The administration has continued to push health reform law as a positive for the American people — despite the ongoing and clear problems with the health reform law. The administration has claimed
1. If you like your plan you can keep it. Only you can’t (please see here and here and here)
2. We can make Medicare more efficient by cutting its funding (good luck on any employers trying to sell that to your employees)
3. By adding more people to the insurance rolls, we will cut costs.
4. Seniors will not lose Medicare Advantage despite the substantial cuts.
And the list goes on. None of these claims ring true when you examine the details of health reform. Administration officials continue to unwisely claim that it is the American people’s fault, or insurers , or someone else for not understanding the bill. As reported by ABC:
With a number of polls showing a sustained level of opposition to the
Democrats’ health care reform efforts more than five months after
passage, Health and Human Services Secretary Kathleen Sebelius said the
Obama administration has “a lot of reeducation to do” heading into the
midterms.
While some surveys – namely the Kaiser Family Foundation monthly tracking poll – have suggested an uptick in support for the reforms, most other surveys continue to show a steady level of opposition to the new law that remains higher than the favorable opinions of it.
“Unfortunately, there still is a great deal of confusion about what
is in [the reform law] and what isn’t,” Sebelius told ABC News Radio in
an interview Monday.
With several vulnerable House Democrats touting their votes against
the bill, and Republicans running on repeal, Sebelius said
“misinformation given on a 24/7 basis” has led to the enduring
opposition nearly six months after the lengthy debate ended in
Congress.
“So, we have a lot of reeducation to do,” Sebelius said.
But the truth is that the bill is very complicated. Insurers are leaving the market. Most insurers will not offer grandfathered plans. No one believes that Medicare will actually be cut — and if it is cut that all services will be maintained. Voters also understand that the bill is not deficit neutral — it can’t be when you expand the number of people on government insurance.
This week Democrats finally acknowledged that their messaging on health reform was not working. As reported by Politico:
The confidential presentation, available in full here
and provided to POLITICO by a source on the call, suggests that
Democrats are acknowledging the failure of their predictions that the
health care legislation would grow more popular after its passage, as
its benefits became clear and rhetoric cooled. Instead, the presentation
is designed to win over a skeptical public and to defend the
legislation — in particular, the individual mandate — from a push for
repeal.
The presentation concedes that groups typically supportive of Democratic
causes — people under 40, non-college-educated women and Hispanic
voters — have not been won over by the plan. Indeed, it stresses
repeatedly, many are unaware that the legislation has passed, an
astonishing shortcoming in the White House’s all-out communications
effort.
“Straightforward ‘policy’ defenses fail to [move] voters’ opinions about
the law,” says one slide. “Women in particular are concerned that
health care law will mean less provider availability — scarcity an
issue.”
The presentation also concedes that the fiscal and economic arguments
that were the White House’s first and most aggressive sales pitch have
essentially failed.
“Many don’t believe health care reform will help the economy,” says one slide.
The presentation’s final page of “Don’ts” counsels against claiming “the law will reduce costs and [the] deficit.”
What’s Up Doc?
By Tory Bunce, CAHI Research and Policy Director
I broke my foot about six weeks ago. I didn’t realize it at the time when I had my bicycle accident – I thought it was a sprain and that the rest of me was pretty banged up but OK. So, a few weeks later when the foot was not healed and still swollen, I finally went to the doctor for a series of x-rays and found out it was broken in two places but that my knee, while still bruised was still hurting from the impact but no broken bones in it. Ouch. So, an air cast boot for my foot and I was good to go but would need therapy on my knee since it was hurting when I put pressure on it when kneeling.
I went to the therapy lab adjacent to the doctor’s office and was presented with a form to sign that said I was on the hook for 20% of the cost of each visit and my insurance company would only cover 30 visits for one year.
“OK., but before I sign this piece of paper that says I agree to pay 20% of the cost of each visit, I want to know what that amount will be,” I informed the front desk.
The therapy tech looked at me incredulously and asked, “Why?”
So I told her – I am not agreeing to pay 20% of the cost of something without knowing what that cost will be. It could be $10 per visit or $500 so I really needed to know.
She informed me that my insurance company had a contract with them and she was not aware of the rate they agreed upon. “We have different rates for each insurance company and Medicaid and Medicare so I really have no clue.”
So I informed her that I was not signing anything until I knew my costs up front.
The therapy tech slammed down her pen and said fine and got her boss. The business manager came out and we went through the same questions all over again. We were at an impasse so I left without making an appointment or signing their piece of paper and planned to inform my doctor, her boss, of our exchange.
The doctor suggested calling the insurance company to find out. The insurance company suggested calling the doctor since they are the ones to bill for service (they are correct). Needless to say, I got the run-around.
And that is where we left off. Does my knee hurt? Yeah, a little. But I went online and figured out through research a few exercises to work with to help stretch my knee out. So far, I am doing OK. Still thinking about therapy but only if they will come clean with my true cost upfront. I live in a rural area so the place is really the only game in town.
Why is it that under our current health care system, people are insulated from knowing the true cost of a medical visit? When I go to the pharmacy, the receipt has not only my cost but the portion that the insurance company pays – so I can add the two together and figure out the cost of the drug. The same should be applied to medical care.
Now I am not advocating for standardized rates – just published rates. Inquiring minds want to know! Some doctors do provide it – when I took my daughter to the Mayo Clinic on a regular basis, I knew my costs upfront because I was paying for things out of my own pocket or out of network and so I insisted on getting that information upfront. After a few battles I got my information.
Having moved to an Atlanta suburb from the Twin Cities, Minnesota last year, I am astonished that no one apparently questions the medical rates. Why is it that people just agree to blindly pay 20% of the cost of something if they have no idea what that will amount to? We don’t typically do that for consuming any other goods or services. We don’t go into the grocery store and select our foods without knowing upfront what the prices are. Same for haircuts – you know when you sit down the cost of your hair cut as they publish the prices or offer a consultation which you can discuss/negotiate the cost of services.
