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Mississippi: Why Not Try Bryantcare?

Phil Bryant holds the fate of more than half a million Mississippians in the palm of his hands as key health care policy decisions hang in the balance. He is the Governor of the great state of Mississippi and has the power to make two major decisions. #1 – Expand Medicaid up to 138% of the federal poverty level. #2 – Decide whether or not to build a state-based Health Insurance Marketplace or leave it up to the Federal government. Both decisions weigh heavily on the future of access to affordable health coverage for the people of Mississippi.

Mississippi Blues: There are more than 2.9 million people in Mississippi and roughly 18% lack health coverage. Of the 530,000 uninsured Mississippians, half are Caucasian, 45% are African-American, and Hispanics represent the remaining 5%. However, African-Americans and to a lesser degree, Hispanics are disproportionately more uninsured as they represent only 37% and 2% of the state population respectively. The lack of health coverage has been a byproduct of many other socioeconomic issues. For example, people who lack health insurance tend to be less educated, earn less income, and either do not work or work for an employer that does not offer insurance. Mississippi is no different. Poverty rates exceed the national average (21% vs. 8%). A higher percentage of Mississippians receive SNAP benefits (15% vs. 8%). 50% of the uninsured population make less than $15,000/year. 91% of those uninsured have a high school level education or less. Lastly, 57% of the uninsured have at least 1 member of their household working.

The Party of “No”: Despite these statistics, as of August 2013, Governor Bryant has opted against enacting both policies; to no surprise. Republican opposition to Obama’s Patient Protection and Affordable Care Act (PPACA) started even before the bill was signed into law back in March 2010. Detractors of the law, like Bryant, suggest a range of arguments ranging from (1) public disapproval, (2) over-reach of the federal government, (3) the expansion of entitlements during a time of fiscal crisis, and (4) the lack of economic sustainability and unintended consequences of the law. All arguments hold good merit and should be discussed, explored, and researched. Here is an attempt to go beyond the Republican rhetoric and find comprehensive solutions to the many issues facing the implementation of the health care reform law in the various Red States across the country.

Argument #1 – Public Disapproval: The term “Obamacare” solicits negative feedback from most residents living in a Red state. Mississippi is not any different. Bryant has been vocal in his opposition of health care reform and his opposition actual reflects his constituents.

Response: 50% of the uninsured in Mississippi would benefit from the Medicaid expansion. The other 50% would largely benefit from lower cost plans sold through the Health Insurance Marketplace that Mississippi also decided not to run at a state level. Additionally, despite the public disapproval, the Mississippi Insurance Commissioner, Mike Chaney, has been a catalyst for trying to carry out the law the best way possible for Mississippians. Politico recently referenced him stating, “No other Republican insurance commissioner has pushed harder for a state-run exchange than Chaney has.” By no means does Chaney agree with Obama’s law, however he correctly states, “but it is the law whether I like it or not, and my job is to enforce the law.” Other Republicans should come to grips with this reality and quickly follow suit.

So why not expand Medicaid and launch a state-based Health Insurance Marketplace? Call it “Bryantcare” or “Mississippi-care” and use new branding and a new logo similar to your Red state neighbor, Arkansas. I know Governor Mike Beebe is a Democrat, but his constituents are not. He was able to sell health care reform to many of them. Similarly, you can spin it as making health care reform work locally; built by Mississippians, for Mississippians. Push the legislation as a right-leaning initiative since the majority of the components of health care reform were technically first implemented by “Mr. Romneycare” himself, Mitt Romney; the former Republican Presidential nominee. Your Insurance Commissioner, Chaney, has already received a letter from the Department of Health and Human Services declining his request to create his own state-based Health Insurance Marketplace on February 8th of this year. But his second request to run a marketplace that only concentrates on small businesses was recently resubmitted. The Obama administration should seize the moment of a Republican acting in good faith and approve Chaney’s latest request.

Argument #2 – Building a Sustainable Model: Many believe health care reform is far too over-reaching and will cost the country more than the CBO estimates. This would place an unsustainable financial burden upon the American taxpayer. While these concerns are real, one may question Governor Bryant’s concerns at the state level. Bryant’s website correctly explains that the total cost to implement health care reform in Mississippi is more than $1.6 billion over 7 years. He also correctly highlights that the talking point from the White House that the Federal government will pick up the tab for all new Medicaid enrollees is not 100% accurate. Mississippi would still be responsible for the incremental administrative costs of the new enrollees and by adding a projected 400,000 individuals to Medicaid would increase administrative costs to $81 million for the first three years of Medicaid expansion.

