The Young are the Restless: Demographic
Changes under Health Reform
By Mary Van Der
Heijde and Doug Norris
Prior to PPACA,
premium price differentiations for gender, age, and other geographic variables
were permitted. Starting January 1,
2014, PPACA changes the insurance rules by not allowing rates to differ based on
gender, and must follow a maximum 3:1 rate band for age.
In a new Insight article, Milliman using the Milliman Health Cost Guidelines, looks
at how these new regulations will increase the difference between healthcare
costs and what insurers are allowed to charge in premiums, thereby raising the
potential for adverse selection as younger individuals seek other
alternatives. Milliman says that plans
will be allowed to vary rates by area, tobacco use and family size but these
factors are unlikely to offset this effect – in reality much of the
restriction’s impact is caused by moving to unisex rates.
article offers insight into the potential adverse selection that occurs when
implementing PPACA regulations. Milliman
says since the oldest people who purchase insurance may only be charged a
maximum of three-times as much as the youngest people, the changes are
significant because the underlying claim costs do not align so neatly. In fact, men and women have different costs
over the course of their lifetimes, and the cost ratio of oldest to youngest is
currently more than 3 to 1. Milliman
says after accounting for unisex pricing, the expected claim cost ratio between
the oldest and youngest adult cohorts is approximately 4.2:1.
concludes that PPACA changes will result in higher premiums for some and lower
premiums for others, and will create challenges for insurers in managing their
Can you think of another name for “false speech?”
G.Michael Bogle USA Senior Care Network President & CEO
The program is a classic win-win-win if there ever was one – seniors pay less for hospital care and even seniors who choose not to take advantage of the program receive discounted premiums, insurers receive savings on their medical costs, and hospitals receive increased patient volume. Despite these advantages, Mary Beth Senkewicz, Chair of the NAIC’s Senior Issues Task Force (SITF) sought to issue a state alert and bulletin claiming that USA’s Medicare supplement hospital network, and Part A deductible waiver program, violated federal and state law. Specifically, Ms. Senkewicz argued that the program violated the standardization requirements for Medicare supplemental plans. This despite CMS Acting Administrator Charlene Frizzera specifically rejecting this assertion in a written response to the NAIC. She found that “this particular network arrangement does not violate the standardization provisions” under federal law.
Ms. Senkewicz continued to pursue efforts to shut down USA’s program, and drafted a state alert and bulletin to persuade state regulators to disallow use of these network arrangements. Her actions were significantly damaging USA’s business relationships, and reluctantly USA was forced to file suit against the National Association of Insurance Commissioners (NAIC) and Mary Beth Senkewicz in federal court. USA’s suit sought a temporary restraining order, temporary injunction and permanent injunction to prevent the NAIC from issuing a bulletin and state alert claiming that USA’s Medicare supplement hospital network, and Part A deductible waiver program, violated federal and state law. In order to avoid the temporary injunction hearing, the NAIC agreed to refrain from taking any action on the above mentioned documents in exchange for USA withdrawing its request for a court ordered temporary injunction.
USA presented the judge in the Federal District Court for the Western District of Texas evidence with statements supporting USA’s product and its legality from insurance commissioners who held leadership positions with the NAIC, and multiple federal opinions favorable to USA’s product that have been issued by the Office of Inspector General of the Department of Health and Human Services (OIG) and The Centers for Medicare and Medicaid Services (CMS). In spite of such evidence and the clear legality of USA’s product under the Social Security Act, USA alleged, the NAIC continued to make contrary statements to the detriment of USA’s business.
In order to sue in federal court, USA’s lawsuit claimed that the NAIC was involved in commercial speech and, therefore, subject to the prohibition of false advertising under the Lanham Act. USA alleged that the Lanham Act requirement of “commercial speech” was met because the NAIC intended to use its bulletin and state alert as a vehicle for boosting its sales of publications and subscriptions and argued that such statements were intended to cause state commissioners to require additional filings, through SERFF, which would also increase the NAIC’s revenues.
In its complaint USA claimed that in order for Med Supp carriers to understand if USA had in fact violated federal and state law, as the NAIC had claimed, the carriers would need to purchase certain documents referenced in the bulletin and alert and that the NAIC sells those.
The NAIC and Ms. Senkewicz filed for summary judgment and asserted that USA lacked evidence to show the NAIC’s commercial purpose and that the NAIC, as a non-profit organization, could not participate in commercial speech. USA’s argument in rebuttal was the NAIC has been involved in commercial speech because the NAIC is clearly a significant commercial business, and has damaged USA and clients severely. Indeed, according to USA’s evidence, during 2010, the NAIC’s assets increased from $66,701,531 to $77,484,575 and the NAIC, as of December 31, 2010, had assets that exceeded liabilities by $67,806,442. Additionally, SERFF alone, in 2010, accounted for $3,049,113.78 in net profits.
In addition to alleging that the NAIC violated the Lanham Act, USA claimed that the NAIC’s actions resulted in state torts, including Business Disparagement, Tortious Interference with Existing Contracts, Tortious Interference with Prospective Business Relations, Fraud and Negligent Misrepresentation, Conspiracy, Negligence and Gross Negligence.
Ultimately, the federal district court determined that the NAIC’s statements did not violate the Lanham Act and thus lacked federal question jurisdiction. The decision did not make a determination of the merits of any of the state torts. The court simply declined to exercise federal jurisdiction over USA’s purely state law claims and dismissed the case. The court dismissed the case without prejudice to USA pursuing its state law claims, which USA is in fact doing.
Unfortunately, the legal press misreported the results of this case – causing further harm. Law 360 erroneously published an article on April 28, 2011 in which it was reported that the NAIC “won summary judgment in a false advertising suit against it” and that the federal judge in his order indicated that “Defendants are free to engage in core speech about matters of public concern—even false speech—without being subject to Lanham Act liability” because the NAIC has certain First Amendment protections as a non-profit association, the court said.
