Actuarial Value: What Does It Mean?

Actuarial value is a term that has been frequently used in connection with health plans on the the federal and state exchanges. Let's take a minute to understand the term as a way to better understand the health reform law.

Actuarial value refers to the share of health care expenses the plan covers for a typical group of enrollees. The four tiers of health plans established by the ACA - bronze, silver, gold, and platinum - are based on the concept of actuarial value.  Each represents a different level of health insurance coverage. Thus, a platinum plan covers the greatest share of enrollees' medical expenses overall, while a bronze plan covers the least.

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For example, in a bronze plan, 60% of an individual's health care expenses are paid for by the plan.  The individual will then be responsible for 40% of expenses through some combination of deductibles, co-pays, and coinsurance, collectively called "cost-sharing."  The higher the actuarial value, the less patient-cost-sharing the plan will have on average.

The levels of coverage provided by the ACA are key to each individual's coverage and how each will perceive the effects of health care reform. 

For an estimate of deductibles and coinsurance that would meet the tier thresholds defined in the ACA, please visit this study by the Kaiser Family Foundation.  It explains the the coverage tiers established in the ACA, presents the actuarial estimates from thee well-established actuarial and benefits consulting firms, and discusses the potential policy implications.

Health Care Reform Propels Shift in Mental Health Business Model

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By now, many patients may have noticed a change in their doctors' offices. Perhaps you've been asked to sign new confidentiality agreements, or maybe your doctor moved into a larger office with more providers. The phenomenon of large provider groups gobbling up small health care provider practices has arrived, and it's having an especially significant effect on mental health providers. 

Psychiatrists and psychologists are feeling a loss of autonomy, as their patients and schedules are now being chosen and managed by larger institutions.  In some cases, these providers are also taking significant cuts to their paychecks.  Blue Shield of California, for instance, recently asked psychologists on their plans to accept anywhere from a 10- to 30- perfect discount for patients who will buy health plans through Covered California. (Kaiser Health News, 10/24/13.)

As more and more patients expect their mental health care to be covered by insurance, there may soon be a trend away from smaller practices who may not accept as many insurance plans. As patients

But the shift from solo/small practices toward large medical groups isn't all bad, especially not for patients. 

For patients, it may mean lower prices, especially when for mental health services. Where as patients might have paid $150 out of pocket for a therapy session, those same sessions may now be covered by insurance via the 2008 mental health parity law.  Mental health parity requires private and public insurers to cover mental health needs, if at all, just as they do physical health conditions, such as similar co-pays for for physical and mental health services.

In addition, quality of care has great potential to increase as a result of this shift. For example, mental health providers are becoming increasingly integrated into multidisciplinary practice and health clinics.  When a psychologist or psychiatric nurse practitioner sits alongside internists and pediatricians, a more holistic approach to patient care develops that can cut back on unnecessary tests and treatments, potentially saving money for institutions, as well as patients.

Medicare Readmission Penalties - No Joke

The Medicare readmission penalty program, part of Obamacare, is finally showing its teeth.  Media outlets across the country are reporting this week on the $227 million in fines imposed on 2,225 hospitals -- 2/3 of the Medicare-qualified hospitals in the U.S.

The program allows the government to assess penalties in the form of reductions to per-patient payments that hospitals would receive under Medicare if a hospital readmits patients covered by Medicare within 30 days of being discharged.

The theory is that many hospital readmissions are avoidable and reducing the rate of readmission would create a more efficient healthcare system and, therefore, reduce overall healthcare costs.  Before Obamacare was passed, hospitals often cashed in on these readmissions, according to a Medicare Payment Advisory Board report submitted to Congress in 2011. The report concluded that reducing readmissions by only 10% would save Medicare at least $1 billion.

However much criticism surrounds this penalty provision of the new health care reform law.  For instance, Kaiser Health news reported that most of the hard-hit hospitals are those that serve the greatest number of low-income patients who struggle most with post-hospital instructions and self-care. These patients also tend to be the most difficult to contact for follow-up appointments and check-ups, resulting in more frequent hospital admissions.

Currently the law only penalizes readmissions for heart attack, heart failure, and pneumonia.  Beginning next year, the law will also track hip and knee surgeries and chronic obstructive pulmonary disease. Hospitals can lose up to 2% of Medicare payments per patients -- and for hospitals that operate on a 1-2% profit margin, this can be a very scary prospect.

Search for your hospital on this chart provided by Kaiser Health News.