Health Business Blog

This is a transcript of my recent podcast interview with SeeChange Health CEO, Martin Watson.

David E. Williams: This is David Williams, co-founder of MedPharma Partners and author of the Health Business Blog.  I’m speaking today with Martin Watson. He is CEO of SeeChange Health, a health insurance company that’s just launching today.  Martin, thanks for speaking with me.

Martin Watson: Thanks David.  Pleasure to be here.

Williams: Martin you describe SeeChange as a value-based health insurance company.  What do you mean by that?

Watson: Value based is really the next iteration in benefit design within the health insurance world. Our definition of value-based is the delivery of benefits that enables somebody to change their behavior, help better manage any conditions or just take better care of himself.  The value-based label is around having people change their values such that they take better care of themselves.

Williams: Do those behaviors extend to the physicians and other providers or is it primarily a consumer focus?

Watson: Our model extends to having the physician involved.  It’s having a benefit plan that enables a stronger relationship between the consumer and their physician.

I can give you an example of how our plan works.

Williams: That would be great.

Watson: We go to market in specific geographies. A good example is Fresno, where we’re launching. We have a number of different health plans.  For example we have an 80/20 co-insurance plan with a $2,200 deductible and $3,200 total max out of pocket. This product is real insurance and is priced very competitively to any of the other carriers, and frequently better.

We ask consumers to do three things.  They don’t have to do anything and they’ve got real insurance at a good price point, but if they do three things we reward them.

The three include: 1) seeing their physician for their routine annual wellness visit, 2) participating in a biometric session, which is just the same kind of thing as when you have life insurance and some blood is drawn, and 3) going online to our website and registering with our web portal.

When they complete those three things, in whatever order, we move the person from an 80/20 plan to 100/0 co-insurance.  We reduce their out of pocket exposure from $3,200 to $2,000 and we fund a health incentive account with $200 for a single consumer or $400 for a family.  When you look at that from an actuarial basis you’ve moved from one plan to a much richer plan while your premium stays the same. And then, based upon the data that we get back, we may identify that the person might be trending towards type two diabetes or they might have diabetes or some other condition.

We reach out to that person both electronically and hard copy. The physicians will also reach out to the people and say, “It looks like you now have type two diabetes.  You should probably do a few additional steps over the next bit.  See your doctor at least twice a year for your A1c, have a foot exam, have an eye exam, etc.”

We try to give you an incentive to go and do those things by then funding additional money into the health incentive account, another $200 or $400 for a family. That covers the cost associated with seeing the doctor for those visits.

So our whole goal is that we want people to see the physician more frequently to identify conditions sooner and then provide a richer benefit set so the person won’t be stressed financially to manage their condition.

Williams: You’re launching this company right when health reform is being signed into law.  I’m just curious if you think it’s a good time to be starting a health insurance company.

Watson: I actually think it’s great timing.  Our plan design and our focus reflects a lot of the things that are in health reform. For example we modeled our products to have 100% preventive services within the plan designs.  We’re focused the offering on segments that require guaranteed issuance, such as small businesses.

We’re also focused on behavior change because we know that if we can get people to manage their conditions even a little bit better or see the physician on a more regular basis that you can lower the overall cost trend with all of those conditions because you’re treating and servicing them sooner.

Williams: You mentioned Fresno, California as your launch site.  Why do you choose that market?

Watson: It’s a great pilot market to start off in.  It’s got a decent sized population.  We also liked the fact that it has had a hard go on the economic side so they will be hungry for a new offering that’s priced competitively.  We started talking with the hospitals and physicians more than three years ago about this concept. Community Medical and Santa IPA embraced the concept of looking at the total population of our membership and getting them to see their physicians and manage their conditions earlier rather than later. So they were willing to partner with us on this model and implement it and let us build out.

Williams: Consumer directed health plans like Lumenos and Definity that were started a few years ago ended up being acquired by the big traditional health insurers.

It may be a little early on day one but is that the path that you expect to follow?

Watson: You know, that’s a great question and I’d love to know what the future would say.  That’s not how we’re operating the company.  Frankly we don’t envision ourselves to really get beyond probably half a million members or maybe a million members over the next seven to eight years.

A lot of the competitors out there have broad networks.  That could be a potential approach but that’s not how we’re operating the company.

Williams: What financial backing do you have?

Watson: We raised $40 million from Psilos, which is a private equity firm out of New York.  They focus on health care services and software and device that focused on improving health care while lowering costs.

