The Senate health care bill imposes a $500,000 deductibility cap on health insurer pay. As I understand it, companies can deduct salaries up to $500,000 for any officer, employee and director but no more. Anything over that amount apparently would be considered taxable income to the company. The Joint Committee on Taxation estimates the government will take in an extra $600 million over 10 years from health insurers paying taxes on those overages. Of course, it’s a not-so-subtle way for Democrats to try and put downward pressure on health insurer executive pay. Just like those congressional “investigations” into health insurer compensation and other practices are a not-so-subtle way of teaching those who aren’t on board with the Democrats’ reform plans just who’s the boss these days.< ?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
And, of course, the bills impose guaranteed issue and modified community rating, allowing only a 2-to-1 variation for age. Meanwhile, the individual mandate with that “robust” penalty meant to compel people to buy health insurance — the key to getting health insurer support — is out. There will be a penalty, but a small one, and neither the mandate nor the penalty will start for several years.
There was, frankly, little chance the Democrats were ever going to include a strong penalty. Doing so creates hoots and howls from Republicans and the public; not doing so disappoints health insurers — the same people the Democrats have villainized for the past four months. The fact is that Democrats, who generally don’t care about actuarial principles, believe that health insurers have a moral obligation to accept anyone and charge everyone the same price, mandate or not. And if the bill does pass and those premiums skyrocket for the young and healthy — as they surely will — Democrats will come in with price controls to stop the increases.
In short, for all the health insurance industry’s efforts to put forth a good-faith effort to work constructively with the administration and congressional leadership for positive reform, they’ve gotten nothing but bad policy and bad press.
Last December Rep. Pete Stark, chairman of the Health Insurance Subcommittee of the House Ways and Means Committee, said on a conference call that health insurers would never support what the Democrats’ were going to push through, but that was all right because health insurance was the most despised industry in the country and Democrats would just roll them. Stark was tipping his hand; and we at CAHI had a good idea where this was going.
As he neared the end of his career, one of my college math professors reflected on the parable of the lost sheep. He took great comfort in the parable when he was younger — seeing himself in the role of shepherd — and seeking out all the math students who became lost. Indeed, he felt it should be his focus to focus on those lost “sheep.”
but, he started wondering about his commitment to the lost sheep parable. While the shepherd was out looking for the lost sheep, who was tending the other 99 sheep? As a teacher, were his other students suffering because he focused on the one student who may refuse to learn? Instead, the math department re focused on the use of the math lab — hiring good students who would be available all day to provide help to students who needed it.
Similarly, in the health care debate we have spent a good deal of time focusing on the issue of the uninsured. We focus on the 47 million uninsured and have tried to solve all of their problems with big government solution. In the current debate in Congress, we have discussed taxing health insurers, taxing the people who purchase health insurance directly (at least “rich” benefit plans), and taxing companies who have not purchased health insurance. The money would pay for a government-run insurance plan, and various subsidies.
By punishing insurance companies, businesses, and those who purchase health insurance, we are likely looking at more problems with our health care financing system. Essentially, we are leaving the current system untended which will result in further problems down the road.
Instead of focusing on the uninsured as single group — ridiculous if you actually look at the uninsured in any kind of detail — we need to focus on helping the people who need help. We need a real safety net — not a big government program. For example:
Already eligible –About 20-25% of the uninsured are already eligible for government programs, so government needs to do a better job of getting them signed up. (Perhaps a little less bureaucracy?).
Can afford insurance — We also know that as many as 25% of individuals counted as uninsured appear to be able to afford insurance based on their family incomes. I am not sure taxing insurance, and creating expensive minimum benefit plans will encourage them to purchase insurance — especially when they can wait until they become sick (no pre-x, remember)
Tax credits — We have some individuals who have health conditions, and it would be nice if the government would help them with high risk pool funding. At the very least, high risk pool enrolleees should get the same tax break as people purchasing health insurance through their employers.