Although the Law360 article indicates that the NAIC “won,” fortunately the NAIC was only successful on a very limited motion related to USA’s Lanham Act cause of action. Later, the court amended its original order to expressly point out that USA’s state law claims and declaratory judgment claims had not been ruled on and could be brought in state court—a case which is now pending. In addition, since the publication of the Law360 article, the federal judge’s ruling on USA’s Lanham Act claim has been appealed to the Fifth Circuit Court.
While the federal appeal and the state lawsuit are in process, the agreement which prohibits the NAIC from taking any adverse action regarding USA’s program remains in effect.
Provisions of the health care law may be crumbling before our eyes. The law, just passed last year and not even close to fully implemented has already been the subject of efforts to make changes (by both sides), admission that pieces of the law are unsustainable, and numerous court challenges. One of the Obama administration’s efforts to support the law is to grant temporary waivers from its implementation. Maine has now received permission to delay implementation of the medical loss ratio requirements. As reported by the Portland Press Herald:
The U.S. Health and Human Services department announced today it’s
delaying for three years a requirement that insurers spend 80 cents to
85 cents of every premium dollar on medical care and quality improvement
after one of three insurers offering individual plans in Maine
threatened to withdraw from the state.
Maine is the first state to receive such a waiver.
Similar requests are pending for Nevada, Kentucky and New Hampshire.
MEGA Life and Health Insurance Co. has 37 percent of the state’s
individual market. Maine’s insurance superintendent says MEGA would
probably withdraw if it had to meet the federal standard. Maine’s
current standard is 65 percent.
HHS posted 126 new waivers on Friday, bringing the total to 1,040
organizations that have been granted a one-year exemption from a new
coverage requirement included in the healthcare reform law enacted
almost a year ago. Waivers have become a hot-button issue for
Republicans, eager to expose any vulnerabilities in the reform law.
In order to avoid disruption in the insurance market, the healthcare
overhaul gives HHS the power to grant waivers to firms that cannot meet
new annual coverage limits in 2011. The waivers have typically been
granted to so-called “mini-med” plans that offer limited annual coverage
— as low as $2,000 — that would fall short of meeting the new annual
coverage floor of $750,000 in 2011.
This list of waivers make clear that the administration is doing everything in its power to preserve the health care law as long as possible — and refusing to acknowledge the faults in the law.
One of our consultants, Kevin Wrege, summarized the impact of Judge Vinson’s ruling. His analysis is listed below:
– during this seven day period, his decision is stayed, meaning that the plaintiffs (and everyone else) must comply with the new law in all respects.
– importantly, assuming the DOJ files its appeal, as ordered, within that seven day period, the judge’s order will remain stayed — or on hold — while the appeal process proceeds. (If it fails to file within that 7 day period, the 26 states who brought the suit are no longer bound by the law.)
– in light of this ruling, the appeal process may move forward at its normal pace. This is because the law can continue to be implemented unless the DOJ misses the seven day deadline. However, Judge Vinson has urged that the appeal process be expedited, even to the unlikely extent of pushing the case directly to the Supreme Court.
– it’s reasonably clear from the text of the judge’s ruling that he thinks the DOJ is stalling, which, in his mind, explains why they waited four weeks to file their “request for clarification.” Presumably, they waited so long, in part, because the longer they drag the process out, the more time passes as the vast majority of states and the federal regulators move forward with implementation decision making.
During the health care debate Republicans released this report (here) that stated:
Looks like that 16,500 new IRS agents may not be so far off after all.
For all the prattle about how Democrats are confident the mandate
will survive a constitutional challenge from more than half the states,
they know a Supreme Court decision is a crapshoot, given the four-right
four-left split and the unpredictability of Justice Anthony Kennedy. If
the justices decide the mandate is unconstitutional, there is no telling
how much of the rest of the legislation they might also kick out due to
the bill’s lack of a severability clause.
Dr. Matthews then highlights the political solution to the bill — The Weyden-Brown bill. As described by Ezra Klein in the Washington Post:
This morning, Sens. Ron Wyden (D-Ore.) and Scott Brown (R-Mass.)
introduced the “Empowering States to Innovate Act.” The legislation
would allow states to develop their own health-care reform proposals
that would preempt the federal government’s effort. If a state can think
of a plan that covers as many people, with as comprehensive insurance,
at as low a cost, without adding to the deficit, the state can get the
money the federal government would’ve given it for health-care reform
but be freed from the individual mandate, the exchanges, the insurance
requirements, the subsidy scheme and pretty much everything else in the
Here we go again with the media doing the dirty work of the Democrats on a health care debate. The impression left from the discussion seems to be that insurance is largely an unregulated wild west market rife with massive abusive and fundamental structural problems. But the media is focusing on problems that were largely solved before PPACA (Obamacare) was passed.
U.S. District Judge Henry E. Hudson said the law’s requirement that
most Americans carry insurance or pay a penalty “exceeds the
constitutional boundaries of congressional power.”
The 42-page ruling doesn’t mean states or the federal government must
stop implementing the law. But it is expected to give ammunition to a
broad Republican assault against the overhaul, which includes efforts in
Congress to chip away at it.
Requiring Americans to buy insurance “would invite unbridled exercise
of federal police powers,” wrote Judge Hudson, a George W. Bush
appointee in the Eastern District of Virginia. “At its core, this
dispute is not simply about regulating the business of insurance—or
crafting a scheme of universal health insurance coverage—it’s about an
individual’s right to choose to participate.”
The second discussion point is the position that the whether “lack of commerce” (i.e. not buying health insurance) is economic activity. The administration has argued that everyone will eventually receive medical care, and the financing of that care is in the public interest. The argument relies — to a degree — on looking at the population as a whole. But Judge Hudson rejected that argument as well.