Williams: Are the folks that you have on your team people who have a health industry background or a health insurance company background?

Watson: We all come out of health insurance, pharma, or health IT.  We’ve all been very intimately involved with the health insurance marketplace.  Some of our team were the early participants in Definity.

Williams: Stepping back a little bit from your specific company and looking at the broader environment, both with the stimulus package and now with health care reform, there have been some pretty major shifts in the market. I’m wondering what you think will likely happen as we look over the next five to ten years as the health care environment evolves.  Do you expect that some of the actions that the government has taken are going to have the desired effect?

Watson: I certainly hope so.  I’m sure reform will continue to get changes over the next ten years.  Right now I do worry a little bit that it doesn’t appear that there has been a lot of emphasis on how you manage the cost trend, long term.  Frankly I have yet to see an estimate come out of government that’s ever even been close to what they forecast.  So I think it would be great if this thing could even be deficit neutral but I’d be very surprised.

Williams: Thanks for your comments.

Watson: I appreciate the time and look forward to future discussions.

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A major criticism leveled at the health reform law is that it doesn’t do enough to control costs. Yet experience with a similar breed of health reform in Massachusetts indicates that the cost control issue will come to the fore sooner rather than later. Four news stories from the past few days have reinforced my conviction about this:

1. Massachusetts health plans have sued the state and stopped issuing new policies to small businesses and individuals after the vast majority of their 8 to 32 percent rate increase requests were denied by the Division of Insurance
2. Some individuals are gaming the system by buying insurance for a few months when they need it, then dropping coverage. These customers are very unprofitable for the health plans
3. Towns are worrying that they will be affected by the tax on “Cadillac” health plans, because the benefits they provide are so generous
4. State legislators and the Governor are seriously considering caps on pricing by doctors and hospitals and replacing fee-for-service payments with global capitation

I choose to look at these items in a positive light:

1. For a long while, health plans in Massachusetts and elsewhere have mainly just passed along cost increases. They haven’t been terribly effective at holding costs down, and in fact with the backlash against managed care their employer customers haven’t really pushed that hard. Higher premiums aren’t bad for insurers since they boost revenues and makes it easier to justify administrative expenses that are growing in dollar terms but stable as a percentage of revenues. Health insurance costs have finally reached the breaking point for individuals and small businesses, but with a mandate in place customers are required to buy anyway. The state can’t just sit still –but neither can insurers offer policies at a big loss. Something has to give.
2. The reason for the gaming is that penalties for not buying insurance are too low. This gaming drives the costs up for everyone else, which is part of the reason insurers have asked for such big rate increases. For policies like guaranteed issue and community rating to have a chance of working, everyone needs to be in the insurance pool. My guess is penalties will be raised.
3. Towns have a big, big problem on their hands with enormous health care premiums for town employees. These costs are going to bankrupt the towns and kill off essential services if they aren’t addressed soon. Apparently Framingham has dozens of employees enrolled in family plans with premiums of $40,000! I’m hopeful that the threat of even more massive spending will help break the logjam that exists today.
4. As mentioned above, health plans haven’t done much to control costs, and the state is on the verge of stepping in. If that happens to a significant degree, health plans will have to find some way to differentiate themselves. Managing utilization is an obvious way to go. If they can’t manage that then I think the days of traditional health plans in Massachusetts will be numbered.

We’ll see how these issues are resolved. No doubt it will be messy. But I think there’s a real chance that effective cost control solutions will be put in place in Massachusetts within three years. And that bodes well for the US as a whole.

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AstraZeneca appears set to follow Merck into the market for “bio-similars.” (See AstraZeneca may join generic rush.) Congress and the media tend to portray biosimilars are analogous to generic chemistry-based pharmaceuticals, and therefore believe that they will lead to much lower prices as a result of the commoditization of these products. If all goes according to plan, that should cut the price of biologics by 50 to 95 percent as has been the case for generic versions of traditional pharmaceuticals.

Pharma and biotech companies aren’t seeing it this way and neither am I. Although they won’t say so, pharma companies are starting to realize that biosimilars –which unlike traditional generics cannot be subsituted by a pharmacist for a branded product– are really like me-too products within a class of drugs. That’s exactly the model that’s enabled multiple blockbusters within a given class in the mainstream pharma business, and led to higher spending overall. Biosimilars are unlikely to be a lot cheaper than the products they copy, and they will have all the sales and marketing costs associated with a branded product, plus some of the development costs. Don’t be surprised if some biosimilars are actually priced higher than the original products, based on some real or perceived improvement in efficacy or safety. That’s what happened when me-too drugs like Lipitor entered the statin market. (See Generic biologics — or Me Too Drugs 2.0? for more details.)

