Several publicly-traded health systems reported elevated numbers of uninsured patients at their facilities in the third quarter of 2015, raising questions among health insurance industry watchers about the long-term viability of the exchanges. But hospital executives and advisers say there are a number of underlying causes at play, and that it’s far too soon to panic.
“A lot of the insurers were saying basically when they were reporting third quarter results that they were seeing a lot of attrition in the Affordable Care Act policies,” says Steve Zaharuk, senior vice president at Moody’s Investor Service. Insurers were reporting faster rates of attrition than in 2014, which Zaharuk says could be attributed to any number of factors, including failure to pay premiums or acquisition of employer-sponsored insurance. But higher premiums and other cost factors very well may have driven people off the exchanges, he says.
“We’ve seen some regions where the increases in premium, the increases in copays and out-of-pocket [costs], and the decreases in the network are saying there’s a big change afoot as far as the attractiveness for these policies for 2016,” he says. “Maybe this is the beginning of a trend, because there are some signals out there that there could be a problem with these policies for 2016.”
Higher patient volumes translate to a plus for hospitals, as long as the patients making the claims have insurance. Gallup on Oct. 8 pegged the uninsured rate to 11.6% in the third quarter, down from 11.9% in the first quarter, which is why hospital conglomerate HCA Holdings, Inc.’s reported increase of uninsured patients set off a few alarms.
The health system’s uninsured admissions went up 13.6% in the third quarter when compared with the year-ago period, totaling approximately 4,400 admissions. HCA saw the numbers increasing in the second quarter, Chief Financial Officer Bill Rutherford said during the third quarter earnings call.
But it’s too soon to tell if it’s a trend, says Dean Diaz, senior vice president at Moody’s Investor Service. Diaz points out that HCA has a large concentration in two states that did not expand their Medicaid programs: Florida and Texas.
In the call, Rutherford conceded that while the elevated number of uninsured was seen across its markets, those two states accounted for nearly 75% of all uninsured admissions. Rutherford attributed one quarter of the increase to processing delays in Texas and Kansas for newly eligible Medicaid recipients, and 10% of the total to exchange members who lost their insurance.
Uninsured Rates Are Fluctuating
Matthew Borsch, lead health care research analyst at Goldman Sachs, asked if HCA executives thought something could be “brewing” in terms of whether exchange members see value in health coverage, given that when they’re uninsured, most of their care is written off due to inability to pay.
HCA President of Operations Samuel Hazen said that the effects of health reform have been “materially in line” with HCA expectations, and that exchange growth is up year over year. “So we are still seeing solid growth,” he said. “Now the issue of seeing some reduction in terms of lives in the exchanges is reality as well. I don’t have data through the third quarter; I have CMS data through June where I can compare the number of lives in the exchange as of end of March as compared to end of June at 2015. And there is a decrease at the end of June. Nationally it’s about 2.3% fewer lives in the exchange and for HCA states it’s about 3%.”
Rosemarie Day, president of Massachusetts-based Day Health Strategies, believes the uninsured rate has remained stable, since just about all observers aside from a few hospitals are reporting flat or decreased uninsured rates.
“The uninsured rates have totally gone down, no question about it,” she tells HPW, citing data from Gallup and the U.S. Census Bureau that said both employer-sponsored coverage and direct purchase rates have either maintained or increased. “Overall, bottom line is, [a] reduction in the uninsured [and] more people with insurance of all types.”
Tenet Healthcare Corp. also reported a 3.7% uptick in the number of charity and uninsured patients compared with the third quarter of 2014, pointing to Florida and Texas as well. In response to a question from Morgan Stanley analyst Andrew Schenker, Tenet Chief Financial Officer Daniel Cancelmi said the company has actually seen a decline in the number of uninsured year-to-date.
“We feel very confident about what we can generate in terms of additional growth from exchange patients as well as some growth in Medicaid expansion states,” he said. “So, there’s nothing in particular that we saw that seems like a trend that we are overly concerned about.”
President of Hospital Operations Britt Reynolds added that exchange growth in Texas and Florida had increased significantly, and CEO Trevor Fetter said the market has been a major plus for the company.
“[The exchange market has] been a great product for us. We continue to drive substantial gains in volumes in this quarter,” he said. “It was 53% in the exchange volumes, and I think those are well established now as a marketplace for individuals to buy insurance. And as I mentioned in my prepared remarks, one of our strategies has been to have very attractive offerings on those exchanges that include our hospitals, and we hit a record high of 90% of our hospitals being in the lowest cost silver plan networks.”
At Community Health Systems, the uninsured rate remained flat for the quarter at 5.8% year over year, with the hospital pointing in part to another non-expansion state, Tennessee, along with Florida. But a November report from accounting and consulting firm Crowe Horwath found that hospitals on the whole experienced a 31.2% decline in their uninsured rates from January 2014 to September 2015.
Still, the shifting dynamics of the exchange market are likely to blame for at least some fluctuation in the uninsured rate. Jim Whisler, national leader of Deloitte’s health actuarial practice, says he has also seen a few hospitals reporting increases in the number of uninsured patients.
“With the large rate increases in many of the exchanges, the federal government admits it’s getting harder to attract people to the exchanges, because you know initially they got a lot of the sick people who really needed insurance, and now they’re trying to attract the healthier people who may make the decision to pay the penalty versus getting the insurance. So maybe what they’re seeing is that this trend of reduced uninsurance is starting to reverse itself. I guess I wouldn’t be too surprised if that’s a recent phenomenon.”