Forgetting the legal issues, we remain skeptical that an individual mandate can work. Earlier this year, CAHI released an updated piece on the individual mandate, Will an Individual Mandate Solve the Uninsured Problem?. In the piece, we argue that the individual mandate can not work in the long-run and it will cause political problems:
One of the key issues — largely ignored — in the health reform debate was the impact on doctors. Proponents of Obamacare believed that the current system could handle the influx of people receiving care, and did not believe the changes would impact doctors. Investor’s Business Daily disagreed:
Four in nine doctors responding to an IBD/TIPP poll sent out in
August 2009 said they “would consider leaving their practice or taking
an early retirement” if Congress passed what has become known as
ObamaCare. That means as many as 360,000 physicians have plans to be
doing something other than treating the growing number of patients in
The doctors also told us — 67% to 22%, with 11% not responding — that
they expected fewer students to apply for medical school in the future
if the plan became law.
Given these views, it’s no surprise that 71% were doubtful that the
government would be able to cover the 47 million uninsured Americans
with better care at lower costs, which ObamaCare supporters have
Other findings from our poll of 1,376 doctors included: six in 10
agreeing that the Democrats’ plan would strip drug companies of the
incentives they need to make lifesaving pharmaceuticals, and 65%
believing that a government overhaul would lead to lower-quality care
“Despite the high profile nature of the health reform discussion,
physicians are equally concerned over the impact of SGR on their
practices,” said Walker Ray, MD, Research
Committee Chair. ”The fact that SGR was not addressed as part of this
year’s reform effort shows that we don’t have a comprehensive solution
yet, and also that doctors simply didn’t have a voice at the table
during the reform debate. That needs to change.”
Key research findings include:
Perhaps they should have taken the popular version of the doctor’s oath to heart. “First, do no harm.”
Health Reform News
Health Reform Lawsuit Update
A number of groups and politicians, including U.S. senators, representatives, governors, and state legislators — from both sides of the political spectrum — have filed amicus briefs in the Florida lawsuit. Read more at http://politi.co/9Kw0su
A federal judge in Ohio ruled on November 24 that a separate lawsuit can start winding its way through the courts there. The ruling in Ohio will provide another venue for defenders and critics of the health reform law to make their arguments. Judge David Dowd of the U.S. District Court for the Northern District of Ohio dismissed three claims in a case brought by the conservative U.S. Citizens Association but agreed to hear arguments that the law’s individual mandate violates the Constitution’s Commerce Clause.
A Virginia judge threw out a lawsuit against health reform brought by Liberty University on November 30. The university argued not only that Congress usurped its power with the individual mandate and employer requirements, as other suits have done, but also argued that the legislation would allow for the federal funding of abortions, a violation of its religious beliefs. It’s the second time a district court has upheld the legislation. Read more at http://politi.co/e8gToH
Health Reform Regulatory Update
Federal officials announced on November 15 that employers would be able to switch insurance carriers without losing their “grandfathered” status under the health reform law as long as they kept their benefits essentially the same. Read the Federal Register notice at http://edocket.access.gpo.gov/2010/pdf/2010-28861.pdf.
Comments are due December 17.
On December 1, the interim final rules implementing the medical loss ratio standards were published in the Federal Register. The regulations are effective January 1, 2011. Read the notice at http://edocket.access.gpo.gov/2010/pdf/2010-29596.pdf.
Comments are due January 31, 2011.
The growing number of limited medical plans that are receiving waivers from the Department of Health and Human Services for 2011 now face some additional reporting requirements. HHS guidance provides a one-year pass from complying with the health reform law’s mandated minimum annual dollar limit requirements to provide participants with written notification stating the annual limit requirements and explaining that the plan does not meet those requirements, but that it qualified for a one-year waiver. Read the guidance at
HHS and the Labor Department issued a request for information on November 17 to assist the departments in planning and developing the federal external review process in instances where there is no applicable state process. Read the Federal Register notice at http://edocket.access.gpo.gov/2010/pdf/2010-28876.pdf.
Comments are due December 8.
On November 18, HHS released its preliminary guidance on health insurance exchanges. Read the guidance at
CMS announced on November 15 that it wants to get some more public input before it launches rulemaking on contracting with “accountable care organizations” (ACOs), a new form of organization meant to spur more-efficient, higher-quality care by eliciting greater teamwork among providers. Read the Federal Register notice at http://edocket.access.gpo.gov/2010/pdf/2010-28996.pdf.
Comments are due December 3.
In related news, ACOs got a cautious nod of approval from the Medicare Payment Advisory Commission (MedPAC) recently. However, the Commission said ACOs must be carefully structured to get the job done. The commission said in a letter to CMS that in order to work, ACOs can’t simply be given bonus payments if they meet goals for controlling costs and improving quality — they must also pay for some of the overruns if they exceed the spending target they are given.
Four physician groups have outlined 21 principles they want to be considered when building the administrative structure of ACOs. The document was put together by the American Academy of Family Physicians, the American Academy of Pediatrics, American College of Physicians and the American Osteopathic Association. Read the principles at http://bit..ly/byBza3
Congress is in the 2nd part of its lame duck session straddling a week off for Thanksgiving. The House and Senate approved a 1-month extension of Medicare payment rates to physicians, meaning the fees paid to doctors will again face a 20 percent or more cut as of January 1. But neither of the amendments attempting to repeal the 1099 tax reporting requirements passed in the Senate on November. Sen. Johanns’ (R-NE) amendment, which was paid for with unspent federal funds, failed 61-35. Sen. Baucus’ (D-MT) repeal amendment, which was not paid for, failed 44-53. Both required 67 votes to suspend the rules. The rest of the session is expected to focus on must-pass legislation to keep the government running until the next Congress convenes in January. No other significant health care legislation is expected to be considered.
The Senate Committee on Commerce, Science and Transportation held a hearing on December 1 on the impact of the medical loss ratio requirements on “mini-med” plans, pressing on whether the limited benefit packages, usually offered to lower-income restaurant and retail workers, are more harm than help for consumers. Chairman Rockefeller has spent months pouring over data on the plans’ premiums, what benefits subscribers get in return and even digging up old advertisements that position the plans as a way to tout health benefits while paying only a few claims.