Now, before we go any further, I don’t have a consumer driven health plan like a Health Savings Account, but I do have a Flexible Spending Account through my husband’s work but regardless - the concept of knowing I am spending my own money still applies.
The bottom line is that people should know the true cost of their own medical care. It helps them make informed decisions about what is appropriate for them.
Under the new federal health care law, little is done to promote education and awareness of the true cost of medical care. HHS discusses the cost of premiums and how consumers are being taken for a ride but not the cost of medical care and what that does to premiums.
If you read notices and press releases from the HHS web site, one would believe the need for health care reform is all about the insurance companies gouging consumers. I beg to differ – it is the cost of medical care and the insulation that even I feel from the true costs of treatment.
###
We heard reports several weeks ago of a rise in the number of people dropping coverage in Massachusetts after receiving costly medical care. Economically, the individuals tended to be higher income, and were willing to pay fines and purchase coverage only when immediately necessary (taking advantage of guaranteed issue, community rating, and no pre-existing condition exclusions).
Now we have a public face of the opposite problem. Michael Merlina’s wife is unemployed, and he works for his family’s firm that does not provide health insurance. He doesn’t qualify for the free care under the state program. The gaming of the system (as highlighted above) has caused health insurance rates to be unaffordable for years. Mr. Merlina was at his wits end after being fined $2000 he can not afford. As highlighted by the Boston Herald:
With help from a few clerks, Merlina became his own lawyer and filed a lawsuit against the Massachusetts Health Insurance Connector Authority.
The 29-year-old North Reading glazier is fighting the $2,000 state fine for not having health insurance. In 2009, the first year penalties were in place, Merlina paid a $400 fine for him and his wife.
This time, he balked.
“It makes no sense to me,” Merlina told The Pulse. “I’m a hard-working, tax-paying guy who can’t afford $800 a month for health insurance, or the $2,000 penalty for not having it, and nobody seems to get this.”
Here in Massachusetts, which requires all residents to have health insurance, some working stiffs like Merlina fall through the cracks.
He’s not one of the 184,000 Massachusetts residents poor enough to qualify for the state’s mostly free health care. Nor is he lucky enough to work for a company that provides insurance.
Merlina installs windows and shower doors at his family’s glass business, which doesn’t offer health insurance to its seven employees. His grandparents and aunts have their health insurance through spouses, but that’s not an option for Merlina, whose wife has been out of work for six months.
“She’s looking, but there’s just not a lot out there,” he said.
Add Howard Dean to the list of those skeptical of an individual mandate. As highlighted by First Read: He predicted that the so-called “individual mandate” – which has “By the time this thing goes into effect in 2014, the mandate will
Dean told Chuck Todd and Savannah Guthrie that a key part of the federal
health care bill – the requirement that almost all Americans must
purchase insurance or pay a fine – is not essential to the overhaul.
been called unconstitutional by a group of state Attorneys General who
are challenging the new reform law – will be stripped out before the
legislation goes into effect in 2014.
be gone, either through the courts, or because it’s unpopular,” he said.
“You don’t need it.”
This comes as the Obamacare had two defeats last week. A federal judge ruled that the issues in the health reform bill deserve to be fully litigated. Missouri voters also overwhelmingly rejected the individual mandate by approving ALEC’s model act.
As others have reported, the bill has no severability clause
(Greg Scandlen):
Apparently there was no “severability” clause written into this law,
which shows how amateurish the process was. Virtually every bill I’ve
ever read includes a provision that if any part of the law is ruled
unconstitutional the rest of the law will remain intact. Not this one.
That will likely mean that the entire law will be thrown out if a part
of it is found to violate the Constitution.
This may or may not mean that finding the individual mandate unconstitutional could strike the whole law. The net result is that health reform may not be standing as strong a ground as we all thought at first.
Last night the state of Missouri passed thier version of the Health Care Freedom Act — an act that protects citizens from the requirement that they must purchase health insurance. Health reform — once passed anyway — was supposed to be popular, but 71% of the voters voted to reject the individual mandate. From Reuters: The fight over the healthcare law — and the individual “Proposition C will be a boon to other states that are The council helped draft the legislation in Missouri and in The Missouri measure states that no rule or law can compel Arizona and Oklahoma will have similar constitutional
mandate that requires individuals to have healthcare insurance
– is expected to be a major issue in the November
congressional elections as Republicans plan to make repeal a
major campaign theme against Democrats.
trying to repeal the individual mandate,” said American
Legislative Exchange Council task force director Christie
Herrera. “Having that grassroots groundswell will give
political courage to lawmakers.”
many other states.
an individual or business to participate in any healthcare
system, and prohibits laws that level penalties against people
who do not buy health insurance.
amendments on their November ballots to opt out of part or all
of federal healthcare reforms.
Regardless, it looks like Democrats are going to have an uphill battle to sell voters on their new health care bill.
In a major victory for opponents of Pres. Obama’s health reform plan, U.S. District Judge Henry E. Hudson refused to throw out Virginia’s lawsuit against the plan.
Unlike the other state suit, Virginia has sued the federal government to defend existing legislation on the books limiting federal power to force the individual mandate. The legislation is based on model legislation from the American Legislative Exchange Council. The Health Care Freedom Act eliminates the states (and federal) ability to force people to buy a health insurance product — a requirement of federal health reform.
From the Virginia Pilot:
Federal attorney Ian Gershengorn argued during a July 1 hearing
before Hudson that Virginia lacked the legal standing to challenge the
case, claiming an individual without health insurance coverage could
suffer a financial injury and seek relief from the courts, not a state.
Further, he told the court, imposing such a condition falls within
Congress’ power to regulate interstate commerce because at some point
all people will have a medical need that will require costly care,
whether or not they are insured.
Cuccinelli, who was present at the hearing but deferred oral
arguments to his staff, contends that he has legal standing to challenge
the federal policy because the individual coverage provision clashes
with a new state law exempting Virginians from such mandates.
It is his job as attorney general, Cuccinelli asserts, to defend
Virginia statutes. The attorney general also argues that Congress
exceeded its authority to regulate commerce by imposing the insurance
mandate. In addition to Cuccinelli’s suit, several other states have
joined together in a challenge of the federal health care plan.