Response: However, quantify these numbers and figures against doing absolutely nothing. Today, there is roughly a 25/75 split between state and federal funds that pay for the Medicaid program in Mississippi. Compare that to states which much higher Medicaid costs and enrollment. For example, in New York the split is essentially 50/50 with a much bigger financial burden on the state tax payer. If Mississippi were to expand Medicaid, this would decrease the percentage of funds from the state to an almost 20/80 split. Additionally, while Federal funds would increase by 33%, it is projected to only increase by 8% for the state. Mississippi also spends money on residents whether they have health coverage or not. Uncompensated care would fall by roughly $400 million over a 10 year period from 2013-2022 based on a Kaiser study by providing coverage to the uninsured now.

Argument #3 – Creating more entitlement programs: The last big worry is that health care reform is yet another entitlement program that can act as a magnet for a state attracting a disproportionate share of people that will use social warfare programs. Additionally, once an entitlement program is in place, it is political suicide to ever try to remove or improve it, regardless of its failures. These fears lead Republic governors to err on the side of caution when big sweeping legislation is passed at the Federal level. It is much easier to argue for people to assume personal responsibility for their health and wellbeing.

Response: Explain to Mississippians that it is impossible to have personal responsibility for their health coverage when they cannot buy it on their own. 84% of the uninsured is aged 18-64 and the eligibility requirements for Medicaid are too strict in Mississippi to allow them to enroll. By expand Medicaid and launching a state-based Health Insurance Marketplace Governor Bryant could actually hold Mississippians accountable for buying coverage. Many residents of the state will face penalties of $95 or 1% of their salary (whichever one is greater) in 2014 if they do not buy coverage.

Additionally, the amount of employees receiving health care from their job trails the natural average by 6% in Mississippi (43% vs. 49%). Say, Mississippi matched the national average. An additional 177,000 people would gain coverage lowering the uninsured rate in the state to 13%; a rate actually lower levels than the national uninsured rate.

However, over a ten-year span (2000-2010), the offer rates of health coverage by employers has decreased by 12% leaving 280,000 Mississippians looking for coverage through other means. In fact, 121,000 Mississippian are eligible for Medicaid today and just have not enrolled. If that population were to enroll, the uninsured rate in the state would decrease to 14%; again below the national average. Lastly, 57% of the uninsured Mississippians in the state have at least 1 member of the household in the labor force and working. So at the end of the day, the people eligible for this “new entitlement program” are not freeloaders or lazy. While there may be some rotten apples, it does not characterize the bunch. These are hardworking Americans looking for some help. The number one reason people are uninsured is due to cost.

In Closing: In a letter to Congressman Paul Ryan, the CBO estimated that the repeal of health care reform would actually do more detriment to the country in terms of debt and deficits than help. Specifically, repealing the law would result in an increase in budget deficits of $109 billion over a ten year period. It goes on to conclude that $1.2 Trillion in savings by repealing the insurance coverage provisions of the law would be offset by 1.3 trillion in costs by repealing the other provisions of the law. Under those circumstances, one could argue the biggest entitlement program would be the billions of dollars spent in uncompensated care when all those newly insured Americans lose their coverage if a full repeal of the law ever went into effect.

An Exchange by any other Name…

In Shakespeare’s play Romeo and Juliet, Juliet surmises that, “Romeo would, were he not Romeo call’d, retain that dear perfection which he owes without that title.” So in the same sense would not Health Exchanges by any other name still be just as confusing?

“’Tis but thy name that is my enemy”
A recent survey conducted by the Research Intelligence Group found that less than half of those eligible for lower cost health care through these upcoming Health Exchanges actually knew about it. Another survey found the number to be as high as two-thirds. Some of the confusion around Health Exchanges can be attributed to negative views about health care reform in general. A Gallup poll released in July found that 52% of Americans disapproved of the Affordable Care Act (ACA). A Kaiser Family Foundation Health Tracking Poll found similar results, however noted that about 18% of those with an unfavorable view believe the ACA did not go far enough. The remaining 80% of those with an unfavorable view believe the law goes too far and is overreaching. The Kaiser poll also found that despite the negative attitude towards the ACA, when called “Obamacare” the favorable ratings increase by 7%. This is roughly the same percentage as those who believed the ACA does not go far enough, highlighting the deep partisan divide among supporters and detractors of the law.

“O, be some other name!”
The lack of awareness and understanding of Health Exchanges can also be attributed to confusion about what to call them. In January, the Department of Health and Human Services began calling Health Exchanges “Health Insurance Marketplaces”. According to a GAO report the Federal government will run these Marketplaces in thirty-four states nationwide using the same name, look, and feel (www.healthcare.gov). However, there are 17 other states that have received letters from CMS granting conditional approval to run their own state-based exchanges. These health exchanges do not necessarily have to be called “Health Insurance Marketplaces” and in many instances will not use that nomenclature or the branding as the Federal website. For example, the state of California spent $900,000 to contract with Ogilvy Public Relations Worldwide. The task is to develop an advertisement and awareness campaign for their newly dubbed health exchange called Covered California. In the meantime the state of California maintains both a health exchange website (www.healthexchange.ca.gov) and a newer customer-friendly website (www.coveredCA.com) as they march towards the October 1^st open enrollment deadline.