Senators Scott Brown (R-MA) and Ron Wyden (D-OR) introduced legislation that would allow states to seek a waiver of the health reform law as early as 2014 instead of 2017 as the health care reform law requires. The law permits states to set up health care systems without a mandated purchase of health insurance, as long as they meet minimal requirements established by the Department of Health and Human Services. States can begin applying for mandate waivers in 2017, three years after the individual mandate is set to take effect. The bill is significant for two reasons: (1) it’s an effort by a Senate Democrat to ease one of the reform law’s requirements; and (2) it’s the first Republican-sponsored effort to modify — rather than repeal — a provision in the law. Read more at http://www.politico.com/news/stories/1110/45316.html.
Under political pressure as a result of the new health law, Sen. Ben Nelson (D-NE) has asked the Government Accountability Office to study alternatives to the controversial mandate requiring most Americans to obtain coverage. The request is significant in that it could signal that Nelson is willing to work with Senate Republicans who want to repeal and replace unpopular parts of the health law, like the individual mandate that takes effect in 2014. Nelson spokesman Jake Thompson said the senator isn’t backing away from the mandate, but is “looking at possible replacements” to get the largest number of people to buy insurance. Read more at http://www.kaiserhealthnews.org/Stories/2010/November/17/ben-nelson-individual-mandate-health-insurance-short-take.aspx
California Fines Insurers
The California Department of Managed Health Care has fined health insurers $5 million in aggregate and accuses the companies of improper payment of health care claims.
Michigan Blue Cross and Blue Shield Accused of Bullying the Market
When Michigan BCBS lost a prominent lawsuit brought by TheraMatrix — the firm accused BCBS of trying to shut down the company by eliminating it from the BCBS networks — it confirmed the concerns of medical providers and BCBS competitors that BCBS was too big. The Detroit News looks closely at the issue of competition in Michigan and the size of BCBS.
Pawlenty Steps up Attack on Health Reform
In front of a likely presidential run, Gov. Tim Pawlenty (MN) continues to attack the health law passed earlier in the year. The state has now been added to the multi-state lawsuit against PPACA.
Oregon Calls for State Flexibility in Health Reform
Unexpectedly, Oregon is leading the call to move health reform back to the states. The state, which passed its own version of health reform in 2009, is calling for the ability of the state to opt-out of much of the federal health reform bill. They believe the increased flexibility will lead to lower costs, and a better program.
Will Texas Ditch Medicaid?
State lawmakers are looking seriously at opting out of the federal Medicaid program. At issue is the expansion of the program under PPACA, and the additional state costs. Many Texas legislators believe the state can not afford the expansions proposed in PPACA. However, losing the federal matching money for the whole program may prove daunting to those looking for Texas to take the lead on Medicaid.
District of Columbia Considers Medical Loss Ratios
The City Council will consider on second and final reading a rating bill (B18-792) that would require carriers to meet so-called “non-aggregate” medical loss ratio (MLR) standards of 70 percent (individual and small group markets) and 75 percent (large groups), among other things. The industry was able to insert a provision allowing carriers to seek waivers upon good cause shown. The engrossed version of the bill can be found at http://www.dccouncil.washington.dc.us/images/00001/20101116105629.pdf
Florida OIR Seeks Waivers for Insurers
The Florida Office of Insurance Regulation (OIR) recently announced that it plans to ask the federal government for a waiver that would give health plans more time to meet medical loss ratio (MLR) restrictions on how premium dollars are spent. Three states — Maine, Iowa and South Carolina — have already applied for relief and more are expected to do so.
The OIR has expressed concern that the MLR ratios could destabilize the Florida marketplace because smaller companies might not be able to meet the requirement. It also is worried that insurance agents could get squeezed out of the market because their fees aren’t considered medical costs.
Louisiana Unsure About Exchange
Louisiana is struggling to decide whether it will run its own health care exchange, and the state’s secretary of health and hospitals said he wants more information from federal officials before deciding. Bruce Greenstein listed two concerns: “One is…the viability and long-term sustainability of the exchanges, and the second…is a little more basic in execution. We still don’t have any guidance from CMS and it certainly will be a long time until we see regs, which makes it difficult to conduct the analysis.'’ Greenstein said state officials are not leaning one way or another until they finish their analysis.
Trends in State Mandated Benefits
Because CAHI closely monitors mandate legislation nationwide, we see trends developing long before many others. Our new Policy Trends paper, “Trends in State Mandated Benefits,” identifies and discusses some of the current mandates we see appearing in the states, such as those for autism, diabetes and various screening tests.
As a companion piece to our more comprehensive study, “Health Insurance Mandates in the States,” this paper can help policy-makers understand the true impact mandates may have on the cost of health insurance.
State Medicaid Reform after Obamacare
In a recent Heritage Foundation WebMemo, Nina Owcharenko suggests that states should not remain silent or complacent about the Patient Protection and Affordable Care Act (PPACA), especially the law’s new Medicaid provisions. States should push back and forge ahead with transformative reforms that would fix the broken Medicaid program.
Read the full report at http://thf_media.s3.amazonaws.com/2010/pdf/wm3062.pdf
Should Your State Establish an Obamacare Health Insurance Exchange?
In the pre-Obamacare world, exchanges were suggested as a way to get around the major government failure in American health care. But John Graham of the Pacific Research Institute points out that states establishing an Obamacare exchange are making a lose-lose bet. He contends that if Obamacare persists, exchanges will become bloated administrative nightmares. And if it is defeated, states will have wasted time and energy.