Hudson wrote in his Aug. 2 opinion that the murky question of
“whether or not Congress has the power to regulate — and tax — a
citizen’s decision not to participate in interstate commerce” is one
that hasn’t been “squarely addressed” by federal courts.
And because both sides made cogent legal arguments on that point, Hudson added, he has declined to toss the case out of court.
Hudson’s opinion concluded with a call for an as yet unscheduled hearing on the merits of both sides’ claims.
Earlier this year, we heard about several insurers ceasing to offer coverage including nHealth (as reported by Richmond Biz Sense)
At least that’s according to a brief letter Richmond-based nHealth sent to insurance agents explaining the
reason behind the shuttering of the once promising local startup.
“I wanted to share with you the decision by nHealth’s board of
directors to exit the health insurance market,” wrote James
Slabaugh, executive vice president of the Richmond-based
insurance company that employed about 50 people. (Many of those were at
an office in Ohio).
Now, it appears that more companies will be dropping coverage — specifically the insurers will no longer offer policies to children. As reported by the AP:
Some major health insurance companies will no longer issue certain
types of policies for children, an unintended consequence of President
Barack Obama’s health care overhaul law, state officials said Friday.
Florida
Insurance Commissioner Kevin McCarty said several big insurers in his
state will stop issuing new policies that cover children individually.
Oklahoma Insurance Commissioner Kim Holland said a couple of local
insurers in her state are doing likewise.
In Florida, Blue Cross
and Blue Shield, Aetna, and Golden Rule — a subsidiary of
UnitedHealthcare — notified the insurance commissioner that they will
stop issuing individual policies for children, said Jack McDermott, a
spokesman for McCarty.
The major types of coverage for children –
employer plans and government programs — are not be affected by the
disruption. But a subset of policies — those that cover children as
individuals — may run into problems. Even so, insurers are not
canceling children’s coverage already issued, but refusing to write new
policies.
The administration reacted sharply to the pullback.
“We’re disappointed that a small number of insurance companies are
taking this unwarranted and unnecessary step,” said Jessica Santillo, a
spokeswoman for the Health and Human Services department.
Starting
later this year, the health care overhaul law requires insurers to
accept children regardless of medical problems — a major early benefit
of the complex legislation. Insurers are worried that parents will wait
until kids get sick to sign them up, saddling the companies with
unpredictable costs.
Blue Cross and Blue Shield of Florida issues
about 9,000 to 10,000 new policies a year that only cover children. Vice
president Randy Kammer said the company’s experts calculated that
guaranteeing coverage for children could raise premiums for other
individual policy holders by as much as 20 percent.
“We believe
that the majority of people who would buy this policy were going to use
it immediately, probably for high cost claims,” said Kammer. “Guaranteed
issue means you could technically buy it on the way to the hospital.”
The result is predictable. As we wrote in our Short Cuts : Guaranteed Issue Piece:
What is it?
Guaranteed issue requires health insurers to accept any applicant for health insurance coverage even if the
applicant has a serious medical condition. In the individual market (health insurance policies sold to individuals and
families), health insurers are not usually required to provide coverage on a guaranteed issue basis. There are some exceptions
as outlined in the federal law known as HIPAA (The Health Insurance Portability and Accountability Act of
1996) and specific state laws. However, most people receive their health insurance from either government sources
(around 27%) or employer sources (more than 60%). Health insurance coverage provided by government and to employees
is almost always issued on a guaranteed issue basis. As a result, it is only the relatively small individual health insurance
market (around 9%) that does not provide guaranteed issue rights.
Guaranteed issue laws guarantee access to health insurance, but do not limit a health insurer’s ability
to charge higher premiums to a group or individual with a chronic medical condition. Policymakers have often responded
by passing price restrictions that limit the ability to raise rates, known as community rating.
The combination of these two policies in the individual market — price controls coupled with guaranteed issue — encourage
individuals to game the system. Since in a guaranteed issue environment health insurance can be purchased at
any time, it makes little sense to purchase health insurance when healthy. Instead, it makes much more financial sense to
wait until threatened by an expensive medical condition. Once the condition is resolved, coverage can be dropped.
State Experience.
He believed that policymakers could choose any two items, but could never successfully achieve all three objectives. We could improve the quality of medical care (more credentialing, higher tech services, etc), lower costs, but in order to do both we would have to find a way to restrict access. Similarly, we could achieve universal access and high quality but costs would sky rocket out of control.
The passage of Obamacare seemed to herald the belief that this precept was not true. Pres. Obama claimed that you could keep your plan (and even add benefits), keep your doctor, AND we could lower costs, AND improve the quality of care AND provide universal access. Of course, it was all a fantasy. You may be able to break the speed limit laws without impunity (at least for a time), but the laws of economics are unbreakable.
We have seen the first actions from Obamacare. As Tory highlighted last week and I highlighted a few weeks ago, you will not be able to keep your plan. Costs are rising. Insurers have started exiting the market. Now we receive word that it is back to the restricted care of the 1990’s for many employers. As highlighted in The Medical News, it looks pretty clear Obamacare will not violate economic laws:
News outlets, including The New York Times, reported on health insurance in light of the new law: “the country’s biggest insurers are promoting affordable plans with reduced premiums that require participants to use a narrower selection of doctors or hospitals. The plans, being tested in places like San Diego, New York and Chicago, are likely to appeal especially to small businesses that already provide insurance to their employees, but are concerned about the ever-spiraling cost of coverage … The tradeoff, they say, is that more Americans will be asked to pay higher prices for the privilege of choosing or keeping their own doctors if they are outside the new networks.
“But companies may be able to reduce their premiums by as much as 15 percent, the insurers say, by offering the more limited plans.” Large employers are also interested, and the Times adds that many insurers “also expect the plans to be popular with individuals and small businesses who will purchase coverage in the insurance exchanges, or marketplaces that are mandated under the new health care law and scheduled to take effect in 2014″ (Abelson, 7/17).