“A rose by any other name”
New York received conditional approval to run a state-based exchange back on December 14, 2012; roughly one month before California. As a result, the New York Health Exchange recently hired BBD Worldwide, one of the few advertisement firms still on Madison Avenue, to develop a comprehensive marketing and advertisement campaign for the New York Health Benefit Exchange. One of the first tasks at hand for the firm will be re-branding. Despite being roughly 60 days out from Open Enrollment on October 1^st, with more than 2.3 million New Yorkers uninsured, the state will launch a new name for the Exchange in the coming weeks.

Many other state-based exchanges have also changed their names and branding. See chart below for details on a few.

The $5 Billion Delay: Employer Mandate

The provision in the Affordable Care Act (ACA) mandating employers of 50 or more employees to offer qualified health insurance has been delayed to 2015. By the myriad of press releases, news articles, and blogs one could believe the delay is cataclysmic to health care reform.

A Wall Street Editorial called the employer mandate the “heart of his health-care law”.
Bloomberg News called it a “delay of a crucial provision”.
A Fox News blog advocated for repealing the provision all together due to the delay.

While the delay can be considered a political chess move in advance of the 2014 mid-term election season, from a policy perspective it is not that big of a deal. Here are 4 reasons why:

1. Been Here Before

There are legitimate concerns about the ACA that do need to be addressed, but the employer mandate delay should not be one of them. We have been here before. On April 14, 2011, Obama signed into law the Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayment Act of 2011. This bill repealed reporting requirements for employers that pay $600 or more to contractors for work and services rendered. The bill was estimated to generate over $21 billion in tax revenues helping to defray the cost of subsidies for consumers that buy insurance on the exchange earning between 133% and 400% of the federal poverty level. A main reason behind the repeal was pressure from small businesses about the administrative hassle and the burden of this type of reporting.

2. Bird’s Eye View

Based on a Congressional Budget Office report, the financial impact of delaying the Employer Mandate by 1 year is $5 billion dollars. The ACA was set to spend $47 billion in 2014 on Health Exchange subsidies. The revenue from employer penalties would have offset roughly 10% of those costs in year one. The 10 year estimate of the Employer Mandate is $150 billion. In short, a 12 month delay of the mandate represents only 3% of the tax revenue forecasted to be generated.

3. Remember Massachusetts?

Massachusetts implemented its own employer mandate in 2006. The penalties were lower ($295/employee) but it affected many more employers; those with 11 or more employees. Today, Massachusetts ranks 4^th highest among all states in the percentage of people with employer based coverage (58%). The national average is 49%. The states ranking higher than Massachusetts are smaller states with higher shares of their population working for larger businesses; Connecticut, Utah, and New Hampshire.

4. The Numbers

As of 2009, there were roughly 307 million Americans. 260 million (85%) had health coverage. Of those with health coverage, 150 million received it from their employer (58%). 95 million (37%) had Public Insurance: Medicare, Medicaid, Tricare, or other public coverage. 15 million (6%) had individual coverage purchased on their own.

Employer Coverage: Based on a 2011 Monthly Labor Review released by the Bureau of Labor Statistics, the 150 million people with employer-sponsored health care overwhelmingly got it from large employers with 50 or more employees.
- Firms with 50 or more employees represent 70% of all employed workers. 98% of these firms offer health coverage to their employees based on a 2012 employer survey.
- Firms with 11-50 employees represent roughly 20% of all employed workers and offered health coverage to their employees at high rates as well. (87% offer rate for firms with 25-50 employees and 73% offer rate for firms with 10-25 employees).
So 90% of the U.S. workforce was employed by a firm that offered insurance. 20% actually received coverage from their employer even though it was not mandated. There is a very high likelihood such firms will continue to offer coverage even with the employer mandate delay.

Data from Kaiser Family Foundation

Read Section 1513 regarding Shared Responsibilities for Employers here.

A Dialogue w/ Mayor Dinkins

June is Men’s Health Month. The Health & Wellness committee of One Hundred Black Men spent the past 27 days raising awareness of preventable health problems and health concerns disproportionately impacting the African-American community. Louis Baldwin and I had the amazing opportunity to sit down with Mayor David Dinkins and discuss these activities on his Saturday morning radio show called Dialogue with Dinkins. His radio show used to air on Saturdays from 8am – 9am on 1190AM WLIB until April 2015 when after 2 decades he finally called it quits.

Dialogue with Dinkins- Listen to the full interview

The Mayor was a founding member of One Hundred Black Men (www.ohbm.org), a non-profit organization started in 1963 by like-minded business, political and community leaders. David Dinkins and others came together by their desire to address issues of inequities in the African-American community. They aimed to empower other African-Americans to be agents for change. Now, celebrating its 50^th anniversary, One Hundred Black Men have over 116 chapters across the United States, the Caribbean, England, and Africa.

