President Biden issues XO reinstating standardized #ACA plans (+ some other interesting stuff)

White House

This morning, President Biden signed an executive order entitled "Promoting Competition in the American Economy" which hopes to promote competition across major sectors of the U.S. economy. There's 72 initiatives across a dozen agencies total impacting a wide range of industries; naturally this includes healthcare policy and the HHS Dept.

In the healthcare field, there are four areas addressed by Biden's XO: Prescription drugs, hearing aids, hospital consolidation and the ACA exchange marketplaces:

Prescription Drugs: Americans pay more than 2.5 times as much for the same prescription drugs as peer countries, and sometimes much more. Price increases continue to far surpass inflation. As a result, nearly one in four Americans report difficulties paying for medication, and nearly one in three Americans report not taking their medications as prescribed.

These high prices are in part the result of lack of competition among drug manufacturers. The largest pharmaceutical companies are able to wield their market power to reap average annual profits of 15-20%, as compared to average annual profits of 4-9% for the largest non-drug companies.

One strategy that drug manufacturers have used to avoid competing is “pay for delay” agreements, in which brand-name drug manufacturers pay generic manufacturers to stay out of the market. That has raised drug prices by $3.5 billion per year, and research also shows that “pay for delay” and similar deals between generic and brand name manufacturers reduce innovation—reducing new drug trials and R&D expenditures.

In the Order, the President:

  • Directs the Food and Drug Administration to work with states and tribes to safely import prescription drugs from Canada, pursuant to the Medicare Modernization Act of 2003.
  • Directs the Health and Human Services Administration (HHS) to increase support for generic and biosimilar drugs, which provide low-cost options for patients.
  • Directs HHS to issue a comprehensive plan within 45 days to combat high prescription drug prices and price gouging.
  • Encourages the FTC to ban “pay for delay” and similar agreements by rule.

Being allowed to import prescription drugs from Canada has long been a goal of healthcare reform advocates in the U.S., and it there's no rational reason not to at least allow this to be done as long as the drugs and sale of them are subject to the same safety/quality control and other regulations that importing any other goods would be.

Having said that, it's important to keep in mind that just because U.S. states are allowed to import drugs from Canada, that doesn't mean that Canada has to export them. In fact, last fall Canada passed their own law outlawing exactly least in some cases:

Canada has banned the export of some prescription medicines in order to prevent a shortage in the country.

The decision is in response to a US plan that would allow for drugs to be imported from Canada to make them cheaper for Americans.

Although prescription drug prices in Canada are higher than some nations, they are cheaper than the US.

A number of Canada's drug suppliers had warned that the plan, implemented by President Trump, would cause shortages.

The pandemic has already increased demands for some medicines, according to the AFP news agency.

A statement from Canada's health ministry said the country sources 68% of its drugs from overseas and therefore it was important to avoid any disruptions to supplies.

"Companies will now also be required to provide information to assess existing or potential shortages when requested, and within 24 hours if there is a serious or imminent health risk," the statement said.

Mr Trump signed an executive order in July to allow for the legal importation of cheaper drugs from Canada.

A month later, Canadian Prime Minister Justin Trudeau said he was happy to help other nations with their supplies if possible but his priority was protecting the needs of Canadians.

Getting back to the XO...

Hearing Aids: Hearing aids are so expensive that only 14% of the approximately 48 million Americans with hearing loss use them. On average, they cost more than $5,000 per pair, and those costs are often not covered by health insurance. A major driver of the expense is that consumers must get them from a doctor or a specialist, even though experts agree that medical evaluation is not necessary. Rather, this requirement serves only as red tape and a barrier to more companies selling hearing aids. The four largest hearing aid manufacturers now control 84% of the market.

In 2017, Congress passed a bipartisan proposal to allow hearing aids to be sold over the counter. However, the Trump Administration Food and Drug Administration failed to issue the necessary rules that would actually allow hearing aids to be sold over the counter, leaving millions of Americans without low-cost options.

In the Order, the President:

  • Directs HHS to consider issuing proposed rules within 120 days for allowing hearing aids to be sold over the counter.

With the advances in audio technology over the past few decades (think about noise-cancelling earbuds and the like), requiring hearing aids to only be purchased through a doctor/specialist seems similar to if the bad old days before AT&T was broken up when you could only get a new phone installed by "The Phone Company." I don't know how much difference this will make but it seems pretty reasonable to me.

Hospitals: Hospital consolidation has left many areas, especially rural communities, without good options for convenient and affordable healthcare service. Thanks to unchecked mergers, the ten largest healthcare systems now control a quarter of the market. Since 2010, 139 rural hospitals have shuttered, including a high of 19 last year, in the middle of a healthcare crisis. Research shows that hospitals in consolidated markets charge far higher prices than hospitals in markets with several competitors.

In the Order, the President:

  • Underscores that hospital mergers can be harmful to patients and encourages the Justice Department and FTC to review and revise their merger guidelines to ensure patients are not harmed by such mergers.
  • Directs HHS to support existing hospital price transparency rules and to finish implementing bipartisan federal legislation to address surprise hospital billing.

Battling hospital consolidation as CA Attorney General was likely one of the main reasons Presiden Biden appointed Xavier Becerra as HHS Secretary in the first place; this is right up his alley.

Finally, we come to my headline above:

Health Insurance: Consolidation in the health insurance industry has meant that many consumers have little choice when it comes to selecting insurers. And even when there is some choice, comparison shopping is hard because plans offered on the exchanges are complicated—with different services covered or different deductibles.