And the Boston Globe reports that the “relentlessly rising cost of health insurance is prompting some small Massachusetts companies to drop coverage for their workers and encourage them to sign up for state-subsidized care instead, a trend that, some analysts say, could eventually weigh heavily on the state’s already-stressed budget. Since April 1, the date many insurance contracts are renewed for small businesses, the owners of about 90 small companies terminated their insurance plans with Braintree-based broker Jeff Rich and indicated in a follow-up survey that they were relying on publicly-funded insurance for their employees.”
Under the Patient Protection and Affordable Care Act or PPACA, as it is commonly referred, President Obama allows people to keep their current health coverage. However, the details are just emerging as to what that really means.
To the average person, keeping your current coverage is a big deal – that is, if you want it. It also allows a person time for a transition to changes in the health care system. Some people adjust well to change – others do not. To an insurer and many employers, keeping your coverage may be an administrative nightmare.
Under the PPACA, a grandfathered health plan is a health plan in existence prior to March 23, 2010 when the new health law was enacted. The federal government recently issued interim final regulations that answer what exactly permits a health care plan to be exempt from many of the new health care bill’s requirements because of its grandfathered status.
Can a person really keep their current health plan coverage? Can a health plan continue to sell its current plan? Inquiring minds want to know.
The interim regulations state that a grandfathered health plan is a plan that must have continuously covered a person since March 23, 2010. OK. That’s easy enough to understand. But is that all or is there more to the story?
The interim rules are clear. An employer cannot significantly cut or reduce benefits – for example, if an employer or health plan covers treatment for diseases such as diabetes, cystic fibrosis or HIV/AIDS, the plan cannot eliminate coverage for those diseases. Further, according to the federal government, an employer and its insurer:
• Cannot raise co-insurance charges – for example, it increases the co-share of a hospital bill from 20% to 30%;
• Cannot significantly raise co-payment charges – for example, it raises its copayment from $30 to $50 over the next few years;
• Cannot significantly raise deductibles – for example, it raises a $1,000 deductible by $200 over the next few years;
• Cannot significantly lower employer contributions by more than 5 percent – for example, it increases its workers’ share of the premium from 15% to 25%;
• Cannot add or tighten an annual limit on what the insurer pays. Some insurers cap the amount that they will pay for covered services each year. If they want to retain their status as grandfathered plans, plans cannot tighten any annual dollar limit in place as of March 23, 2010. Moreover, plans that do not have an annual dollar limit cannot add a new one unless they are replacing a lifetime dollar limit with an annual dollar limit that is at least as high as the lifetime limit (which is more protective of high-cost enrollees).
Thankfully the health plan does not lose its grandfathered status if one or more people enrolled in the plan terminate coverage – as long as the health plan has continuously covered someone since the grandfathered date. Further, an employer may allow newly hired employees and their families enroll in the employer health plan without jeopardizing the grandfathered status.
But for the employer and the insurer, there is little flexibility in maintaining the current health plan. On the health reform.gov web site it asks the question “Why do we need change? Why can’t we leave health care and health insurance the way they are?” The federal government’s response is that people have grown increasingly frustrated by a lack of control over their own health insurance. And that by allowing the grandfather rule, there will be a balance between allowing existing health plans to make routine changes and preventing plans from making large changes that they are no longer the plans people once had and liked. To me, looking at the list above, it sounds like an employer and insurer with a grandfathered health plan have less control than before the new health law was enacted.
The administrative nightmare associated with the grandfathered health plan requirements is about to begin, however. For example, in order to maintain its grandfathered status, the insurer must maintain records as all necessary documentation to verify and explain the health plan’s grandfathered status as long as it remains in effect as such. Such records must be made accessible to policyholders as well as state and federal agencies. As an employer as well as an insurer, the liability for keeping up with the grandfathered status could be overwhelming.
The federal government has estimated that a little more than half of employer-sponsored plans will lose their grandfathered status by 2013…so much for keeping your current health plan under the new law. From what CAHI can foresee, with the many other changes in the new health law, there seems to be a clear indication that most health insurers will have to alter their current structure in order to remain solvent. From an employer perspective, change may not be a good thing – while the benefits might be better, there could be a significant employer cost in switching from a grandfathered health plan to a new health plan. For consumers, benefits might be better, but at the cost of another benefit or employment structure.
The Impact of the Slacker Mandate by Tory Bunce
Last weekend I went to a neighborhood cookout. I just moved to Georgia about a year ago and so I thought it would be a good opportunity to meet some of the extended neighbors and learn more about what makes Georgians tick. Interestingly enough, I was surprised to find out that the main topic of conversation was the recently enacted health reform legislation and the dependent health insurance mandate. This eligibility mandate has been commonly referred to as the “slacker” mandate.
The conversation centered around a group of neighbors lamenting the fact that the federal government will now allow a person’s adult child through the age of 26 remain as a dependent on their parent’s health insurance policy. This surprised me – if you listened to the propaganda during the debate – everyone wanted or needed this eligibility mandate.
For example, a distant neighbor Joe has a 24 year old son, Chris, who graduated and was living at home delivering pizzas at night and spending an increasing amount of time playing XBOX Live. Joe remarked to another neighbor and myself that his son’s lack of ambition was driving him crazy – Joe shared with us that his son said he was trying hard to find a job but the economy was making it hard for his son to put down the XBOX controller and get out into the real world as there was no place for him to go. Joe hoped that his son would realize that he needed to grow up, get a job and become independent but instead, Chris has mentioned that he feels the need to take the time to ‘find himself” because the pressure to find a real job was not there now that he had health insurance for another couple of years under his dad’s health insurance policy. Joe is at a crossroads – let his son fall on his own sword or suck it up and let him be covered because the alternative of no insurance was scary.
