Foundation Releases Study on Healthcare Waivers for Georgia

NEWS RELEASE
FOR IMMEDIATE RELEASE
May 28, 2019
Contact: Benita Dodd, Georgia Public Policy Foundation

benitadodd@georgiapolicy.org | (404) 256-4050 

Foundation Releases Study on Healthcare Waivers for Georgia
Researchers Find 1332 Waivers Improve Access, Affordability

Atlanta – The Georgia Public Policy Foundation has long advocated for market-oriented solutions to Georgia’s healthcare challenges. As one way of accomplishing this goal, the Foundation supports the use of a Section 1332 State Innovation Waiver under the Affordable Care Act (ACA). The Georgia General Assembly has authorized Gov. Brian Kemp to use this tool to pursue more flexibility in how Georgia administers certain aspects of the ACA.

The Foundation has been provided with a report by Anderson Economic Group (AEG), in conjunction with Wilson Partners, and is publishing the report today in the interests of furthering public discussion. This report, “Healthcare Innovations in Georgia: Two Recommendations,” illustrates one way Georgia might use a 1332 waiver to lower the cost of healthcare, empower more Georgians to purchase private insurance, restore the primacy of the doctor-patient relationship, and ultimately blaze a trail for other states to follow.

The AEG report recommends Georgia adopt two policy innovations:

  • A reinsurance program that would apply to all large insurers in the state and “reimburse accumulated claim costs that exceed a set threshold within a given year.” According to AEG, it would have the goal of “stabiliz(ing) rates for individual health insurance plans and provid(ing) greater financial certainty to health insurers and health insurance consumers.” AEG estimates a claims threshold of $50,000 per plan member would yield annual savings of more than $550 each for members of an individual-market plan, totaling more than $250 million in the first year.
  • A Georgia primary care access option, which would require large insurers to offer at least one plan that includes a direct primary care model. Plan members would select a primary care physician, who would receive a fixed monthly fee rather than the traditional fee-for-service model. Because direct primary care eliminates the need for physicians’ offices to track and code services and file for reimbursement by the insurer, the provider avoids large overhead costs for compliance. This arrangement allows physicians to have a profitable practice with a much smaller number of patients, which could make it a particularly effective option for rural Georgia. Assuming 5% of those eligible enroll in these plans, AEG estimates this option would lower premiums on the individual market by $42 per member in the first year, totaling almost $42 million. The savings would be larger for those who chose a plan with direct primary care benefits.

Click on this link to access the study.

“The Georgia Public Policy Foundation has been at the forefront of the conversation over how to fix Georgia’s healthcare market, ready to propose and promote innovative ideas,” said Kyle Wingfield, president of the Foundation.

“The AEG report outlines two possible options for Georgia. While there may be more policies the Kemp administration could pursue through a 1332 waiver, we find these proposals intriguing enough to place them in the public sphere for study and discussion by Georgia’s citizens, policymakers and lawmakers.”

The Foundation will host an informational call about the report for credentialed members of the news media with Kyle Wingfield, Patrick Anderson, Principal and CEO of AEG, and David Wilson of Wilson Partners on Tuesday, May 28, from 3:00-3:30 PM. For call-in information, please contact the Foundation’s vice president, Benita Dodd, at benitadodd@georgiapolicy.org or 404-256-4050.

About the Georgia Public Policy Foundation: Established in 1991, the Foundation is an independent, state-focused, nonprofit think tank that proposes market-oriented approaches to public policy to improve the lives of Georgians. Regular events include Leadership Breakfasts and Policy Briefing Luncheons. Follow us on Facebook at facebook.com/GeorgiaPolicy and on Twitter at twitter.com/gppf. The Foundation is ranked in the Global Go-To Think Tank Index among the “Best Independent Think Tanks.”

6 thoughts on “Foundation Releases Study on Healthcare Waivers for Georgia

  1. Under section 1332 State Innovation Waiver under the Affordable Care Act (ACA) the study recommends how the waiver can be beneficial to lower the cost of health insurance and encourage Georgians to purchase private insurance. One way that has been proposed is for major insurers to set a threshold for insurance claims up to a certain amount and anything above that within a given year will be reimbursed. The study estimates a threshold of 50,000 per plan member per year, which means that there would be a cut of $550 dollars per plan member or an estimated total of 250 million within the first year. To me, this sounds like it benefits the insurance companies more than the individual. I think that the threshold is extremely high, a typical person that is able to afford health insurance if not ill with a chronic disease will not reach 50,000 a year in claims. This solution does not cut the cost to consumers. The second proposal is to implement a system where insurers offer a direct primary care model. Consumers can pick a primary care doctor and pay a fixed monthly rate to cut down on administrative costs. The proposal claims to allow doctors to have a more profitable business with fewer patients. But I don’t understand why anyone would want to pay monthly for a doctor that you don’t see every month when you already pay for insurance every month. To me, that sounds like more money spent again on the consumer side and a larger profit margin for everyone else. I would much rather only pay when I see the doctor, I mean that only makes sense. I do not think that people should be forced or persuaded to purchase private insurance if it is not going to benefit them, this looks like another way that the state and the federal government can make more money but greenwash and say it for the greater good.