African-Americans & Cancer
Cancer is of particular concern for the Health & Wellness committee. A February 2013 study from the American Cancer Society indicated that death rates for all cancers are 33% higher for African-American men and 16% higher for African-American women, compared to their White counterparts.

Specifically, for prostate cancer, the incidence rate is 40% higher and the death rate is 2.5 times higher for African-American men. For colorectal cancer, the incidence rate is 23% higher and the death rate is 31% higher.

This is particularly alarming and upsetting because these two cancers can be treated or prevented if detected early. Additionally, these disparities have more to do with where people live (socio-economic issues) than with biology or genetics. African-Americans disproportionately live in poor neighborhoods lacking access to quality health care. Many times these barriers lead to late diagnoses when health issues have higher severities and are more expensive to treat.

As a result, the Health & Wellness committee participated in a cancer prevention study sponsored by the American Cancer Society (ACS). The committee helped educate and find over 100 people in a 2 month period to sign up for this prevention study and aid ACS in finding treatments to better cure and prevent cancer.

African-Americans & the Affordable Care Act
In less than 95 days the Affordable Care Act should address some of these disparities by increasing the availability and affordability of quality health care. Many screenings for preventable diseases will be covered for free by the health insurance plans sold in 2014.

An Urban Institute study found that more than 2.7M people lack insurance in New York. African-Americans make up 17% of this population, roughly 450,000 people. However, based on their modeling only 167,000 (37%) will actually get insurance in 2014. The other 283,000 African-Americans (63%) will remain uninsured. About half of those that remain uninsured would actually be eligible for free public insurance options like Medicaid or Child Health Plus.

That is unacceptable.

Awareness and education will be essential to lowering the uninsured rates for African-Americans. In turn, this will help to eliminate the various health care disparities that exist. Health disparities affect everyone. They are a silent tax on our economy. Every time we lose human productivity, we deprive our economy of sustainable growth. Disparities also indirectly increase our health insurance premiums. Every time we treat a preventable disease, we negatively impact health insurance risk pools which in the long run increase health care costs for everyone.

How Much Does Free Healthcare Cost?

Health exchanges intend to provide affordable coverage to a group of consumers who otherwise, for various reasons, have been historically uninsured. Each health exchange will use advanced premium tax credits (APTCs) or “subsidies” pegged at a person’s salary to help defray the cost of health insurance. To be eligible for these subsidies, a consumer (and/or their family) must earn between 133% and 400% of the federal poverty level (FPL). In 2013, 400% of FPL is roughly $46,000 for one person and $95,000 for a family of four. These APTCs are calculated by using the “retail price” of the 2nd cheapest Silver Plan offered to a consumer during their health exchange shopping experience. Health plans offered through the health exchange are ranked by these metal descriptions to signify the level of coverage each one offers. A Bronze plans, the lowest level, covers the least amount of average health care services at sixty percent while Platinum plans cover the most at ninety percent.

U.S. will spend $107B over the next three years providing these advanced premium tax credits (APTCs) to consumers according to a February 2013 report from the Congressional Budget Office

When consumers shop for benefits online, they will see health plans with the subsidized rates after APTCs are applied. Since these subsidies are based on the 2nd cheapest silver plan available to them, there could be instances when the subsidies received are more than the real cost of a cheaper bronze or silver plan. When subsidies are more than the cost of a plan, the consumer pays $0 for coverage. By law, health insurance companies are required to show the amount of APTCs a member uses when billing for premium payments. The question puzzling many health policy professionals is what does this “free health care cohort” look like?

Shopping for $0 Health Insurance
For consumers who earn less than 250% ($27,925) of the FPL, there is actually a second subsidy available called cost-sharing subsidies (CSRs). This second subsidy lowers the copayments, deductibles, coinsurance, and out of pocket costs on a sliding scale for the various Silver plans offered. The closer a consumer is to 133% of the FPL, the more comprehensive the Silver Plan becomes with lower copayments and deductibles. For example, at the 100-150% FPL level, the Silver plan receives such a high cost-sharing subsidy it resembles the benefit coverage of a Platinum plan. However, even though the benefits offer more coverage, the cost of the better Silver plan remains the same to the consumer.

U.S. will spend $28B over the next three years providing these cost sharing subsidies (CSRs) to consumers according to a February 2013 report from the Congressional Budget Office

Economically, it makes the most sense for consumers that earn below 250% of FPL to buy a Silver plan eligible for both types of subsidies (APTCs and cost-sharing). However, there will be other plans available to buy that are cheaper than these highly subsidized Silver Plans. For example, Bronze and Catastrophic plans could be priced lower due to the level of coverage they offer. However, the cost-sharing subsidies do not apply to these plans. So while they will seem cheaper in price, there will be higher out of pocket costs associated with these products.