AstraZeneca won’t be the last company to pursue this strategy. If a regulatory pathway for bio-similars is established in the US, every big pharma will jump on the bandwagon.

If policymakers want to control the cost of biologics, there’s a much simpler and easier way. Simply regulate the price of biologics once their patents expire. That would have several advantages:

• Guaranteed lower pricing and certainty about when lower pricing will be available
• No need to subject patients to the hazards of clinical trials
• No need for FDA to stretch itself further monitoring new biologics manufacturing facilities –which are notoriously difficult to run well

It wouldn’t even be that bad for biologics companies. They’d already have earned their profits during the patented life of the product, and would retain 100 percent market share post-patent expiration. They can’t really complain about the government interfering with the free market, considering that patents are granted by the government in the first place.

The only real losers in this plan would be generic biologics companies. Since the industry doesn’t even really exist yet, now is a good time to implement my scheme.

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Merck has made a wise decision to pursue the development of generic biologic drugs. (See Merck Restructuring Puts a Focus on Generic Drugs.) Merck and its traditional big pharma rivals are suffering because they’ve failed to develop novel chemistry-based products and because their existing products face generic competition. Although the biotech sector has not been stellar, at least biotech companies are still developing and launching innovative products. Meanwhile, the generic biotech market doesn’t really exist yet (except a bit in Europe).

As the market has shifted, biotech products are taking up a higher and higher share of total drug spend. Individual biotech products can be frightfully expensive: often tens or even hundreds of thousands of dollars per year per patient. And unlike with chemistry-based drugs, there’s no relief valve of generic competition to drive prices down 30, 50, or 90 percent. The biotech industry has been around for a couple of decades now, so products are going off patent but maintaining their monopoly.

From a policymaker’s standpoint, the time would appear to be ripe for bio-generics. After all, the Hatch-Waxman Act, which created a pathway for generic drugs, led to a vibrant generic industry and affordable drug prices. Why not do the same thing with biologicals? Merck and others are banking on action from Congress that will enable a bio-generic industry to form. It’s a good bet.

But as I’ve written before (Paradox or Idiocy?), bio-generics are a bad idea. Generic versions of drugs like Zocor can be substituted directly by pharmacists. If the doctor writes “Zocor” the pharmacy can (and often is mandated to) fill the prescription with generic simvastatin instead. Generic companies sell based on price, which drives prices way down once a few companies reach the market. Generic companies just have to show their drugs are chemically the same –they don’t have to conduct clinical trials.

That’s not how it’s likely to work for bio-generics. These products will be considered “bio-similars,” not directly substitutable by pharmacists. That’s because biologics are much more complex to manufacture, and it’s very difficult to make an exact match. Companies will also have to perform some clinical trials on human patients in order to get approval. If you think about it, this is really much more similar to the traditional big pharma model than it is to the generic market. And the result will probably be like the big pharma model, too, not the generic market.

Back in the day when the pharmaceutical industry was launching new classes of drugs, every big pharma would rush to develop a “me too” product in the same class. The drugs were similar, but not directly substitutable. The statin class is a good example: Mevacor came out first, followed by many others including Zocor, Lipitor, Lescol, Pravachol and Crestor. Companies spent serious money to persuade physicians and payers to cover these products. Each company looked for ways to position its product slightly differently to emphasize the real and imagined distinctions among the products. This included large sales forces, follow-up clinical studies, direct to consumer marketing and other big pharma activities. You can be sure prices didn’t fall as a result of all the statins reaching the market!

Merck is probably counting on developing the same model in biologics. The company plans to bring to market a competitor to Amgen’s Aranesp, but I’ll bet you they won’t position the product as “generic Aransep.” Instead they’ll emphasize subtle differences in the product to pitch it as an alternative therapy. They’ll deploy a salesforce that visits physicians and will look to expand the overall market. Maybe they’ll price the product somewhat lower than Aranesp. Then again, maybe they won’t.

If policymakers want to control the cost of biologics, there’s a much simpler and easier way. Simply regulate the price of biologics once their patents expire. That would have several advantages:

• Guaranteed lower pricing and certainty about when lower pricing will be available
• No need to subject patients to the hazards of clinical trials
• No need for FDA to stretch itself further monitoring new biologics manufacturing facilities –which are notoriously difficult to run well

It wouldn’t even be that bad for biologics companies. They’d already have earned their profits during the patented life of the product, and would retain 100 percent market share post-patent expiration. They can’t really complain about the government interfering with the free market, considering that patents are granted by the government in the first place.

