FOYperspective Healthcare Upheaval- 2017 Q1 Update

1. FOYper spective
Exper tise. Ser vice. T r u st.
PET ER C. FOY & ASSO CI AT ES
I N SU RAN CE SERVICES I N CO RPO RAT ED
Advisor s ? Br oker s ? Con su ltan ts
In T his Issue...
- T he Price is Right
- Gam e, Set, M atch
- Reform ed Feelings on
the ACA
- Final T houghts
H ealth car e Uph eaval
In another whirlwind couple of weeks in healthcare policy, a secretary of Health
and Human Services has been confirmed, another mega merger between insurers
was blocked in federal court, and surprising market reforms have been floated by
the Trump administration in an effort to stabilize the individual marketplaces.
T h e Pr ice is Righ t
While the rest of the nation slumbered in the early morning hours of Friday,
February 10th, the midnight oil was burning brightly in the nation?s capital. The
Senate, working deep into the night through Democratic protests of the Trump
administration?s cabinet appointees, confirmed Rep. Tom Price as the newest
secretary of Health and Human Services at 2:00 a.m. on a straight party line vote.
Secretary Price will soon consider the political blockades of his Senate
confirmation to be a pleasure cruise compared to his new task: to shepherd the
Trump administration through the complex work of keeping its campaign promise
of repealing the ACA, while also replacing the law with a practical, functional,
financially responsible, and politically palatable alternative plan.
Gam e, Set, M atch
The Justice Department?s antitrust division flexed its muscles once again in
February, as it succeeded in blocking the $48 billion merger between Anthem Blue
Cross-Blue Shield and Cigna in federal court. Judge Amy Berman Jackson found the
government?s antitrust case to be compelling, and ruled in favor of the blocking the
merger between the two insurers. Punctuating the ruling was the following:
?The evidence has also shown that the merger is likely to result in higher prices, and
that it will have other anticompetitive effects? It will eliminate the two firms?
vigorous competition against each other for national accounts, reduce the number of
national carriers available to respond to solicitations in the future, and diminish the
prospectsfor innovation in the market.?
One of the interesting aspects of this particular antitrust case has been the
acrimony and open hostility between the two merger partners. Over the course of
the antitrust case, it has been plain to many observers that the court case has
evolved from a fight against the antitrust suit to a fight between the two insurers
themselves. At stake in this sinking merger is a $1.85 billion dollar breakup fee that
Anthem had previously agreed to pay Cigna, should their merger fall through.
Anthem has stated that they intend to appeal the court ruling, and the upcoming
proceedings are sure to further amplify the infighting between the two parties as
they attempt to position themselves for the all but certain extended legal fight
over the breakup fee. It is believed that the appeal is not rooted in the merits of
Anthem?s case, but primarily as a stage setter for the coming legal fight over. Just
days after the Judge Jackson?s ruling, Cigna sued Anthem for $13 billion in
damages related to the failed merger. This ill-fated partnership seems destined to
be one of the great corporate merger failures of the new millennium.
March 2017
.

2. Exper tise. Ser vice. T r u st.
Br oker s ? Con su ltan ts ? Advisor sRef or m ed Feelin gs on th e ACA
In unexpected development, there have been reports of proposed modifications to the ACA that could be enacted in the
near term, prior to full-scale repeal and reform bill later this year. These potential modifications include:
1. Allowing the community rating 3:1 ratio to be expanded, to allow for higher prices for older insureds and lower
prices for younger enrollees. This change is expected to help insurers better attract younger, healthier
demographics, in an effort to make the risk pool healthier as a whole, and a closer representation of the nation?s
health risk profile.
2. Termination of exchange coverage after a 30 day grace period. Currently, customers have a 90 day grace period.
Tightening the window before coverage lapses is expected to significantly increase administrative efficiencies.
Additionally, the current practice of terminating coverage retroactively for insureds after 90 days of non-payment
leads to subsidy over-payments by the government, much administrative work for insurers, potentially significant
retroactive charge backs on medical claims to members, and large tax assessments for those who claimed credits
for periods in which there coverage had lapsed retroactively.
3. Tightening of the qualifications for the public exchanges?special enrollment period. Additionally, proof of the
qualifying event must be provided prior to the start of coverage, rather than after the start of coverage, as is the
current practice.
4. Shortening the length of the open enrollment period from three months to 45 days.
Insurers have long complained that the exchange marketplaces?regulations have been far too permissive, allowing for
members to receive months of care without paying premiums, proving eligibility, and even allowing savvy individuals to
navigate the system to sign up for coverage after getting sick, with little delay in care or penalty for previous
non-coverage. The hope is that the tighter administrative rules will prevent consumers from playing both ends against the
middle, waiting up to three months to sign up for medical coverage, then having a grace period of another three months to
utilize the coverage without paying premiums, and finally, eliminating permissive rules that have allowed consumers to
fairly easily jump in and out of coverage, without the requirement to prove that the qualifying event for coverage was in
fact legitimate until well after the coverage has begun.
These potential tweaks are designed to help stabilize the public exchange marketplaces, so that their behavior becomes
more predictable, and the exchanges become a more rational marketplace and ultimately more dependable for insurers
who have been hesitant to commit to making participation in the marketplaces a part of their long term business plans.
Time will tell if such changes, while scoring points with underwriters everywhere, may in fact contribute to the instability
of the marketplace, given that these changes will likely be temporary, and they will be rewritten by the new rules created
through the wholesale reform of the ACA, now expected to come later in 2017.
Fin al T h ou gh ts
The difficulties that lie within our healthcare system are widespread and deeply complex. The answers to these questions,
as Democrats and Republicans alike understand, are difficult to discern, and subject to immense political pressure and
many inherently conflicting interests between insurers, hospital systems, drug companies, and other interest groups.
Albert Einstein, known for a few good ideas in his own right, had this to say about seemingly impossible obstacles:
?We can?t solve problemsby using the same kind of thinking we used when we created them.?
? Albert Einstein
In a time where great change in our healthcare system is all but certain, let us hope that our nation?s leaders can work
together to find some new solutions to the cost and access problems that continue to plague our healthcare system in the
post-ACA era.
Best regards,
Jared Foy
Director of Compliance
Peter C. Foy & Associates
818-703-8057
jared@pcfoy.com
FOYperspective March 2017
PET ER C. FOY & ASSO CI AT ES
Advisor s ? Br oker s ? Con su ltan tsFOY