Typically, state health insurance laws allow for unmarried dependent children to remain on their parent’s health insurance policy if they are a student or under the of 22 to 24 depending on the state law. In recent years, we have seen in some states an increase in the age limit in which health insurance coverage is extended to unmarried dependents or students up to the age of 30. Now, don’t get me wrong – there are good reasons in some cases to allow a person to remain on their parent’s health insurance policy – for example, if they have a handicapped or disabled adult child or if they have a college student. However, increasingly, this mandate is being used to fill a gap in coverage rather than encouraging people to purchase their own health insurance policy with the proper incentives. The problem with the slacker mandate is not the issue of extending coverage to a person’s dependents, but rather, a dependent’s cost increases as they age and therefore the policy is not appropriate priced to reflect the dependent’s true cost.
As previous experience has show, in essence, mandates require insurers to pay for care that consumers previously funded out of their own pockets, if they purchased it at all, so insurers have to pay more claims — and eventually they must raise premiums to cover those costs. And experience demonstrates that when health insurance costs increase, more people drop or decline coverage. At a time when the number of people without health coverage is growing, it is important to recognize that mandates drive up the cost of health insurance, and that some employers or individuals will not be able to afford it.
Casting aside the parental or societal issues surrounding the federal slacker mandate, could it be a big deal under the new health care law?
Under the new law, a person is supposedly able to keep their own health insurance plan if they want to and the federal government calls this a grandfathered health plan. However, if a grandfathered health plan or the employer needs to adjust the premium rates, co-insurance, co-payment, deductibles, or alter employer contributions, then the plan is no longer grandfathered. In essence, the employer and the insurer are stuck in a quandary with the slacker mandate. The cost of coverage is really not reflective of the cost being charged. Insurers and/or employers have to eat that cost or pass them along to policyholders and/or employees but they cannot do so and remain a grandfathered plan. In fact, the federal government has estimated that 51% of American workers will be in plans without grandfathered status by 2013. And under the worst case scenario, as many as four in five small business employees and 69% of American workers overall will lose their current coverage.
Like a parent’s decision to keep their aging dependent on their insurance policy, it is a slippery slope no matter how you ride it.
By Kevin Wrege
This is perhaps the best general media piece we’ve seen exposing the widening cracks in the MA reform plan and raising critical implications for the closely analogous federal reforms. Among other things, the article does a good job of pointing out that what was initially framed in the Bay State as an insurance access problem has now, by dint of the hyper-regulated state insurance market, turned into something far more ominous: an increasingly serious cost challenge, both for small business owners trying to pay for escalating premiums and for the Commonwealth’s budget — which faces increasing cost pressures stemming from its generous (and very costly) public coverage subsidies.
The full article from Fortune is available here:
Costs are rising relentlessly for both families and for the state government. The median annual premium for family plans jumped 10% from 2007 to 2009 to $14,300 — again, that’s a substantial rise on top of an already enormous number. For small businesses, the increase was 12%. In 2006, the state spent around $1 billion on Medicaid, subsidies for medium-to-lower earners, and other health-care programs. Today, the figure is $1.75 billion. The federal government absorbed half of the increase.
Hence reform’s proponents boast that expenses have risen only $354 million or around 6% a year. But the real increase is double that, including the federal share. And it’s highly possible that given the current budget pressures, the U.S. will reduce the contribution that has encouraged the state to spend so lavishly.
Lesson 2: Community rating, guaranteed issue and mandated benefits swell costs.
How did costs in Massachusetts get so big to begin with? A major reason is the adoption of guaranteed issue and community rating in the mid-1990s. The new federal bill would expand those rules to the entire nation. Under guaranteed issue, insurers must accept all enrollees regardless of their medical condition; under community rating, they must charge all customers similar premiums, even if their costs are far different. The result is that prices rise steeply for young, healthy customers, who must pay far more than their actual costs. It also give them a strong incentive to drop insurance; then they can “game the system” by signing up any time they need surgery or get diabetes.
Hence the pool of insured people gets older and sicker as the healthy drop out. That’s what happened in Massachusetts, and it contributed to soaring premiums. The 2006 reform plan was supposed to solve the problem by requiring that everyone buy coverage or pay a fine of around $1,000. It worked, but only in part: Of the 600,000 uninsured in 2005, around 450,000 are now covered. But a large share of 150,000 who still lack coverage are young residents who choose to pay the fine instead of high premiums. Insurers are also getting socked by people who sign up for insurance to get expensive care mandated under state law, including hospitalization for childbirth or hip replacements, and then depart once the procedure is completed.
In the federal bill, the fines for going uninsured are even lower than in Massachusetts — and anyone who can’t find an inexpensive plan is exempted from all penalties. Hence the “adverse selection” problem could prove far worse.
Lesson 3: Huge subsidies for low-to-medium earners could prove extremely expensive.
One of the most fascinating features of the Massachusetts plan is that it introduced a system of subsidized policies, sold through an insurance “exchange” that’s extremely similar to the one in the new federal plan. Under Commonwealth Care, the state subsidizes plans — offered by private carriers — for residents who earn up to $66,150 who are not covered by employers. The aid is extremely generous. At $44,000, families pay around $1,000 a year in premiums. At the $66,150 maximum, they contribute around $3,000.
The problem is that the actual annual cost of these plans is around $10,000, so the subsides are enormous — that’s 90% for families earning $44,000. And while the costs keep going up, the share paid by the enrollee barely budges. Says Michael Tanner, an economist at the conservative Cato Institute: “It’s a situation where the entire escalation in costs is paid by the government, not the people receiving the care.”
0:00 /4:25Downside of health care reform
The federal plan also subsidizes care provided through state-run exchanges. The patients’ contributions are bigger than in the Mass. plan: A family earning $66,000 would pay $6,300 a year. But the federal plan offers subsidies far higher along the income scale, aiding families of four making up to $88,200. And surprisingly, the federal plans would probably prove a lot more costly than the ones in Massachusetts, where the state prides itself on restraining what they pay by squeezing providers, who then shift the added costs to private customers.
The big problem arises if far more people sign up for these exchange-offered plans than anticipated. That’s been the case in Massachusetts. And as we’ll see in a moment, it could still get a lot worse there. A potential disaster threatens the federal plan if employers staring dropping coverage, since a flood of newcomers would rush into the state-funded pools.
Lesson 4: The exchanges reward people for working less and earning less.