Read the full report at http://www.pacificresearch.org/docLib/20101025_HPP10.2010_F.pdf
New CDHP Analysis
According to Mercer’s National Survey of Employer-Sponsored Health Plans, enrollment in consumer-driven health plans (CDHPs) grew from 9 percent of all covered employees in 2009 to 11 percent in 2010. CDHP enrollment has risen by two percentage points each year since 2006, according to Mercer’s surveys. CDHP enrollment rose fastest this year among the largest employers, those with 20,000 or more employees. Over half of these employers offered a CDHP in 2010 — 51 percent, up sharply from 43 percent last year. Enrollment rose even faster, swelling from 9 percent to 15 percent of covered employees. Read the Mercer press release at http://www.mercer.com/press-releases/140
According to the HHS website, the government has issued one hundred and 11 waivers to the health care law (as of Nov. 1). The waivers reflect problems with the fundamental design of the law — essentially requiring employers (and insurers) to offer comprehensive (and almost no limit) health care coverage or offer no coverage at all. If the law was a victory for consumer reps claiming no insurance is better than limited benefit insurance, these waivers show the opposite — and highlight a major weakness in the law. As highlighted in the New York Times:
Last month, federal officials granted dozens of one-year waivers
that were aimed at sparing certain employers, including McDonald’s,
insurers and unions who offer plans that sharply limit the coverage they
provide. These limited-benefit plans, also known as “minimeds,” fail to
comply with new rules phasing out limits on how much policies will
provide in medical care each year.
Concerned about the potential disruption that would be created by
enforcing the new rules, the administration has granted dozens of additional waivers and also made clear that it would modify other rules affecting these policies. Last week, the Department of Health and Human Services issued more guidance,
saying it would use a different method of calculating spending for
these plans so they would be able to meet new regulations dictating how
insurers should use the premium dollars they collect.
Meanwhile, cost issues are growing for many employers. The Post and Courier is reporting Boeing is increasing its cost sharing:
In a letter mailed to employees late last week, the company cited the
overhaul as part of the reason it is asking some 90,000 nonunion
workers to pay significantly more for their health plans next year. A
copy of the letter was obtained Monday by The Associated Press.
“The newly enacted health care reform legislation, while intended to
expand access to care for millions of uninsured Americans, also is
adding cost pressure as requirements of the new law are phased in over
the next several years,” wrote Rick Stephens, Boeing’s senior vice
president for human resources.
It seems clear that some of the fundamental problems with the health care law include centralization of authority, and the proposed “one-size fits all” approach. This gives rise to the perception (true or not) of cronyism, and overly bureaucratic meddling with individual insurer plans.
A far way from “If you like your plan, you can keep it”
Health Reform News
Will States Dump Medicaid?
PPACA requires states to significantly expand their Medicaid rolls over time and limits their ability to cut the program. But many states do not have the money to cover their existing programs, let alone expansion. As a result, states are now beginning to look at the feasibility of opting out of the program entirely. Read more at: http://www.palmbeachpost.com/health/state-gop-leaders-look-at-way-to-trim-1035732.html?cxtype=rss_news_194103
High Risk Pool Enrollment Anemic
Many believed that the funding for the proposed high risk pools under PPACA was going to insufficient to cover the onslaught of enrollees. Well, a funny thing appears to be happening to conventional wisdom — it appeared to be wrong. Thus far enrollment has been very slow — with 21 states enrolling less than 50 people. HHS pushed back against suggestions that the program was under-performing, claiming “it’s actually better than the [enrollment] experience with the Children’s Health Insurance Plan when it started in the late 1990s.” Read more at: http://www.nytimes.com/2010/11/05/health/policy/05risk.html?_r=2&src=me
Legal Challenges to Health Reform Law
The 20 states challenging the health care law filed a motion for summary judgment in the case on November 4, a step that was expected following a decision in October by the presiding federal district court judge to allow portions of the case to move forward. The five-page motion — which asks for a decision in the states’ favor — argues that the individual mandate to obtain insurance included in the health reform law is unconstitutional, as are provisions expanding the Medicaid program to cover millions of uninsured Americans. The Department of Justice must respond to the motion by November 23.
On November 8, the U.S. Supreme Court unanimously decided to reject a suit brought by a former Republican state lawmaker from California who was attempting to get the justices to overturn the health reform law before any federal appeals court had decided the case. What is drawing attention in legal circles is the fact that the court’s newest jurist — Elena Kagan — did not recuse herself. The Washington Post story can be found at
Revere America, a conservative group critical of the Democrats’ health reform law, has collected more than 1 million signatures calling for its repeal, the group announced October 28. The group, chaired by former New York governor George Pataki, has posted its petition online, calling for “the repeal and replacement of this law with responsible reforms.” Read more at http://thehill.com/blogs/healthwatch/health-reform-implementation/126425-conservative-group-claims-1-million-signatures-on-repeal-petition.
Health Reform Implementation
HHS is rumored to be close to releasing nearly a dozen health reform regulations in an effort to pre-empt Republican efforts to “repeal and replace” key provisions of the health reform law. The minimum medical loss ratio (MLR) regulations are a top priority following the NAIC’s release of their recommendations. Other key regulations are expected to address grandfathered health plans and guidelines on health plan rate reviews.
The U.S. Department of Labor’s Employee Benefits Security Administration posted new Frequently Asked Questions (FAQs) regarding implementation of the market reform provisions of the health reform law. The FAQs address issues regarding grandfathered plan status and other issues. Additional FAQs were previously issued on September 20, October 8, and October 12, 2010.
