Friday, December 20, 2013

ACA Transactions Not Completing

The next obvious shoe to drop in the series of bombshells the Affordable Care Act is leaving on the American health insurance market is round two of the you-really-can't-keep-your-insurance reality: small group policies.

Press coverage of this issue should be abundant in 2014 as the line between "do you or don't you have coverage" is both clear and potentially widespread, and maybe much wider than the individual market.

Less obvious are the data integrity problems on the back-end that could render supposedly active policies useless.  That is, even if you are told you have "coverage," acting on that could be problematic.

Robert Laszewski and Daryl Chapman, two health insurance industry insiders, recently discussed the "834 transaction" issues.

Even prior to the Affordable Care Act, "the hardest thing" the insurance industry handled was the "split bill" scenario where premiums were subsidized by the government: part was paid by the enrollee and part by the government such as in Medicare Advantage.

The Affordable Care Act has made two changes to the market: (1) that kind of subsidy calculation now happens for everyone in the exchange even if that subsidy calculates to be zero, and (2) that subsidy can change from month to month depending on any changes to one's income or life circumstances during the year.  This latter point is what Chapman referred to as the "dynamic nature of the subsidy" and why the insurance company must now keep track of a ratio between government and enrollee premium payments that "can change through the year."

If all those data points don't line up exactly right all year long, "the carrier system will suspend eligibility and not pay claims."

For the insurance industry, the most fundamental connection they make is between who has a paid premium and who gets paid claims.  You don't have one without the other.

If claims are not paid, providers stop offering their health care services.

This "member to cash reconciliation is hard when the data is pristine."  Falling short of pristine, in October and November the 834 transaction errors were happening five to 10 percent of the time.  That means, among those confirmed on the front end (user side) to have health insurance, anywhere from one in 20 to one in 10 would not actually have insurance due to failures of information transfer to the insurance company on the back end (server side).  Further, there is no federal government system for reconciling these data issues, and even if there were no such issues, there is no system yet for the federal government to make the premium subsidy payments to insurers.

Is anyone, then, who is subsidized in this system really insured?

None of this is stopping the exchanges from not correctly waiting to debit people's checking accounts (only once) until their agreed upon payment time, and one cannot be sure that such payment information would be so dutifully transmitted from the government to the insurance companies paying claims from those premiums.

If people can actually figure out what a plan offers, there is still little guarantee they'll actually get what they expect and not something else.

These are just some of the technical reasons why "coverage" may not end up fully operative in 2014.

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