Federal clinics — For some all of the insurance in the world can not help them with health care. Free clinics located in poor neighborhoods, or on bus lines can ensure they actually get access to care not just a promissory note.
Buried among the many insurance provisions in the Wisconsin budget was a major change in the way the state deals with auto insurance. Wisconsin had been one of two states to avoid mandating auto insurance coverage (allowing an opt-out), but the state legislators decided to end that status. While doing that, the legislature also decided to substantially increase the required minimum coverage levels (any surprise it was supported by the trial lawyers?).
Of course, these provisions are going to increase costs. This fact should be acknowledged by anyone with the most basic understading of economics — when you buy more of something it costs more than when you buy less. In this case, it should be obvious to everyone that forcing people to buy more insurance coverage will lead to an increase in the cost of the insurance coverage.
I know, I know. It is brilliant. Believe it or not, it is beyond the understanding of Wisconsin Assembly Majority Leader Tom Nelson (D-Kaukauna). Acccording to a Green Bay Press Gazette story:
That’s the same thing he told Scheller when he called to complain.
“I’m
not buying it from Mr. Nelson,” Scheller said. “I believe it’s the
state law. That’s what I’m hearing from two different agents.”
Nelson said in an interview that insurance companies were “simply using the Legislature as an excuse to raise premiums and generate more profit.”
Nelson’s
assertion is “flat out wrong,” said Andy J. Franken, president of the
Wisconsin Insurance Alliance. The alliance represents insurance
companies and spent more than $500,000 lobbying against the changes
passed by the Legislature.
Franken said at its most basic level, the
Legislature increased the amount of coverage people will have to carry
and it’s “simple economics” to see that will result in higher premiums.
“Everyone understands if you buy more of something, it costs more money,” Franken said.
I think we all hope nobody is keeping track of how often we are wrong. Well, I was recently wrong again.
I assumed that a multi-state ban on underwriting based on domestic violence would have solved the issue. I knew that insurers are not using domestic violence information to reject individuals. I also knew that administratively it would be impossible to carve out the few states that don’t actually ban the practice, so effectively there was a nation-wide ban. I also knew insurers would support laws that would further clarify the practice they weren’t doing would be banned.
No way this is going to be an issue… it is just some crazy bloggers groping for any issue to write on — especially one that would paint the insurance industry in a bad light.
I was wrong. It has gotten some play. For example from one newspaper:
Mississippi and seven other states are without laws to block
such action, but a coastal lawmaker is working toward
changing that in the 2010 Legislature.
“Although we have no reports of it ever happening, and
I can tell you of no cases of a victim being turned away,
there’s nothing in the codes to prevent it from
happening,” said Sandy Middleton, state legislative
chairwoman for the Mississippi Coalition Against Domestic
Violence.”
This is the best and truest function of state regulation — settling matters that will best help protect the vulnerable. And protecting the vulnerable — including creating a true safety net — is one of CAHI’s founding principles.
So just to be clear, we don’t think this is a problem anywhere and are not opposed to efforts to ban in the other states.
Health Reform on a Dime
By JP Wieske,Hawaii Reporter
While Washington once again debates reforming our health care reform system, the states have marched on. Washington-based proposals, like those currently before Congress, are too expensive and ignore the fact that most Americans don’t want and are concerned about a big-government takeover of the U.S. health care system. President Ford had it right when he said, “A government big enough to give you everything you want is a government big enough to take from you everything you have.”
Instead of throwing away our state-based system, we should build on it. Take the problems of access and affordability. Most states guarantee access to health insurance despite a clear lack of federal support, and some states have taken significant steps to increase the affordability of health insurance. As one regulator stated, “Affordability without access is meaningless but accessibility without affordability is equally meaningless.”
There are many reasons why people don’t have coverage (e.g., they have low incomes, are in job transition, don’t think they need it, etc.), and the solutions can and should be equally diverse. Instead of throwing away our current system, which relies heavily on state oversight and regulations, we should improve upon it — guaranteeing access without making health insurance unaffordable. Several limited and targeted reforms would do exactly that.