Federal officials are making it easier for employers in some states to obtain waivers from a requirement of the health law phasing out the annual limits many health plans impose on what they will pay out for medical care. In a new twist on a waiver policy set by the Department of Health and Human Services, a November 5 memo issued by the department says that entire states in certain cases may obtain exemptions for health plans from the higher limits required by law until the limits are eliminated entirely in 2014. Read more about the waivers at
The Institute of Medicine has quietly begun work on a crucial health reform provision: laying ground rules for the “essential health benefits” package, the set of treatments reform requires insurers to cover. Over the next 16 months, a to-be-formed IOM committee will advise HHS in determining what counts and how the list ought to be updated. This is a huge provision for just about any health lobby and IOM knows it — they’ve added a “public comment” form to the study page, which, a spokeswoman tells us, is a rarity. As one health consultant e-mails PULSE, “Let the games begin.” See the study announcement at Health
In an editorial in the Washington Times, Nina Owcharenko points out that one of the main issues with Obamacare is a fundamental shift in policy. The legislation has shifted primary insurance regulation from the states to the federal government. Sure, states still have the power to regulate — but the regulatory authority derives from the federal standards. She links the issue to the broken promises of Obamacare:
For example, it has become increasingly clear
that the approach won’t “bend the cost curve” to make health insurance
and health services more affordable. Last week, the AARP, one of the
main supporters of the bill, announced it would be shifting more health
care costs to its employees, in part because of Obamacare.
will the Obamacare model give people the kind of “choice” they
envisioned. Indeed, most of those slated to gain coverage under the law
will be herded into Medicaid, the welfare program for the poor. Others
will be coerced into mandated exchanges to buy federally approved health
Finally, despite the president’s repeated promises, the
new law won’t allow a vast number of Americans to keep the coverage they
are happy with right now.
All true and accurate. And Nina suggests a realistic solution to Obamacare:
Many believed that the funding of the proposed high risk pools in PPACA was going to be one of its biggest problems. $5 billion dollars seemed insufficient to cover all of the high risk individuals. Even the existing high risk pools appeared to require significantly more financial resources. Well, a funny thing appears to be happening to conventional wisdom — it appeared to be wrong.
Thus far, the high risk pools appear to be enrolling fewer individuals than expected. As reported by the New York Times:
Instead, after two or three months of operation in most states, the
plans have enrolled only 8,011 people, according to figures made
available for the first time by the Department of Health and Human Services. Although there are notable exceptions, enrollment in most states as of Nov. 1 was well below 10 percent of capacity.
New York and Florida, for instance, have each enrolled fewer than 300, and 21 states have fewer than 50.
In my experience, legislators have always required “risky” programs — low cost health plans, list billing, mandate-lite policies, etc — with a 6 month wait time. This was something different, it was a cost-cutting measure. The result has been very problematic for those individuals with existing medical conditions — thankfully existing high risk pools are likely providing the needed safety-net.
The solution is simple — go back to the legislation and fix it. The best way to do that is to provide the existing high risk pools with federal subsidies. But the political situation has made this more difficult for the White House. So their solution — put the high risk pools on sale! As reported by Kaiser Health News:
Trying to spur enrollment in a new health insurance program for
uninsured people with pre-existing medical conditions, the federal
government is doing something private insurers almost never do: slashing
That announcement Friday came as the government released the latest enrollment figures
for these high risk insurance pools, which have attracted far fewer
customers than expected. The program, established under the health law, began signing up enrollees in August and September. Not surprisingly, the states with lower rates have had higher enrollment.
The program is only scheduled to run until 2014, but putting these policies “on sale” at an actuarially unsupported rate may do more harm in the long term than good. Lower prices will lead to higher losses on the pool which will further cut the number of people able to access the program. In the end, Congress will have to re-think the structure of this program.
Add AARP to the list of companies informing its employees about cost increases due to health reform. As reported by the Associated Press:
In an e-mail to employees, AARP says health care premiums will increase by 8 percent to 13 percent next year because of rapidly rising medical costs.
And AARP adds that it’s changing copayments and
deductibles to avoid a 40 percent tax on high-cost health plans that
takes effect in 2018 under the law. Aerospace giant Boeing also has
cited the tax in asking its workers to pay more. Shifting costs to
employees lowers the value of a health care plan and acts like an escape hatch from the tax.
“Most plan co-pays and deductibles have been
modified,” Jennifer Hodges, AARP’s director of compensation and
benefits, wrote employees in an Oct. 25 e-mail. “Plan value changes were
necessary not only from a cost management standpoint but also to ensure
that AARP’s plans fall below the threshold for high-cost group plans
under health care reform.”
AARP officials said medical inflation is the main reason employee costs will be going up. The health care law is “a small part,” said David Certner, legislative affairs director.
Of course, this is in part a political statement. We’ll never know the precise impact of health reform, but what is clear is that it is not decreasing costs as promised.
to Health Reform
U.S. federal district judge Roger Vinson in Florida
has allowed a multi-state lawsuit challenging the constitutionality of the
health care law to proceed. The two major counts he’s letting through: the
states’ challenge to the controversial requirement that nearly all Americans buy
insurance and a required expansion of the Medicaid program. Vinson criticized
Democrats for seeking to have it both ways when it comes to defending the
penalty/tax for not buying insurance. Read more at http://politi.co/9i8qwA
U.S. federal district judge
Henry E. Hudson heard oral arguments on October 18 in Virginia’s case against
the federal government’s health care law, which requires that nearly all
Americans purchase health insurance beginning in 2014. Hudson says he’ll rule by
the end of the year on whether Congress overstepped its constitutional authority
when it required nearly all Americans buy insurance coverage. If he rules that
the mandate is unconstitutional, Virginia Attorney General Ken Cuccinelli wants
him to block implementation of the entire law.
Read more at http://www.politico.com/news/stories/1010/43760.html
EBSA Q&A Posted — The Employee Benefits Security
Administration (EBSA) has come down on the side of health plan sponsors in
several newly posted answers to questions about the Affordable Care Act. EBSA,
an arm of the U.S. Department of Labor, has discussed topics such as application
of the rules governing matters such as grandfathered health plans, rescissions
and abuse of the mandatory preventive care coverage requirements. Read more at
frequently asked questions
(FAQs) about the Affordable Care Act.
Plan Summaries Cause
Controversy — A requirement that insurers summarize their health plans in a
short brochure has led to a drawn out clash between industry and consumer
advocates over how to best define health insurance benefits. The little-noticed
provision in the health reform law calls for insurers to outline their health
insurance plans on a standardized, four-page form with information about costs,
benefits and definitions of commonly used terms. The new documents would not
come into use until 2013, but regulators have already spent months debating what
the new form will look like and how common insurance terms will be defined.