    1. Insurance is based on probabilities of events that require payouts. If everybody pays a small monthly amount, the insurance company builds a large asset as the months go by. If or when a payout is required, the insurance pays out of the asset it built up over the years.

      Reinsurance is an insurance company hired by another insurance company to pay only when claims reach some high threshold. So in this case, the insurance company obtains reinsurance to payout on claims that exceed 50,000. The insurance company can now charge lower monthly fees to the consumers since its risk is limited to 50,000.

      The other innovation — Direct Primary Care is an alternative to primary care payed by insurance claims. A DPC primary care physician is payed a small monthly subscription directly by the consumer, whereas traditionally, a primary care physician must submit a claim for insurance payout. The insurance claims process is a long, expensive, difficult and time consuming requiring armies in both the doctor\’s office and the insurance office to argue it out. DPC simply and neatly bypasses this expense. The consumer can combine DPC with less expensive high deductible type medical insurance or as is increasingly done, with a medical share organization.

      Both ideas are an innovative attempt to lower the cost of medical insurance for the consumer.

      1. Reinsurance does little to reduce either the number of events that require payouts or the total amount of payouts. It does spread risks more evenly, which can result in some cases net savings. But often a bit more is going on than just risk spreading.

        For example, in the Section 1332 waiver request submitted by Georgia, reinsurance is used to redistribute risk away from rural counties toward non-rural counties. This lowers premiums in rural counties and raises them in non-rural counties. It’s a subsidy scheme. Where you stand depends on where you sleep, or where you need to pick up votes.

        As for direct primary care, its advocates regularly push the envelope on exaggerating how huge the costs of insurance billing are. You can even find claims that puts the cost of administering insurance as high as 60% of overhead. What you cannot find is careful quantitative study that supports numbers anywhere near that high.

        What you CAN find is quantitatively detailed, peer reviewed academic research that indicates that a family practice’s billing and insurance costs are less than 15% of revenues. So eliminating insurance is not that big a deal. In fact, doesn’t that really suggest that direct primary care’s potential is limited to saving patients about 15% of their primary care costs.

        Well, in the AEG/Wilson study for which this webpage was created, the expert authors put direct primary care at 7% of all health care claims costs. 15% of 7% is a little over 1% of total health care costs that might be might be saved by moving to direct primary care.

        On the other hand, direct primary care can cost real money. DPC advocates make wild claims about how low cost direct primary care is. This very website has mentioned $40 a month, and the AEG/Wilson Partner’s study for which this webpage was created says $70 a month – with no indication where that number comes from.

        But if you look for quantitative, peer-reviewed work, what you’ll find is that even five years ago the average monthly payment to a direct primary provider was over $93 a month. https://www.jabfm.org/content/28/6/793. And that article was by a recognized leader of direct primary care movement, Dr Philip Askew.

        $93 a month is $1116 a year. If primary care is 7% of health care costs, and $1116 buys you all the primary care you need, your annual medical costs are about $16,000. If you insure for the other 93% of costs, and you are a person of average risk, you need to be covered for over $14,000. Your high deductible will be about $7500. The good news is that if Congress passes HR3708 you’ll be able to include the direct primary are fee in your deductible. The bad news is the policy will cost your 42 year old male self more than $3000 a year.

        So, that’s what you meant, right?

        1. Sorry for replying to my own post, but I need to make corrections. Let’s back up.

          Your DPC bill is $1116. An average cost for downstream claims per the AEG/Wilson Partners report would be $5583 even assuming that their 15% cost savings ASSUMPTION for DPC is correct. Notice they provided no support for that assumption.

          You may choose to handle that $5583 in value by your own preferred mix of deductible amount and a measure of insurance, but that is the amount of “actuarial value” you need to reach. AEG/WP report assumes people will cover it by insurance and the cost will be about $7000 in premiums (includes insurance company makeup, which is fortunately limited by the ACA’s medical loss ratio rules). You can reduce that with a high deductible. Fairly or not, the Affordable Care Act limited deductibles to about $8000. So your catastrophic policy is going to be about 8K deductible. That policy is going to cost your 42 year old male self more than $3000 a year.

  2. How exactly is a reinsurance plan ,that uses governmental leverage to send money into rural areas at the expense of other areas, a “market-oriented solution”? Market conditions make rural health care a tough proposition and maybe rural areas deserve govermental help. But governmental help is quite the opposite of a the kind of “market-oriented solution” GFFP claims to be for.

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