The only real losers in this plan would be generic biologics companies. Since the industry doesn’t even really exist yet, now is a good time to implement my scheme.

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In Part 3 of this series I analyzed the candidates’ positions on expansion of pubic programs. In this post I assess the candidates on parts C, D, and E of the Kaiser Family Foundation’s health08.org framework: C. Premium subsidies to individuals, D: Premium subsidies to employers and E: Tax changes related to health insurance.

First, here is the Kaiser summary:

C. Premium subsidies to individuals

McCain

• Provide a refundable tax credit of up to $2,500 (individual) and $5,000 (families) to all individuals and families for the purchase of health insurance
• Provide income-related premium subsidies, in addition to the tax credit, to individuals enrolled in the Guaranteed Access Plan. [Note: this plan will be discussed in Part 5] 

Obama

• Make federal income-related subsidies available to help individuals buy the new public plan or other qualified insurance

D. Premium subsidies to employers

McCain

• No provision

Obama

• Provide small businesses with a refundable tax credit of up to 50 percent of premiums paid on behalf of their employers if employer pays a “meaningful share” of the cost of “a quality health plan”
• Provide federal subsidies to partially reimburse employers for their catastrophic health care costs if the employers guaranteed that premium savings would be used to reduce employee premiums

E. Tax changes related to health insurance

McCain

• Reform the tax code to eliminate the exclusion of the value of health insurance plans offered by employers from workers’ taxable income
• Allow individuals owning “innovative multi-year policies” that cost less than the tax credit to deposit the excess into expanded HSAs

Obama

• No provision

The candidates’ positions on these topics present quite a contrast. McCain’s positions are bold, radical and sweeping. Obama’s are modest and targeted. Overall I think Obama’s positions are better because they build on rather than undermine the employer-sponsored model in place today, but a modified version of McCain’s plan –along the lines of something that would actually be passed by Congress– might be superior.

A centerpiece of McCain’s program is to eliminate the tax deduction for employer-paid health insurance and replace it with a tax credit to individuals and families. He’d also provide some additional subsidies to lower-income people, especially to those whose pre-existing conditions make insurance unaffordable.

As McCain points out, employer-deductibility of health insurance costs is unfair to those who lack employer coverage. The problem with eliminating such coverage is that it will erode employer-sponsored insurance and increase the number of uninsured. Meanwhile the tax credit won’t be high enough to pay for health insurance, so many employees who lose their health insurance are going to be stuck. That’s especially true for people with pre-existing conditions, who benefit today from being part of larger risk pools thanks to their employers. Overall inefficiency will rise, too because administrative expenses for individual plans are higher than those for large groups.

What I’d like to see instead is a cap on deductibility, preferably not indexed to inflation at all or indexed at a low rate. That would correct the unfairness over time without causing employers to dump health insurance. It would also provide an incentive for health plans to come up with insurance products that stay below the cap –perhaps containing costs as they do so.

McCain’s tax credit is a lot better than a tax deduction because it’s of equal value to people in high and low tax brackets. So I give him points for that. I also like the emphasis on multi-year policies. Those are good because they align the incentives of members and plans. For example, a health insurer that’s responsible for a member’s costs five years into the future rather than one is going to have an incentive to invest more in prevention and wellness, which will lower overall costs and keep the member healthier.

Obama’s positions are very clearly focused on reducing the number of uninsured. Individual subsidies are useful to make insurance affordable and the emphasis on tax breaks for small businesses is well-targeted. Almost 100 percent of large companies already provide health insurance, it’s the smaller ones that don’t. And small employers are often worried about having a catastrophic loss that would drive up their premium. By taking that risk off their books –in exchange for keeping costs down for employees– Obama is trying to increase the percentage of employees who take insurance that their employers offer.

The various Obama provisions do a good job of reducing the number of uninsured, but it might just be simpler to skip the tweaking and propose a single-payer system. Obama’s too smart to propose something suicidal like that, however.

Obama’s plan would be better than McCain’s if enacted as described, because it would reduce the number of uninsured while McCain’s plan would have the opposite effect. However if McCain’s proposal led to a cap on employer deductibility as a compromise –which seems likely– I’d favor it.