Read the POLITICO
story at http://politi.co/cpKQAW
Risk Pools to Advertise — Facing dismal enrollment numbers, state Pre-Existing
Condition Insurance Plans are gearing up to spend big on professional marketing
television commercials last week, featuring citizens who have already enrolled
in their plan, testifying to how they have been helped. Wisconsin is about to begin soliciting
contracts from professional marketing firms to help get the word out. State
officials are also asking outside groups to help pay the tab, tapping
unconventional funding sources to help people afford the high-risk-pool
premiums. They’re turning to a variety of sources – from local medical providers, such
as hospitals and national charities such as the American Kidney
Fund – in order to
cover as many people as possible.
Accountable Care Organizations —
The Office of the Inspector General (OIG) at the U.S. Department of Health and
Human Services Department (HHS) teamed with other agencies to organize a
workshop recently to hear participants’ thoughts on the creation of “Accountable
Care Organizations (ACOs) – a formal or informal group of
providers that will take responsibility for caring for a patient’s entire
medical care. Provisions in the health reform law encourage the Centers for
Medicare and Medicaid Services (CMS) to use ACOs to try to improve the quality
and reduce the cost of care. The provisions do not require private payers to use
ACOs, but CMS and private payers have already been testing ACOs and similar
mechanisms for getting beyond the practice of paying a separate fee for each
service provided, and private carriers often end up emulating new ideas that
work well for CMS programs. The HHS OIG workshop focused on concerns about
antitrust, physician self-referral, anti-kickback, and civil monetary penalty
laws. A transcript of the workshop can be found on the HHS
California Federal Highhttp://www.thedenverchannel.com/news/25510465/detail.html
Risk Pool Operating - Finally!
No state high risk pool was
operational by the required July 1st deadline (and neither was the federal high
risk pool), but California may be the last. California’s pool finally became
operational on October 24th. Read more at
Will Patient Protect
and Affordable Care Act Lead to Employers Dropping Coverage?
According to an article in the
Omaha World Herald, it is beginning to get very attractive for employers to drop
coverage: “While it’s too early to proclaim the demise of job-based coverage,
corporate number crunchers are looking at options that could lead to major
changes.” Gov. Phil Bredesen, D-Tenn., said the economics of dropping coverage
are “about to become very attractive to many employers, both public and
private.” Read more at
Children of Montana
State Employees on SCHIP?
The Associated Press is reporting that
Montana is considering allowing its employees children to participate in the
SCHIP program. By changing the state requirements, the children’s health care
costs will be jointly paid by the state and the federal government. Read more
Oregon Laying Out Policy Options on Health
While most states have not yet begun
their deliberations on the creation of a health insurance exchange, Oregon is moving quickly. The Oregon
Health Care Policy Board will be recommending that the state implement an
exchange run by a public corporation. The board believes the public corporation
will be more innovative and effective than a charitable organization or a state
agency. Read more at
Will The Utah Exchange Be Allowed Under PPACA?
Utahpassed its own health reform program
more than a year ago. In August 2009, the state conducted a test run of the
exchange. As a result, the state made further changes to the exchange earlier
this year. With a full roll-out coming later this year, the question remains if
their exchange will be approved by the Department of Health and Human Services.
Read more at
Next Wisconsin Governor Faces Big Decisions on
The next Governor of Wisconsin,
either Milwaukee Mayor Tom Barrett (D) or Milwaukee County Executive Scott
Walker (R), will shape the implementation of health reform in the state. Mayor
Barrett has signaled his support for health reform and the creation of a
Wisconsin-based exchange. County Executive Walkerwould instruct his attorney general
(likely JB Van Hollen (R)) to join the multi-state lawsuit against the Patient
Protection and Affordable Care Act (PPACA) but has not determined how the state
would deal with the complicated issue of the health insurance exchange.
Coalition Seeks to Replace
A state legislator and a coalition of labor unions and
consumer advocates have asked Gov. Jodi Rell to replace Insurance Commissioner
Thomas Sullivan. In an October 25 letter to Rell, the groups asked for a
replacement who is a “more consumer-oriented individual who will protect
Connecticut residents from unwarranted health insurance increases.” Democratic
lawmakers as well as Jay Angoff of the U.S. Department of Health and Human
Services have called on Sullivan to re-open a rate review for Anthem Blue Cross
and Blue Shield in Connecticut. The Commissioner recently approved a set of rate
increases as filed, including hikes as large as 47 percent. Sullivan has
responded that the Anthem rates were justified by actuarial science, and the
reason the rates went up so much is because Anthem and other carriers had to add
a number of new benefits mandated by federal healthcare reform. Sullivan has now
agreed to hold a public hearing on Anthem’s proposed 2011
Agreement Reached in
Maryland on Child-Only Policies
The Maryland Insurance Administration and some carriers
operating in the state have reached agreement on a proposal to offer child-only
policies to residents. The policies will offer coverage to children during one
of two annual open enrollment periods. Kaiser Permanente of the Mid-Atlantic
Region and CareFirst BlueCross BlueShield agreed to offer the policies pursuant
to new regulations. See the announcement from the Acting Insurance Commissioner
Massachussetts Issues Emergency
The Division of
Insurance (DOI) issued emergency regulations directing insurers to calculate and
report their MLRs consistent with the National Association of Insurance
Commissioners’ currently methodology. These regulations are a product of S.B.