In the Order, the President:

  • Directs HHS to standardize plan options in the National Health Insurance Marketplace so people can comparison shop more easily.

Way back in 2015, I wrote the following (at the time it was in response to a significant drop in the number of healthcare plans available on the ACA marketplace in many states):

While this sounds negative overall, in some ways it actually could be good news. For instance, the Massachusetts exchange deliberately cut down on the number of plans available:

Consumers can expect at least two big changes this fall when they go shopping for their 2016 health insurance through the Massachusetts Health Connector: significantly fewer choices, and a new mechanism to find out which care networks include their doctors.

The Connector staff told the agency’s governing board Thursday that the number of plans offered next year will be no more than 81, down from the current 126.

The board had agreed in March that the Connector needed to simplify its offerings. The differences among the plans were described as too small to justify the confusion caused by so many options.

This is something I've actually been wondering about myself. Competition is good in general, and having lots of choices can be helpful...but it can also just confuse the hell out of people.

As an example of what I'm talking about, consider Steve Jobs' return to Apple nearly 20 years ago:

When Jobs took the reins as interim CEO in July of 1997, Apple was making more than 350 different products, many of which seemed redundant, expensive, and outdated. In order to get the company focused on making better products that made more sense to consumers, he cut that number down to just 10. He knew that in order for the company that he co-founded to survive, it needed to be leaner and more focused, than it had been under previous CEO Gil Amelio.

At the core of the new line-up were four products, a consumer laptop and desktop, as well as a laptop and desktop designed for professionals. Each of those computers had various configurations of course, but as far as Apple was concerned, the product line remained extremely streamlined and simple. This allowed the company to focus on new technology and design, which resulted in the first iMac, a computer that made waves due to its unique looks, and shift away from traditional IO ports in favor of USB – something that was radical at the time.

Obviously healthcare policies aren't computers, but the point is still valid: From the enrollee's POV, all of the different elements to consider (Premiums? Deductibles? Co-Pays? Networks? HMOs? PPOs? Coinsurance? Metal Levels?) are already confusing enough. Throw in a dozen other companies (in some areas) and it can scare the hell out of you.

David Anderson has been writing about this problem (and its sister issue of "Silver spamming") for years. Here's a more recent post he wrote back in April 2019 about the situation:

Given Washington State’s market where there is at least one Medicaid Managed Care company in each rating area, I don’t think a public option will be price competitive as Medicare +60 is closer to “standard” commercial rates than either Medicare-ish or Medicaid-ish rates that Centene/Ambetter and Molina are paying their networks.

However, I think the real action is in the single standardized plan design requirement. Centene/Ambetter is a low cost insurer. They are in most rating areas. They offer a number of silver plans that are all priced tight to the benchmark position. This means two things.

First, they get most of the price sensitive and reasonably healthy very heavily subsidized folks as the next cheapest Silver plan offered by another company is significantly more expensive. Secondly, since the benchmark plan is close to the cheapest Silver (also offered by Centene/Ambetter), there are very few great deals so the enrollment pool is smaller than it would be if there are larger silver premium spreads between cheapest silver and the benchmark. This is the “silver-spamming” strategy that Centene loves.

Single standardized plan requirements takes away this spamming strategy. We can see this if we look at Washington State Rating Area 1 and 3 for 2019 (data via RWJF HIX Compare and premiums are for a single 27 year old)

Unfortunately, in the end, while the Washington legislation which passed did include standardized plans, it didn't require all plans to be standardized. In other words, on the Washington ACA exchange there are three types of plans: Some are standardized public option plans ("Cascade Select"), some are standardized but not PO plans ("Cascade Standard")...and some are simply the same wide range of Qualified Health Plans (QHPs) which don't have to follow any additional regulation beyond what they did before WA passed their Public Option bill.

This is better than not having standardized plans at all, but it doesn't really address the main issue at hand. HealthCare.Gov tried doing something like this back in 2017, where they included "Simple Choice" plans in addition to the existing QHPs. I don't know how well it worked, however, because once the Trump Administration took over I think they abandoned the "Simple Choice" project (or at least they stopped emphasizing those plans, which kind of defeats the point of having them).

I can't tell from the Fact Sheet whether Biden's XO means simply a rehash of the "Simple Choice" program (which would be fine but likely wouldn't have much impact) or whether it means that all ACA exchange plans from all carriers would have to conform to these standards. If it's the latter, this would be huge; in addition to Massachusetts, this is how Covered California has operated for years:

Patient-Centered Benefit Design

Covered California is leading the way for consumers by using a patient-centered benefit design. What this means is consumers can shop across our different health insurance companies knowing that the benefits are the same, depending on metal tier, no matter which company they choose.

Consumers get an apples-to-apples comparison about copays, deductibles and other out-of-pocket costs so there are no surprises when they use their plan. The consumer can choose their coverage level based on the metal tier system and can then compare the costs and star ratings of the plans within that metal tier in their area.

For example, in California, every Bronze plan has a $0 co-pay for the first 3 non-preventative visits and a $65 co-pay after that until they hit the maximum out-of-pocket cost. Every Bronze plan has a $95 specialist visit co-pay until it hits the MOOP, and so on. For Silver plans, it's $40 and $80 respectively, and so forth.

This means when you're trying to calculate the best value, you don't have to worry about whether the co-pay is $20 from one plan vs. $45 on another as long as they're both of the same metal tier.

I'm really hoping that the new Standardized Plan rule is made mandatory for every plan on the exchange, not just optional, but we'll have to see; it almost certainly wouldn't kick in until 2023, however, as it's likely too late to implement it for the 2022 enrollment period at this point. Stay tuned...