Stay tuned for Part 5: Creation of insurance pooling mechanisms.

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A major explanation for the dynamism of the US economy is the flexibility of the labor market. Compared with Europeans, Americans have historically been more willing to leave established employers to start their own companies or work for start-ups, and to move to other cities and states to find work. Companies also face fewer restrictions on hiring and firing. There’s no requirement for big severance payments in the US, for example.
Although it can mean more turmoil for individuals in the short-term the free-market approach generally promotes growth, prosperity and lower unemployment overall. It’s also part of the pursuit of happiness: individuals don’t find themselves chained to jobs they hate.

But the current situation in health care is undermining this advantage of the US economy and the US way of life. As today’s Wall Street Journal describes (Anxiety Over Health Insurance Shapes Life Choices) people are doing extreme things just for health insurance like getting married (or delaying divorce), restricting where they live, or working for companies where they’d rather not be. The article focuses on the insurance aspect of this: it’s generally easier and cheaper for people, especially those with pre-existing conditions, to get insurance through their employer rather than as individuals. But overall cost is also a problem. People get less bent out of shape about disparities in other expenses, because the overall amounts of money are generally lower.
As I’ve argued in the past (When socialism is good for capitalism), socialistic sounding policies such as Massachusetts’ guaranteed issue and community rating can actually encourage entrepreneurial activities by putting big companies, small companies and individuals on a roughly equal footing. It’s at least as significant as equal tax treatment of health insurance for companies and individuals. The downside is that such policies are often accompanied by a paternalistic element –namely lots of mandates– that drive costs up.

I don’t advocate nationalized health insurance, but I do think it’s at least as compatible with capitalism and the free market as our existing system.

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Jeffrey Lapides, PhD, a business consultant and physicist who writes Political Sunshine Government Sunshine, has posted an analysis that goes beyond the oft-quoted 40+ million people in the US without health insurance to estimate the number of people who want health insurance but can’t get it. It’s a useful analysis because it begins to help policymakers (and insurance companies) devise relevant approaches.

Rather than relying on surveys of the uninsured Lapides uses bottom-up calculations to reach an estimate of about 42 million uninsured (lower than the 47 million we often hear, but he has his reasons). He then analyzes a variety of segments:

• Wealthy people who forgo insurance for whatever reason
• Young adults who choose not to buy
• Younger people in between jobs
• Older people in between jobs
• Those eligible for government programs such as Medicaid but unaware

Using data where available and some pretty good guesses where not, Lapides concludes that the number of people who want health insurance but can’t get it is about 23 million, still a big number but quite different from the original figure.

Another way to look at the number is the 19 million (=42 million – 23 million) who could get health insurance but choose not to. This is roughly the number of people who could be added to the insurance roles with an unsubsidized mandate and guaranteed issue.

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The mood in the pharmaceutical development world is not good. Fewer new products being approved despite rising R&D expenditures, and many marketed products are under threat because of safety and efficacy concerns.

There are several reasons for the dearth of new products and rising cost of pharmaceutical development. One major challenge is the FDA’s requirement for so-called Thorough QT (TQT) studies to determine whether a drug may induce prolongation of the QT interval on ECGs in the healthy volunteers who comprise the Phase I study population.

As Alexandra (Sasha) Latypova and Anthony Fossa from iCardiac Technologies, Inc. –a company whose board I serve on– write in the current issue of Drug Discovery & Development:

The purpose of the TQT study, as stated by regulators, is to decide whether more extensive ECG monitoring is necessary in subsequent development… In reality, however, a positive TQT study or even QT prolongation detected in preclinical studies most often leads to termination of the drug development program, as both sponsors and regulators have become increasingly risk-averse in the wake of the recent, high-profile, market withdrawals of several blockbuster drugs.

Prolonged QT as a biomarker has been widely-criticized for its high rate of false-positives and false-negatives. Consider the case of cisapride (Propulsid), a drug for gastrointestinal motility disorder. When the drug was evaluated for cardiotoxicity in humans using FDA-required testing, cisapride exhibited a small prolongation of the QT interval and consequently was considered safe for marketing. Once on the market, cisapride was associated with numerous arrhythmic events, including 341 cases of life-threatening cardiac arrhythmias with 15 sudden-cardiac arrests over a period of six years.