Medicaid members that may lose coverage due to seasonal salary changes and uninsured people that earn right above the Medicaid eligibility level have the most to gain from a Silver Plan in the exchange. It is the best way for these consumers to receive the richest benefits at the lowest price. However, this cohort by default has the highest sensitivity to price due to lower levels of disposable income. During the shopping experience, this cohort will have to pass on free or lower priced plans with higher copayments and deductibles to land in a Silver plan. However, this cohort has all the demographic characteristics to suggest this will not happen. Based on a U.S. Census Bureau report they are younger (58% aged 19-34), foreign born (34%) work part time year round (29%), and earn less than 25,000/year (25%).

So how much does free healthcare cost?

Roughly $135B over the next three years for approximately 7 million individuals.

Example of Health Exchange Shopping Experience from IDEO

The Dartmouth Atlas Memo: Diabetes Discharges in New Jersey

New York is not Massachusetts – Health Care Reform Implications

Massachusetts and New York have always had similarities. Tragically, the Boston Marathon bombers had plans to also terrorize Times Square in Manhattan, New York City. Both states saw their respective Basketball teams battle against each other in the first round of the NBA playoffs. Also, both states are known for having millionaire politicians that made their success in the private sector before entering public service. However, in terms of Health care reform, the differences are vast.

Massachusetts has the lowest uninsured rate in the nation. Since the implementation of Mitt Romney’s Health care reform bill in 2006, the state has increased coverage by an additional 5 percentage points. In 2006, the state’s uninsured rate stood at 11%. Seven years later, the state’s uninsured rate has lowered to roughly 4%. Many studies have since been published hailing “Romneycare” as a success. As a result, the Massachusetts health policy experiment became the precursor to the Health Exchange concept found in the Affordable Care Act (ACA) signed into law by the Obama administration in 2010.

The United States is now less than 5 months away from the first Health Exchange open enrollment date. As 49 other states gear up for this heavy lift, they continue to outline metrics and measures hoping to define success. If New York were to increase health coverage by an additional 5 percentage points, that would translate to an additional 978,000 individuals enrolled and a 9% uninsured rate. However, benchmarking success to Massachusetts is not that easy. New York is not Massachusetts, and as a result there are many Health care reform implications.

As seen in the chart above, New York and Massachusetts have very similar health coverage rates with Public Programs (Medicare/Medicaid) and Individual private insurance. However, the disparities that lead to the higher uninsured rates in New York are found in Employer-sponsored Health coverage. Massachusetts Employers cover 10% more of their state than New York (58% vs.48%).

This difference in employer-sponsored coverage rates may not change with Health Exchanges. In fact, many can argue the disparity between NY and MA can only grow. Employers with 50 employees or more will face penalties for not offering health coverage. However, already more than 95% of those firms in both states offer coverage. There are no penalties for small employers with fewer than 50 employees to offer coverage. However, this is the exact segment that has the highest uninsured rates.

Large Employers
Firms with 50 employees or more will face penalties for not offering health coverage. Even though the penalties in the first year will be less than the cost of offering insurance, if we assume that the firms in New York with 50 employees or more will match the health coverage rates of Massachusetts, that equates to a 2.1% increase in employer offer rates. Using Census Data, there are 16,230 businesses in New York with more than 50 employees representing more than 4.8M employees. Currently, 15,581 (or 96%) of these firms offer coverage. Post reform, an additional 341 businesses with roughly 100,000 employees would need to offer coverage to match Massachusetts’ levels. However, these are merely offer rates. Simply offering coverage is very different from employees purchasing the coverage offered. Post-reform, offering coverage for an employer will mean it meets affordability rules. That means it must cost less than 9.5% of an employee’s annual salary. So this 96% offer rate in New York is only predicated on the assumption that the coverage offered will remain affordable under the new ACA employer rules in 2014.

Small Employers

A 2008 Health Affairs article outlined survey results from 1,003 randomly selected Massachusetts businesses. It found that after Health care reform in the state, the percentage of firms with 3 or more workers offering health coverage increased from 73% to 79%. The study also found that small employer offer rates increased from 2007 to 2008. More than 60% of micro small businesses (3-10 employees) and more than 80% of other small businesses (11-50 employees) offered coverage. This is a stark contrast from New York and the national average. In 2012, only 50% of firms with 3-9 employees offered coverage nationally. Additionally, only 73% of firms with 10-24 employees offered coverage nationally. The differences in small employer offer rates stems from the differences in penalties found in the Massachusetts Health care reform bill versus the ACA. Massachusetts required all businesses with more than 11 employees to offer coverage in the face of a $295 penalty per employee. The law also enforced cafeteria plans for small employers which allow employees to pay for health coverage with pre-tax dollars deducted from their paycheck. The ACA only requires businesses with 50 or more employees to offer coverage and lacks a cafeteria plan requirement. As a result, there is little motivation for small employers to offer coverage after reform.