Data is lacking on how damaging these perverse incentives are in practice. But it’s clear in Massachusetts that low-to-medium earning families often suffer financially if they get a raise, work overtime, move to a higher paying job — or if a spouse rejoins the workforce. For example, a family earning $33,000 pays no premium at all under Commonwealth Care. But if their pay goes to $46,000, they’re obligated to contribute about $2,400. That’s an effective tax rate of 18.5% on that $13,000 raise. A pay increase of $44,000 to $46,000 is mostly erased by higher premiums alone.
The federal bill is plagued by the same weakness. For example, a $55,000 earner contributes $4,400 a year towards insurance. At $65,000, the bill is $6300; so the family is paying a “tax” of $1,900 or 19% on that $10,000 raise. After payroll taxes, those Americans would face a marginal rate of around 35%, a number that’s heretofore been the territory strictly for high-earners.
Lesson 5: The generous plans and added mandates give employers an incentive to drop health insurance.
In charting the future of health-care costs, the biggest danger by far is that companies will drop their coverage. It’s also the one that’s the most difficult to handicap, both for Massachusetts and the entire nation. The problem is simple: If employers stop paying for health care, employees will flood into the government-subsidized programs, enormously raising the cost to already fragile budgets.
Surprisingly, health reform in Massachusetts has actually increased the number of workers covered by employers. Over 100,000 more employees are covered by corporate plans today than when the program debuted in 2006. The main reason is that the plan imposed a $1,000 fine on employees who refused their employers’ plans. Then, families were paying around $3,600 a year towards their company policies. Many decided that, when faced with a fine, the better choice was paying the extra $2,600 for full coverage. The plan was shrewdly calibrated by the administration of then-governor Mitt Romney to tilt the market towards company-provided care.
The Massachusetts plan also bans any employee from getting coverage from Commonwealth Care if his or her company offers coverage. Hence it would appear that corporate coverage is solidly entrenched. But that’s by no means certain, either in Massachusetts or under the Obama plan. The reason is the fast escalation in costs, for both companies and employees. From 2007 to 2009, the employee contribution for family policies rose a steep 17%, or $624 a year, to $4,200.
Employees can only move into Commonwealth Care if their employers drop their plans. The danger is that the incentives are tilting in that direction as the costs of coverage for employer, and the price of premiums to employees, keep climbing. The point is rapidly approaching where both will pocket big savings if employers drop their plans and workers buy their policies through the heavily subsidized exchanges.
In Massachusetts, the state government is pushing toward that tilt point by adding heavy mandates to a list of more than 40 already on the books. In 2009, it required insurers to cover prescription drugs. An expensive autism mandate is now being debated in the state legislature. The list of mandates under the federal plan is bound to mirror the ones in Massachusetts, and once again, the added expense severely weakens companies’ incentive for providing coverage.
Cracks are already starting to appear. Part-time workers can get coverage under Commonwealth Care for a fraction of what they’d pay as full-timers. So they “game the system” by working ten or fifteen hours a week for two or three companies. Or they find that it pays to switch from full- to part-time work. PHI, an organization that represents home health-care workers, states that one-fourth of the home care agencies in Massachusetts are reducing workers’ hours so they’re eligible for state-subsidized care.
The federal plan will encounter the same problem — perhaps a more acute one since its penalties are lower and its subsidies go much higher on the income scale.
Starting in 2017, the states will have the option of allowing companies that drop their plans to shift workers into the subsidized, state-run exchanges. That choice doesn’t exist now in Massachusetts. It’s not that employers are likely to dump their plans en masse. What’s far more probable is a progressive erosion that relentlessly and systematically raises government spending.
The incentives are there, both in the federal plan, and its prototype in the Bay State. And when the incentives are that big — and when subsidies inevitably get bigger, not smaller — no amount of regulatory tinkering can stop America’s employers and employees from taking the government’s money, and saving their own.
Our blog posting yesterday focused on the same issue, but the report was focused on employer sponsored plans. This editorial focuses on Medicare and Medicare Advantage. The administration continues to claim that Medicare Advantage plans (these are alternative managed care plans that typically offer enhanced benefits over traditional Medicare) will continue despite a significant fee cut for insurers offering the plans. Almost every expert acknowledges in the long run, the fee cuts will lead to insurers discontinuing their plans.
The issue may not be as bad for traditional Medicare, but the $500 billion in cuts will have their impact. In fact prior cuts have begun to erode the availability of care for seniors as this story points out:
Finally here is an excerpt from the SF Examiner editorial:
Last year we posted a piece (excerpted below) that made the argument health reform would not allow you to keep your existing health plan despite the promises of Pres. Obama. Well, it turns out we were right. From the Investor’s Business Daily:
Small firms will be even likelier to lose existing plans.
The “midrange estimate is that 66% of small employer plans and 45% of large employer plans will relinquish their grandfathered status by the end of 2013,” according to the document.
In the worst-case scenario, 69% of employers — 80% of smaller firms — would lose that status, exposing them to far more provisions under the new health law.
The 83-page document, a joint project of the departments of Health and Human Services, Labor and the IRS, examines the effects that ObamaCare’s regulations would have on existing, or “grandfathered,” employer-based health care plans.
Draft copies of the document were reportedly leaked to House Republicans during the week and began circulating Friday morning. Rep. Bill Posey, R-Fla., posted it on his Web site Friday afternoon.
And here is an excerpt of our original piece:
Sometimes, it is what people don’t say that is important, especially
in health care reform.
Throughout the summer, and even in the campaign for President, Pres.
Obama promised the same thing. if you like your insurance plan, you can
keep it. While just about every fact checker challenged this assertion,
he stuck to it.
The problem was that his loosely defined health reform plan required
extensive new rules for insurance companies including guaranteed issue,
modified community rating and an individual mandate. Fact checkers
rightly pointed out that existing plans and new plans would be under two
entirely set of rules – an impossible situation for many insurers. As
stated by FactCheck.org
• In fact, under the House bill, some employers might have to
modify plans after a five-year grace period if they don’t meet minimum
benefits standards.