[T]he litigation costs of false-negatives can be astronomical—class action suits and legal fees alone for cisapride exceeded $100 million. The conservative regulatory guidance has now dramatically reduced the probability of a false-negative QT study. However, false-positive QT studies produce an enormous “silent” burden on society. A false-positive QT study may cause an unnecessary termination or adverse labeling for an inherently safe drug and thus lead to lack of access to new medicines for patients that need them while at the same time contributing to the skyrocketing costs of new drugs. Some examples of false-positive QT drugs that did make it to market include moxifloxacin (an antibiotic), amiodarone (an anti-arrhythmic), tamoxifen (anti-neoplastic) and ziprasidone (an antipsychotic). All are associated with significant QT prolongation but do not have pronounced arrhythmogenic properties at therapeutic doses.

iCardiac is developing advanced cardiac safety biomarkers in order to overcome the limitations of TQT. Success will increase the chance that the next moxifloxacin, amiodarone, tamoxifen and ziprasidone make it to market, while protecting us from the next cisapride. I look forward to doing my part to help the company succeed.

I interviewed iCardiac’s Chairman and CEO, Mikael Totterman last year.

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Two Congressional Reps have introduced a bill to create a pathway for generic biopharmaceuticals. It seems to me like a big waste of time.

The bill has the following key provisions, according to Kaiser Daily Health Policy Report:

• 12-14.5 years of market exclusivity for the original product before generics can appear
• Clinical trial requirements for follow-on products, which could be waived by FDA (I don’t have more details on this yet)
• Exempting “select agents and toxins” like Botox from competition, for “national security” reasons. (Maybe it will keep the enemy wrinkly-faced?)
• Granting the FDA the authority to declare medications as interchangeable

I can’t imagine how this bill would have any significant impact on drug costs. It seems likely to severely limit the number of biotech drugs facing serious competition, which will keep prices up. The only beneficiaries will be brand name biotech companies and a few generic biotech companies who get drugs approved and enter into an oligopolistic market environment.

As I’ve said before, a better idea would be to simply regulate the prices of biotech drugs once they’re off patent (or have been on the market for a certain number of years). Advantages of this approach include:

• Guaranteed, predictable savings
• Elimination of risky and expensive clinical trials of follow-on products, with their potential to harm patients
• Limitation on the breadth of FDA oversight. Fewer new manufacturing facilities makes it easier for FDA to keep up
• Higher manufacturing capacity utilization for brand name companies, who will retain 100 percent of the market

The only losers will be generic biotech companies. Since that industry doesn’t really exist yet, I don’t think it’s such a problem.

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A new paper from America’s Health Insurance Plans (AHIP) takes a pro-active approach to the health care coverage debate. In Guaranteeing Access to Coverage for All Americans, AHIP addresses a number of hot button issues. Notably, the proposal would guarantee access to insurance coverage for individuals –including those with pre-existing conditions and higher than average medical costs–, allow third-party review of recission decisions and pre-existing conditions, and cap premium levels for high-risk members at 150% of the base rate. The proposal, which is modeled on existing high-risk pools, relies on states and other funding sources to ensure affordability and to encourage individuals to purchase insurance.

I like the principles outlined in the proposal. In particular, “Guarantee Access” is a pragmatic alternative to guaranteed issue and community rating. The emphasis on encouraging widespread purchase of insurance is self-serving but also a legitimate public policy goal. After all, as employers reduce coverage it’s more often younger, healthier people who lose access to coverage. That raises costs for those remaining in the risk pool, who tend to be older and sicker.

Under the AHIP proposal, individuals who are denied insurance coverage –or offered substandard coverage– can apply for the Guarantee Access program. Those whose expected medical claims are <200% of the average will receive coverage from health plans at 150% or less of standard rates. Those whose claims are expected to be >200% of the average will be eligible for a Guarantee Access Plan, again at 150% or less of the standard rate. Of course, some sort of subsidy will be required to make that work. Improvements in predictive modeling enable the health plans to more accurately place people in a specific cost category.

I expect the concepts in the proposal to be viewed reasonably favorably. They are compatible with the mainstream Presidential candidates’ views and most of the state-led reform efforts (though not, of course, with single-payer). The proposal is consistent with a push toward higher levels of coverage, promoting individual responsibility, and reducing the fear of losing access to health insurance or entering medical bankruptcy. It’s also compatible with increasing the portability of health insurance, which is key to enhancing labor market flexibility.

Expect some pushback, though, on the numbers. In particular, critics will point out that 200% is a modest threshold for putting someone in the high cost category. The proposal is also silent on how the plan will be funded.

I also wonder why AHIP calls the plan “Guarantee Access” instead of “Guaranteed Access.”

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