Since becoming law in 2014, the Affordable Care Act, better known as Obamacare, has dramatically changed the health care landscape in nearly every aspect — from the federal government to the smallest business. Proponents cite increased access as a sign of the law’s efficacy, while naysayers report rising costs for care, lost jobs and a rollback for employer-provided benefits as shortcomings. Either way, Colorado hospitals say their share of uncompensated costs — care they provide but do not get paid for — has dropped considerably.
Medicaid’s growing footprint
The ACA continues to expand Medicaid eligibility in several states, including Colorado. The result: a decrease in uncompensated care across the board, according to local officials.
“Because of the ACA, we’ve seen a shift in our payer mix overall,” said Patrick Ballard, vice president of finance at Penrose-St. Francis Health. “A lot of folks that would have been self-pay or charitable a year and a half ago have some form of insurance. They’re coming with something from the [Colorado Health Insurance Marketplace] or qualifying for Medicaid. We’ve seen an increase of 7 to 10 percent in our Medicaid volume [current fiscal year, June 2014-July 2015].”
Overall, Ballard said the system has seen about a 30 percent increase in Medicaid claims.
“From a volume perspective, Medicaid [users made up] 10 to 15 percent [of patients] before the ACA,” Ballard said. “That’s up to 25 to 30 percent, depending on the month. We’ve also seen a shift from inpatient care to more outpatient,” he said, adding, “Medicaid is more of an outpatient product.”
Ballard said, “Because of [Penrose-St. Francis Health Services’] faith-based platform, we’re less focused on that patient’s insurance provider and whether they come to the table with insurance or not.”
He said the ACA has increased access to care for many and, as such, “It’s been a benefit to the overall health of the community.”
Chris Tholan, vice president of financial policy for the Colorado Hospital Association, said the state has seen a drop of 35 to 40 percent in uncompensated care.
“There’s a very clear indication that’s because of the ACA,” Tholen said. “There was a very stable trend occurring through 2012 and 2013 and uncompensated care was in 2014, a very dramatic drop.”
A study released by the Colorado Hospital Association showed hospitals in states that expanded Medicaid under the ACA, including Colorado, “saw significantly more Medicaid patients and a related reduction in self-pay and charity care cases; whereas, hospitals in states that chose not to expand Medicaid experienced no changes outside normal variation in Medicaid volume or self-pay and charity-care cases.”
Dan Weaver, director of media relations and communications for University of Colorado Health, indicated those statistics are holding true for Memorial Health System. In an emailed statement, Weaver wrote: “Because our hospitals operate on fiscal years, we won’t have financial specifics until late this year — when we talk to Colorado Springs City Council,” adding, “UCHealth’s hospitals, including Memorial Hospital and Memorial Hospital North, have seen similar trends to what the CHA found: decreased numbers of uninsured patients, and very significant increases in Medicaid patients. I think it’s important to point out that Medicaid generally reimburses hospitals less than the cost of providing that care.”
Tholen said while Medicaid reimbursements are low, they do help offset the costs of charity care, which has dropped significantly.
According to the U.S. Department of Health and Human Services, national uncompensated care has been cut to the tune of billions of dollars.
“As a result of Marketplace coverage and Medicaid expansion, hospital uncompensated care costs have been reduced by an estimated $7.4 billion in 2014, compared to what they would have been in the absence of the coverage expansion,” the department’s website states, adding states supporting Medicaid expansion, (Colorado joined that list in 2014), “account for $5 billion, or 68 percent, of that reduction.”
Insurer hikes under review
By 2016, it is expected Connect for Health Colorado’s $177 million in federal funding will be exhausted, according to Healthinsurance.org, a consumer advocacy site. The state’s health insurance exchange, which will have to be self-sustaining once those funds are depleted, is expected to have a budget of $54 million for the 2016 fiscal year.
“Board members have noted that higher fees will be necessary in order to generate sufficient revenue,” the site states. “Currently, the fee is 1.4 percent of premiums, which is significantly lower than the fees charged by other exchanges with similar enrollment counts (generally 2.5 to 3.5 percent; in states that use Healthcare.gov, the fee is 3.5 percent),” according to Healthinsurance.org. “On May 10, Connect for Health Colorado recommended increasing that fee to at least 3.5 percent of premiums. They also recommended increasing the monthly individual market fee from $1.25 to $1.80 per policy (including off-exchange policies).”
The changes were approved by the exchange board of directors May 14 and fee increases go into effect in 2016.
“The new fees will be 3.5 percent of premiums for all plans sold through Connect for Health Colorado, and $1.80 per policy per month for all private plans in the state,” according to healthinsurance.org.
“Together, the two fee hikes are projected to increase revenue for Connect for Health Colorado by about $7.8 million,” the site states, adding $5.8 million of that would come from the increased fee on policies sold within the exchange, and the remaining $2 million would be generated by the additional fee on all policies sold in the private market in Colorado.
Regarding private market rate increases, Tholen said, while correlation doesn’t imply causation, the states seeing the biggest rate bumps are those that did not expand Medicaid.
“[Colorado hasn’t] seen large rate increases for 2016, but it’s still very preliminary,” Tholen said. “Many of the states seeing large increases are states that didn’t expand [Medicaid] — Texas, Florida, North Carolina.”
United Healthcare in Florida, for instance, has proposed an 18 percent increase to its rate, while Humana proposed a 30 percent rate increase in Texas.
According to a news release issued by the Colorado Division of Insurance, part of the Department of Regulatory Agencies, the DOI provided “preliminary information regarding the proposed rates submitted by health insurers for ACA plans for the 2016 plan year. The due date for 2016 ACA rate filings was May 29. Since then, DOI staff has been conducting initial reviews to check the filings for completeness, and to ensure that any confidential or proprietary information has been properly marked.”
The release indicates some states have seen large increases in proposed rates for 2016, and while some insurers in Colorado have requested lower rates, others “are looking to single-digit increases. Overall increases appear to be more than the average increases seen from 2014 to 2015, however these are just the premium rates requested by insurers, and are not the approved rates. Any requested rate has to be justified by the insurance carrier.”
Tom Abel, head of DOI’s Rates and Forms section for life, accident and health insurance, said in the release, “The proposed increases are likely due to a couple of reasons. It looks like the number and types of claims are impacting the rates, as well as medical inflation. It’s also the first time carriers have a full year’s business experience under the ACA.”
The rate review will be completed by the DOI in September.