Small Employer Implications

Businesses in states with the highest small employer health insurance prices will most likely find it economical to dump coverage all together rather than offer coverage with the threat of employees going to the Health Exchange anyway if coverage is more than 9.5% of their salary. Based on a 2010 AHIP study, West Virginia, New York, New Hampshire, Nebraska, and Massachusetts have the highest small business health insurance rates in the nation. These states average a $523 monthly rate for individual employee coverage. As such, an employee in 2014 becomes eligible for the individual exchange if they pay more than 9.5% of their salary towards coverage. For these five most expensive states, that would equate to small employers contributing $474 a month towards the cost of insurance with the employee paying less than $49 a month. These rates are based on 2010 pricing and will only be more expensive in 2014. A recent Washington Post article from May 1^st warns about sticker shock as Health plans begin to file their 2014 rate filings. Small business employees with families become the most at risk. The 9.5% of salary is benchmarked at individual employer coverage. It does not relate to the cost of family coverage from an employer. This is a policy gap that must be addressed if states like New York esteem to reach uninsured rates that match Massachusetts.

Click here for more information on the difference between Massachusetts Reform and the Affordable Care Act.

Executive Thoughts: Healthcare Marketing

Virna Brooks, a Professor and Healthcare Executive, catches up with the Briefing Room (BR) to talk about Healthcare Marketing in light of Reform. The consumers are new, their preferences are different, and the timing is tight. Marketing will play a pivotal role in the success of health care reform.

What’s Your Name
Brooks: Virna Brooks

How long have you been in the health care industry?
Brooks: Since 1996- 17 years

Tell us about your health care experience.
Brooks: My first experience working in healthcare marketing was in the UK- where I worked for a private insurance company called British United Provident Association (BUPA). I had to learn quickly about the NHS. Later, I joined Aetna as director retail strategy for its Group insurance products. I was approached by Aetna while working at American Express – specifically because I had not worked in healthcare or insurance. Back then, in 1996, the second-sale (to employees) was still rather new for contributory and/or voluntary products—also, for health products, as most of the cases were “total replacement.” This would change of course, requiring an increase in business-to-consumer marketing. I later moved to Aetna’s health insurance marketing team, becoming their first general manager for e-marketing (back when the web was new!). At the end of 2000, I was recruited by Empire BCBS to be their chief web officer. That role grew to include more marketing functions. In 2005, Well Point and Empire BCBS merged, and I went on to oversee the Marketing of Group and consumer products for WellPoint. After leaving WellPoint, I joined North Shore LIJ Health System as their chief branding officer and head of marketing. Currently I teach marketing, including healthcare marketing, at NYU.

What do you see as the greatest barrier to health care literacy and education?
Brooks: The industry is extremely complex— health insurance, health conditions, medications, health care providers, types of care and services, etc. – and after working with hundreds of marketing professionals during my career, I strongly believe that the education has to begin with the marketing team creating the strategy, the products, the programs, etc. Most industry professionals working in marketing are not necessarily experts in the industry– rather, many are functional experts (e.g., direct marketing, or advertising or database experts). Most of the burden to communicate resides with the writers (aka, the “creative” team).

From a customer or member or patient or employee perspective- the barrier to literacy and education is timing. If I don’t need to know right now, do I have to learn this, right now? Most say, no. So how to get people to read/learn/pay attention/plan, when they don’t need the product/the service/the care?—that’s a challenge. But approaches can be tested and results (response) tracked.

What is the biggest opportunity for innovation and/or creativity in health care communications?
Brooks: Getting people engaged in the topic before they need the information or service. Using a combination of the many tools available (such as social media, events, conferences, collaborations, etc., in addition to traditional channels), and the techniques that work in many other consumer products (e.g., integrated marketing).

What are your worry items for successful health care reform execution?
Brooks: The worry is that lack of education and follow through will cast a shadow on the health care reform efforts. Consumers and businesses may look to blame someone for implementation that is not executed or communicated correctly- and it’s so easy to blame health care reform as a whole. For example, think of the insurance plan member at the drug store blaming the insurance company for a drug not being on the formulary—when it may be that the insurance product was sold as an ASO (administrative services only), and it was the Group that made the decision. Or when a physician group decides not to take any form of insurance, and the patient blames the insurance company.

Name 1 thing the U.S. should learn from other countries’ health care reform experiences?
Brooks: That it takes time to implement, and perfect. Thinking of countries that implemented a health service from “scratch, “ note that many did not ‘reform,’ but rather, they implemented. We cannot ignore the complexity of our system—just TRY to explain it to someone from another country.