2585 (2010), or Chapter 288, which established minimum MLRs for small group
coverage. The new law also requires carriers to submit an annual comprehensive
financial statement detailing carrier costs for the previous
Consumer advocates have asked Health and Human Services
(HHS) Secretary Sebelius to certify the NAIC’s MLR recommendations, now in rule
form, in their current form. NAIC consumer advocates, led by Timothy Jost, wrote
to HHS earlier this week. They also asked Sebelius not to change definitions,
issue MLR waivers or to remove agent and broker commissions from administrative
costs for MLR calculation purposes. The letter and the NAIC press release with a
link to the final MLR rule can be found at http://www.naic.org/Releases/2010_docs/naic_adopts_final_mlr_regs.htm
The USA Senior Care Network has sued the NAIC and Senior
Issues Task Force and Task Force member Mary Beth Senkewicz, alleging that the
NAIC’s “false and misleading statements” regarding its Medicare Supplement
hospital networking arrangements constitute a tortious interference with its
existing hospital contracts. The complaint seeks a temporary restraining order
prohibiting the NAIC from allegedly mischaracterizing the arrangements to the
states in draft bulletins or alerts.
On the final day of its Orlando meeting, the NAIC elected
the following officers to serve in 2011:
Insurance Mandates in the States, 2010
According to our
recently-released study, the number of state mandated benefits continues to grow
– to 2,156 nationwide, up from 2,133 last year. Any changes in state mandated
benefits will be increasingly important in a post-PPACA world as the federal
government looks at the issue of “essential benefits” and the federal and state
insurance exchanges define minimum benefit levels.
For the the full report,
including tables summarizing which states have the most mandates, please visit
NCSL’s State Actions to
Implement Federal Health Reform
In response to the federal health
reform law, many state legislatures and governors have begun setting up the
state infrastructure for implementing the new federal health law. State
implementation efforts include implementing major provisions such as health
insurance exchanges, insurance reforms, and Medicaid expansion. Legislators in
at least 40 states have also proposed legislation to limit, alter or oppose
selected state or federal actions, including single-payer provisions and
mandates that would require purchase of insurance. NCSL has a great table of
state legislative implementation efforts — www.ncsl.org/?tabid=20231
Should Your State
Establish an Obamacare Health Insurance Exchange?
Exchanges are the
hot topic of interest these days. What will they look like? Should a state
establish one? A new Pacific Research Institute study by John Graham looks at
whether or not a state should establish an Obama-prescribed health insurance
exchange. He posits that in order to protect competition, states may be better
off not establishing their own insurance exchange.
For the full report –ttp://www.pacificresearch.org/docLib/20101025_HPP10.2010_F.pdf
Bunce, CAHI Research and Policy Director
recently released the 2010 edition of “Health
Insurance Mandates in the States.” This year, our report contains two
new sections: frequently asked questions of our mandated benefit research
methodology and mandated benefit definitions which defines the terms used in the
mandate chart (and is largely based on specified enacted
to our study, the number of state mandated benefits continues to grow – to 2,156
nationwide, up from 2,133 last year. CAHI staff has tracked mandates in-house
is a sampling of the most and least mandates by state in
health insurance “mandate” is a requirement that an insurance company or health
plan cover (or offer coverage for) common — but sometimes not so common — health
care providers, benefits and patient populations. This is an important note
because oftentimes legislators only consider benefit mandates and not provider
and patient population benefits as true mandates. CAHI calls these “back door”
mandates because if you mandate the provider, the benefit must be paid by the
team of independent member and non-member actuaries has estimated that
(depending on the state, number of mandates, and type of policy) mandates can
boost the cost of a policy between 10 and 50 percent. A full state-by-state
tabulation of those mandates, plus an actuarial estimate of each mandate’s
impact on the cost of a health insurance policy are included in the
mandates can drive up the cost of health insurance, it would be easy to assume
that the states with the most mandates would also have the highest premiums.
While that may be true in some states, it is not necessarily so. Some mandates
will typically have a bigger cost impact than others depending on its scope and
frequency of use. A fact often overlooked in the mandate
makes this study timely? Policymakers are increasingly focused on how to reduce
the number of uninsured Americans and lower the cost of health insurance but
some state and federal legislators continue to pass new mandated benefit laws
that drive up the cost of health insurance and make health insurance policies
unaffordable for millions of Americans. As implementation of the new federal
health insurance law further drives up the cost of health insurance, the cost of
adding new mandated benefits will become a more important issue.
This week, the NAIC took final action on the medical loss ratio rule. Most of the commissioner’s understand that the proposed standards in PPACA will have a disastrous result on insurance markets across the country. Indeed, a number of the commissioners who voted for the rules are expected to file requests with HHS Secretary Sebelius to find transitory assistance. As highlighted in Politico, Secretary Sebelius was pleased:
recommendations are reasonable, achievable for insurers and will help to ensure
insurance premiums are, for the most part, supporting health benefits for
consumers,” Sebelius said in a statement. “Not only do they ensure consumers
receive better value for their health care dollar, they recognize special
circumstances in different markets to preserve market stability and employee
coverage as we transition to the new marketplace in
“HHS has been
very involved,” NAIC president and West Virginia Insurance Commissioner Jane
Cline said after the vote. “They have heard all the debate and discussion…as
we move forward, they’re clearly aware of what’s in there.”
The National Association of
Insurance Commissioners voted down final attempts to change the regulation and
voted unanimously to move it to the Department of Health and Human Services,
which will have to review the policies before they have the force of
Without action, the road is now clear. The federal government will takeover the regulation of health insurance.
Apparently, it is the White House that has conducted the misinformation campaign. Pres. Obama and Congressional Democrats promised no changes to Medicare despite significant cuts to the program. They argued the cuts would strengthen Medicare (perhaps we should cut their salaries to strengthen their finances), and seniors would feel no changes. The Medicare actuaries apparently do not agree. As reported by Politico:
Richard Foster, the actuary for the Centers for Medicare and Medicaid, also tells Senate Republicans that the overhaul will result in “less generous benefit packages” for Medicare Advantage plans next year. Foster is independent from the administration and non-partisan.
Democrats have long contended that Medicare Advantage plans – private insurance alternatives to Medicare – overpay private insurers, increasing premiums for everyone, and needs to be reformulated.
But Republicans say dramatic changes to the program mean some seniors won’t be able to keep their plans – a promise President Barack Obama made during the reform debate – and the GOP has made the issue part of its attempt to roll back the health law.