITING, BY THURSDAY, AUGUST 31, regardless of whether your damage occurred before that date. That is, it does not matter if your DAMAGE occurred before the effective date. To take advantage of current law you must actually file a claim by Thursday. It must be (1) IN WRITING, and (2) SPECIFIC ABOUT WHAT DAMAGE YOU ARE CLAIMING OCCURRED.

Pretty soon we were seeing similar tweets and Facebook posts urging people whose homes were damaged by Hurricane Harvey to file insurance claims before September 1st when a new Texas law, HB 1774, goes into effect. The law does make it more difficult for homeowners to sue their insurance companies over weather-related damage claims, but it does not change the actual claims process.

As misinformation about the law spread we began to see panicky tweets about the impending deadline for filing claims, some implying that claims filed after September 1st might not be paid in a timely manner (or at all!).

tweet1

Yesterday we were contacted by a reporter at Snopes.com who was fact checking this story. Here is what he wrote:

Snopes

In the past 24 hours numerous other media outlets have also covered the new law. While most reported accurately, some of the headlines probably didn’t help the situation. For example, this headline from The Daily Beast:

DB head

The story itself is a reprint of a Texas Tribune article, which has a much less sensational headline.

Other good coverage appeared in the The Wall Street Journal :

WSJ

and on Vox.com which provided a useful “explainer” about the law.

vox

Our hometown paper, the Austin American Statesman did a fair job as well.

Statesman

UPDATE: The New York Times has now picked up the story too, and adds the following:

But the law does not affect most people in Texas whose property has been flooded. Only about 15 percent of homes in Harris County, which includes Houston, have flood insurance, according to an Insurance Information Institute survey.

Of the small number who have flood insurance, the vast majority bought it from the federal government’s National Flood Insurance Program, which is exempt from state laws. Neither the existing Texas penalty nor the new one applies to the federal program.

The law also exempts the Texas Windstorm Insurance Association, the state-run insurer of last resort for wind damage in coastal areas. So most homeowners in the flood zone can safely ignore the warnings, said State Senator Kelly Hancock, who sponsored an amendment to the law that lowers the penalty.

 

After the Flood: The Limits of Homeowners Insurance

Most of the homes currently underwater in the Houston area are probably not covered by flood insurance. Only around 15% of homes in Harris County (the county encompassing much of the metro Houston area) are in a designated flood zone. To get a mortgage on a property in a flood zone, homeowners have to purchase flood insurance from the National Flood Insurance Program.

FloodedHouse

Few who are not required to buy flood insurance do so. Many people wrongly assume their homeowners insurance policy covers flooding. It doesn’t. The standard homeowners insurance policy excludes flood damage. Wind damage is covered.

The standard homeowners policy most people purchase is the HO-3 or “Special form” policy, developed by the Insurance Services Office (ISO). It provides the minimal level of coverage required by mortgage providers. HO-3 is what is known as an “all risks” policy because it covers all perils not specifically excluded in the policy.

exclusions
From: ISO Sample Homeowners Special Form (HO-3)

water damage

You can download a sample of the entire form here.