Understanding the demographics of the uninsured, should marketing strategies change? If so, how?
Brooks: Absolutely, they should change. The ‘barrier to entry” varies not just between the insured and the uninsured, but also among the subgroups of the uninsured as well. If you think of the well known Four P’s of marketing— each one will vary for the uninsured: the Products are different, the Price points and payment channels are different, the Distribution channel (Place) is different, and finally, how to reach this target, which channels to use, and what to emphasize in your message (Promotion)- is all different. Thus, the strategy has to vary.

How can marketing strategies help health consumers find utility in health insurance when they are healthy?
Brooks: Too often, the conflicting business priorities across the healthcare industry, results in conflicting messages, all leading to potential consumer confusion. For example, Insurance companies want you to ‘buy’ but not necessarily ‘use,’ whereas care providers/health systems/pharma, want you to use– frequently. In addition to these groups, there are several more- all with their own business objectives and marketing strategies. The consumer of healthcare is taking in all of these messages and instructions…. or not. Insurance marketers should look at all the other messages—formulated by, for example, pharmaceutical companies, employers, fitness companies, diet companies, physicians, etc. If we step back and look at all of the messages, and align better with those, we may be able to better educate consumers, and create clearer calls to action—since insurance (for the insured population) is a platform for so many of these other services/products and messages.

As a professor, what can you pass on to current healthcare students?
Brooks: In the health care marketing course, I begin with a look at the past—how did we get here? Followed with a look at the current situation (where are we now?), and finally, an overview of HCR (where are we headed?). In all three sections (past, present, future), the role of insurance companies, hospitals, and other industry groups (participants) has evolved (and is expected to continue to change). As we review the changes—we are reminded that change is a constant, one that is best dealt with, with an open mind.

1.7M New Yorkers Will Lack Coverage After Reform

On January 30^th, Urban Institute issued a report that forecasts the impact of health care reform on the uninsured population in New York State.

Currently 14% of New York’s population does not have health coverage. While this is lower than the national average of 16%, New York is one of the states with the highest number of people who lack coverage.

Employer-Sponsored Coverage – Roughly half of state residents receives insurance through their employer. However, employer-sponsored coverage is heavily skewed towards larger companies. About 96% of firms with 50 or more employees offer health coverage to their employees. In contrast, less than 45% of firms with 50 or fewer employees offer health coverage. As a result a large proportion of the uninsured are working and unable to buy coverage on their own.

Individual Coverage – Purchasing insurance independently is very costly. The price of a standard HMO policy for a family ranges from $38,000 to $85,000 a year for a plan in New York City. The cost of living in NYC only adjusts pricing by about 30%. In Albany, for example, the same policies for a family range from $30,000 to $66,000 a year. The cost of individual coverage is a multilayered complex issue. More information is available here. However, when individual coverage is so unobtainable for so many, it steers the working poor and the middle class into public programs. As a result, individual coverage only represents 4% of New York while public programs represent more than 33% of the population.

Public Programs – Roughly one-third of the New York population receives coverage through either Medicare (12%) or Medicaid (22%). These programs provide health coverage to the poor, the elderly, the disabled, and the youth. New York’s Medicaid program costs are the highest in the nation at $52 billion a year averaging a 5.5% growth rate from 2007-2010. New York receives a 50/50% match from the Federal Government to run the program, however, since New Yorkers pays more in taxes than they receive in Federal services, the state ends up responsible for the balance.

Nationally, the average cost of a Medicaid enrollee was $5,527 in 2009. The cost of children averaged $2,305 while the cost of the disabled averaged $15,840. In comparison, New York spent $8,960 per Medicaid enrollee (62% higher) which equated to an average of $2,505 per child (9% higher) and $29,881 per person with a disability (88% higher). These staggering statistics have led to a February 5^th report from the U.S. House of Representatives’ Committee on Oversight and Government Reform requesting an independent audit of New York’s Medicaid program. The committee believes the program wastes billions of dollars each year because of the lack of accountability.

Uninsured – The uninsured represents 14% of New York’s population equaling roughly 2.6 million people. When factoring in the undocumented in the state, the number can increase by an extra 1 million – 1.5 million people. Health care reform does not allow coverage for the undocumented however Governor Cuomo’s 2013-14 budget proposal provides a means for undocumented New Yorkers to receive coverage through new regulations over HMO health companies licensed in the state.

Health Coverage Status – New York

	Population
Insurance Source	#	%
Employer	9,298,300	48%
Individual	776,600	4%
Medicaid	4,149,500	22%
Medicare	2,302,100	12%
Other Public	70,600	0%
Uninsured	2,620,500	14%
Total	19,217,600	100%

Source: statehealthfacts.org

Urban Institute Findings

Reform passed to specifically lower the number of uninsured while helping those with insurance to maintain coverage. The Urban Institute’s report outlines what will happen to New Yorkers post reform, which officially start on January 1, 2014.