• Furthermore, some firms are likely to
buy different coverage for their workers than they have now, or simply
drop coverage and pay a penalty instead, leaving workers to buy their
own private coverage or go on a new federal insurance plan.
The legislation is a moving target, and projections of how many
employees would be switched to a federal plan are wide-ranging – from
near zero to a high of 56 percent of all covered workers under the most
extreme assumptions.
… From Cardiovascular Business :
A District Court judge in Florida has denied the Department of Health and Human Services’ (HHS) request for additional time to file a motion to dismiss an amended complaint in the case of State of Florida v. U.S. Department of Health and Human Services, a case that questions the constitutionality of the health reform law.
On May 14, the State of Florida filed an amended complaint against HHS, and the original schedule allowed 33 days for the defendants to file a motion to dismiss the amended complaint. Roger Vinson, senior U.S. District Judge in the U.S. District Court for the Northern District of Florida, Pensacola Division, denied the HHS’ extension request on May 28.
The HHS has “at their disposal the very substantial resources of the federal government, including numerous attorneys and staff within and outside the U.S. Department of Justice,” wrote Vinson. “[T]hey have both the means and ability to respond to the amended complaint within the time period originally set out in the scheduling order and [an] extension is unwarranted.”
In 1986, Shelly Long and Tom Hanks starred in the movie The Money Pit. In the movie, the couple needs a house and buys a cheap fixer-upper. Not having the time to fully checkout the house proves their downfall. As the movie moves on, the couple spend more and more money in a futile attempt to fix the rotten house. It appears that the Democrats are trying to do the same with their health care reform plan by starting a $125 million effort to sell the program to the American people.
Hastily put together (despite months of hearings much of the language was relatively new) and quickly sold (the final version anyway), the White House and Congressional leadership promised Democrats that passing a health care bill would make it better. (hmmm Tom Hanks and Shelly Long thought their lives would be better in the fixer-upper too) Democrats and their allies spent millions trying to make their health reform plans more popular. But their health care plan continues to be unpopular — so much so that many Democrats are planning on skipping town halls (from the New York Times):
BEL AIR, Md. — The reception that Representative Frank Kratovil Jr., a Democrat, received here one night last week as he faced a small group of constituents was far more pleasant than his encounters during a Congressional recess last summer.
Then, he was hanged in effigy by protesters. This time, a round of applause was followed by a glass of chilled wine, a plate of crackers and crudités as he mingled with an invitation-only audience at the Point Breeze Credit Union, a vastly different scene than last year’s wide-open televised free-for-alls.
The sentiment that fueled the rage during those Congressional forums is still alive in the electorate. But the opportunities for voters to openly express their displeasure, or angrily vent as video cameras roll, have been harder to come by in this election year.
If the time-honored tradition of the political meeting is not quite dead, it seems to be teetering closer to extinction. Of the 255 Democrats who make up the majority in the House, only a handful held town-hall-style forums as legislators spent last week at home in their districts.
With images of overheated, finger-waving crowds still seared into their minds from the discontent of last August, many Democrats heeded the advice of party leaders and tried to avoid unscripted question-and-answer sessions. The recommendations were clear: hold events in controlled settings — a bank or credit union, for example — or tour local businesses or participate in community service projects.
But that is not all. In an effort to make it popular, Democrats are looking to spend even more money. This new effort to prop up health reform comes as some polls suggest that health reform is getting less popular. The White House is looking to spend $125 million in a public relations effort to support health reform from Politico’s Mike Allen:
The extraordinary campaign, which could provide an unprecedented amount of cover for a White House in a policy debate, reflects urgency among Democrats to explain, defend and depoliticize health reform now that people are beginning to feel the new law’s effects.
The Health Information Center is being started by Andrew Grossman, a veteran Democratic operative who founded Wal-Mart Watch, a labor-backed group to challenge the world’s largest retailer.
Grossman told POLITICO that the lessons of Wal-Mart Watch will be helpful on health reform: “When you treat people with respect and try to understand how they interact with businesses and politics, you can move them.”
The estimated budget is $25 million a year, for five years. Grossman has begun raising money from unions, foundations and corporations.
President Barack Obama on Tuesday will kick off a series of high-profile health-reform events heading into the November election. The job will continue as long as he is president, since the biggest provisions — including the requirement that individuals carry health insurance — don’t kick in until 2014.
Read more: http://www.politico.com/news/stories/0610/38199.html#ixzz0qAvWzaAV
First Casualty of Health Reform?
By Roy Ramthun
I received a phone call that both shocked and
saddened me yesterday. There have been several reports suggesting there will be
consolidation and market exit to come. Yesterday, these reports started
becoming real. A newly formed health plan, offering only HSA-qualified high
deductible insurance plans, which I helped bring to the market two years ago,
will no longer be able to continue to operate because of the requirements
imposed by health reform which have made it almost impossible to raise the
necessary capital to continue meet regulatory requirements and continue
operations (see article below or here). The result will leave consumers in that state
suffering from bloated pricing from the dominant insurance carrier. Where and
when will the next shoe drop?
Startup health insurer shutting
June 4, 2010 by Michael Schwartz
The hotly debated healthcare reform bill signed into law in
March has killed a local insurance company.
At least that’s according to a brief letter Richmond-based
nHealth sent to
insurance agents explaining the reason behind the shuttering of the once
promising local startup.
“I wanted to share with you the decision by nHealth’s board
of directors to exit the health insurance market,” wrote James Slabaugh, executive vice president
of the Richmond-based insurance company that employed about 50 people. (Many of
those were at an office in Ohio).
The letter, obtained by BizSense, was sent June 2 to nHealth
insurance agents. (You can read it here).
The letter explained that “considerable uncertainties” in
the health insurance market caused by the recent federal healthcare legislation
made the two year-old company’s business model unsustainable.
“Despite a product that was gaining increasing acceptance
among companies throughout the Commonwealth, the uncertainties in the regulatory
climate coupled with new demands imposed by national healthcare reforms have
made it challenging to sustain the level of sales required to remain viable over
the long run,” Slabaugh said in the letter.
According to nHealth CEO Paul Kitchen and Paul Nezi, one of
the company’s original investors and former board members, regulatory changes
the company believes are coming as a result of the legislation will require
levels of capital beyond what nHealth’s business model can sustain.
Nezi said nHealth tried to raise additional capital but was
unsuccessful.
“People got skittish about writing any more checks,” Nezi
said. “Because of that uncertainty, would you invest a few more million dollars
of your money in a startup if you don’t know what the rules are going to
be?”
That left company with only one choice.
“The most prudent and sensible conclusion for us is to
discontinue the sale of healthcare policies and withdraw from the healthcare
business,” Slabaugh wrote in the letter.
Founded in 2008, nHealth was built around a high deductible
insurance plan model that utilized health savings accounts and kept costs down
making consumers more involved in their healthcare decisions.
Nezi and other investors helped fund the company out of the
gate with a $12 million investment, he said.
“Initially we raised $12 million in no time from local
investors and one large investor on the West Coast,” Nezi said.
The company also raised additional capital a few months ago
he said.
And for a while, the investment seemed to be paying
off.
nHealth was recognized in October 2008 by the Venture Forum
a promising company to watch and Nezi said the model was gaining acceptance in
the market.
“Our results over the last couple of years prove the product
does work,” Nezi said. “I believed and still believe in the product design or I
wouldn’t have invested in the company.”
Kitchen, former CEO of the Medical Society of Virginia,
wouldn’t say what kind of revenue the company was generating, only to say it was
“growing.”
The linchpin within the legislation for nHealth, Kitchen
said, was related to pending requirements that would raise loss ratios for
insurance companies, a ratio related to premiums versus claims.
Kitchen said the quick decision was based on a long-term
outlook that showed healthcare reform would have a fatal effect on
nHealth.
“You don’t make decision like this without good reason,”
Kitchen said. “We didn’t do it just to prove any points.”
As for shutting the company down, Kitchen said an official
closing date is difficult to determine. He said the company will send out
letters to its customers but will likely let brokers spread the word first. The
company is also working to help customers transition smoothly into coverage from
other firms.
The letter to agent stated nHealth has “ample capital to pay
claims” for business on the books through the end of the year. It also said the
company will continue to pay commissions on business “as long as it remains on
nHealth’s books.”
Kitchen said it’s unclear how much, if any, investors will
get back.
Michael Schwartz is a BizSense reporter. Please send news
tips to Michael@richmondbizsense.com.
Source: http://www.richmondbizsense.com/2010/06/04/startup-health-insurer-shutting/
This story was posted by several people, but if you haven’t seen it bears some attention…you see bureaucracy always functions the same way. It functions by rules, penalties, and adheres to those rules even when normal people would consider it cruel or ridiculous. The excerpt below was taken from The Times , (located here):
Jenny Whitehead, a breast cancer survivor, paid £250 for an appointment with the orthopaedic surgeon after being told she would have to wait five months to see him on the NHS. He told her he would add her to his NHS waiting list for surgery.
She was barred from the list, however, and sent back to her GP. She must now find at least £10,000 for private surgery, or wait until the autumn for the NHS operation to remove a cyst on her spine.
“When I paid £250 to see the specialist privately I had no idea I would be sacrificing my right to surgery on the NHS. I feel victimised,” she said.
The case will reopen the debate over NHS policy towards patients who pay for some of their care privately. Following a Sunday Times campaign in 2008, the government ordered the NHS to stop withdrawing care from patients who received additional private treatment or drugs. Cancer sufferers were being barred from further NHS treatment after buying potentially life-saving medicines not offered by the health service.
Whitehead’s case, which has shocked her local Labour MP, reveals that patients who go private in despair at long waiting lists still risk jeopardising their NHS treatment. Department of Health officials admit it remains official policy.
Whitehead, 64, a former museum assistant from Yorkshire who works as a volunteer at a hospice, went to her GP in December for back pain. Because of her breast cancer history, she was immediately offered an MRI scan to check the disease had not returned. It revealed a cyst on her spine, pressing against her sciatic nerve. Her GP referred her to a consultant at Airedale NHS hospital.
She was told the next available NHS appointment was in May, so she accepted the offer of a private slot to see him the following week.
“My husband and I are retired and don’t have a lot of money, but I am in intense pain and couldn’t face the thought of waiting months just for an initial consultation,” she said.
An American Speaks to a Canadian
Couple about Health Care Reform…
By Tory Bunce
Recently I traveled outside the United States. While waiting in a lengthy line, I met a couple vacationing from Canada and they immediately struck up a conversation, grilling me on what it was like to have Barack Obama as my president.With the passage of health reform, many are concerned with patient privacy and whether in an increasingly centralized system that privacy can be maintained. This story from Great Britain may leave you very concerned
As you may you know the British are in the midst of a general election battle. The May 6th election date fast approaching, and the incumbent Labour party is looking to hold on to power by targeting voters with mailers. Similar to our election, these mailers are often filled with negative hyperbole.
But many believe one Labour party mailer went too far. The mailer targeted breast cancer survivors, and as reported by the Telegraph:
Personalised cards were sent to 250,000 women saying that the Tories would
scrap a Labour guarantee that all suspected breast cancer patients would be
seen by a specialist within two weeks of GP referral.
Gordon Brown, the Prime Minister, was under pressure from the Tories to
investigate the mailings, although Labour said it was “categorically
untrue” to suggest the party had targeted the patients.
The mailshots, which featured a message from a breast cancer survivor praising
Labour’s policy, referred to the addressee’s name several times.
The cards ask specifically: “Are the Tories a change you can afford? Many of
those who received the cards had undergone scans or treatment within the
past five years.
In one instance a card was sent to a woman who had died of breast cancer.
Another card was sent to a television producer who had a potentially
cancerous lump that turned out to be a cyst.
Its seems clear that some targeting went on, but the question remains — did the Labor Party violate the patient’s privacy or did the they somehow find a magic list suiting their needs. For those concerned with patient privacy, either prospect is chilling.