Of the 2.7 million uninsured New Yorkers

1.5 million New Yorkers remain uninsured (2/3^rd)
- 50% are eligible for Medicaid but do not enroll
- 40% of them could receive financial support via the exchange but chose to not enroll
- 2/3^rd are White or Hispanic
- 44% are single with no children
- 54% lack any college education.

Roughly 1 million New Yorkers receive coverage post-health care reform (1/3^rd)
- Medicaid grows by 11% adding half a million enrollees
- Individual insurance grows 40% adding 300k enrollees via health exchanges
- Employer-Sponsored insurance grows 3% adding 235k enrollees

	Pre-Reform		Post-Reform		Change
Insurance Source	#	%	#	%	#	%
Employer	9,298,300	48%	9,534,145	50%	235,845	3%
Individual	776,600	4%	1,091,060	6%	314,460	40%
Medicaid	4,149,500	22%	4,594,985	24%	445,485	11%
Medicare	2,302,100	12%	2,302,100	12%	0	0%
Other Public	70,600	0%	70,600	0%	0	0%
Uninsured	2,620,500	14%	1,624,710	8%	-995,790	-38%
Total Population	19,217,600 19,217,600				N/A

Analysis based on Urban Institute study of UI Analysis of ACS NY Records using statehealthfact.org data as a baseline

CO-OPs – Healthcare’s $1.9 Billion “Solyndra” Experiment

A late addition to Obama’s healthcare reform bill was $6 billion worth of funding for Consumer Operated and Oriented Plans, or put more simply: CO-OPs. Conceptually, these are non-profit member-driven health insurance companies designed to compete against the larger, for-profit carriers. The end vision is a more effective, competitive marketplace.

The History
Originally a Republican idea, CO-OPs became reality out of a compromise to Obama’s 2008 proposal to have a “public option” offered alongside the for-profit and private insurer options. The underlying goal here is for CO-OPs to lower insurance premiums for everyone, since the for-profit carriers would now be competing against the cheaper, public options. While Senators such as Chuck Schumer of New York have argued for CO-OPs, many critics believed that a government controlled “option” will ultimately end the leveled playing field that the healthcare reform bill initially intended to create. Ironically, despite the need for fair rules, CO-OPs now have rules buried in the final guidelines that allows their qualified health plans (QHPs) sold on the exchange to only represent 2/3rd of their total enrollment.

In a late-night back-room Fiscal Cliff deal, Congress elected to cut CO-OP funding to $3.8 billion. The focus now is building one CO-OP per state, funded through low-interest loans (see below) given to non-profit carriers that would apply to act as a state’s CO-OP. Fear has since arisen that since new entities will run these CO-OPs, they will lack the bargaining power of their for-profit counterparts. This could dramatically impact their ability to not only compete, but also remain solvent and pay back those 0% loans on time. CO-OPs could quickly become the healthcare version of Solyndra, the only difference being one bankruptcy disaster for every state.

Loans Already Paid
So far, Health and Human Services has issued $1.9 billion in loans to CO-OPs that will launch in 24 states. Still, these particular states only represent 33% of the uninsured population, with the loans averaging out to $159 per uninsured person. However, these numbers quickly become distorted due to a lack of economies of scale. Vermont, for example, will cost $608 per uninsured person with only 56,000 uninsured while other states with upwards of two million can sink to $67 per person. Clearly, the uninsured landscape shifts dramatically from state to state.

With 29.2 million uninsured Americans remaining in the states lacking current loans, it would take $4.6 billion to launch a CO-OP in each state by January 1^st, 2014. As mentioned early, the Fiscal Cliff compromise lowered the funding to $3.8 billion, yielding an $800 million delta. I suppose we can throw a “TBD” label on this one.

For further information on CO-OPs:
Rules & Regulation – Federal Register

Briefing Room Analysis

CO-OP Analysis	(as of 1/28/2013)
States w/ CO-OP Loan	24
Uninsured in States w/ CO-OP Loans	19,410,500
Wt. Avg Loan $ per Uninsured	$159.31
Total CO-OP Loans Dispersed	$1,980,728,696.00
States w/o CO-OP Loan	26
Uninsured in States w/o CO-OP Loans	29,201,100
Wt. Avg Loan $ per Uninsured	$159.31
Total CO-OP Loans Needed	$4,652,027,241.00
Based on data from HHS & KFF

Highlights of Loan Perimeters:

Two types of loans

‘‘Start-up Loans’’ must be paid back in 5 years.
“Solvency Loans” must be paid back in 15 years

Interest Rates for loans

“Start-up Loans” is the average interest rate on marketable Treasury securities of similar maturity minus one percentage point and the interest rate cannot be less than zero percent.
Solvency Loans will be equal to the greater of the average interest rate on marketable Treasury securities of similar maturity minus two percentage points or zero percent.

CO–OP applicant receiving a loan must offer at least one QHP at both the silver and gold benefit levels

Late payment penalties require CO-OP recipients to pay 110% of the loan including interest.