Guaranteed Access. The healthy can always buy coverage when they need it, but the sick can’t. So President Obama proposes requiring health insurers selling to individuals to accept any applicant (that already happens in employer-sponsored coverage). But that’s like requiring an auto insurer to accept a person after a car wreck.
A better solution for the uninsured with pre-existing conditions is what we call the “Tri-Share Guaranteed Access Plan.” It is similar to the current state-based high risk pool system but with standardized federal guidelines and increased funding.
Tri-share (i.e., three funding sources: federal and state, health insurers and premiums from participants) would provide health coverage for those with a pre-existing medical condition, creating a true safety net for the uninsured. The guaranteed access plans would preserve what is good about the state- based system, protect the vulnerable and keep health insurance premiums more affordable.
Affordable Choices. Any American who has lost a job can tell you employer health insurance is expensive. The stimulus bill provided a temporary subsidy for coverage, but only to continue the employer’s expensive coverage. The unemployed should have access to Affordable Benefit Choices (ABC Plans), which allow them to choose not only from the plans offered by their employer, but a less-expensive “basic” health insurance plan that’s sold in any state.
Equalize Tax Treatment. Most of the uninsured work for employers but don’t have access to employer- provided coverage. It is fundamentally unfair that these employees who decide to purchase health insurance on their own do not get the same tax break as those who have employer-provided coverage. Congress can fix this disparity by providing them with a “refundable” tax credit (in essence, a voucher) to help offset the cost of coverage.
Increasing Competition. If President Obama is really concerned with competition — especially in states like Maine, Massachusetts and New York, which have ruined their market with onerous regulations — he would allow individuals living in one state to buy health insurance that’s approved and being sold in other states.
Safety Net for the Poor. The most important issue for the poor is not access to health insurance but access to needed medical care. Some people will not get health insurance or are too transient to have a medical home. Federally qualified health clinics provide medical care in locations that are easy for the poor to access. In 2007, this safety net program was funded at a $1.99 billion dollars — not nearly enough to provide a true safety net.
Malpractice Reform. One area where the states are leading is malpractice. California, Texas and recently Oklahoma have passed significant tort reform legislation. The downward pressure on malpractice premiums in Texas, for example, and the reduction in needless lawsuits prove the value of reform. States may continue to lead on tort reform, especially if the federal government refuses to take any significant steps.
We need to free ourselves from the idea that we need to achieve universal coverage through a federal mandate. Building on our current system allows us to refocus on solving the targeted problems we can fix while maintaining long-term financial sustainability — and get close to universal coverage in the process.
J.P. Wieske is director of state affairs for the Council for Affordable Health Insurance.
One of the fundamental issues in health reform — especially for conservatives — is will government keep its promises?
We know state governments are facing budget problems — capping enrollment or outright removing some people from eligibility of certain programs — because they can no longer afford the coverage. This is, of course, comes at a horrible time as more and more people will continue to access the safety nets provided by the states. Now the rug will be pulled out from them as states can deliver on the promises they made during good economic times.Insurance companies are required to keep “reserves” (money that is safely invested and available in the case of a financing crisis), so in bad times the insurer can draw down the reserves to pay for claims solving this exact problem. Perhaps states willsee the wisdom of this approach and reserve for future losses.
Don’t bet on it, it is only going to get worse. The stimulus bill already heaped future unfunded mandates on the states, and the health care bill will do the same.
You see Pres. Obama has promised his plan would not raise the federal deficit. (yes, we know just about every analysis has indicated the plans would add to the federal deficit). He hasn’t promised the same for state deficits, and this plan shifts significant costs to the states from the AP:
WASHINGTON — A preliminary state report shows the pending federal
health care reform plan would add about 2.5 million Texans to the state
public insurance rolls.
The report by the Texas Health and Human Services Commission also says
the added enrollment would cost state taxpayers up to $20 billion over
10 years.
U.S. Sen. John Cornyn requested the analysis and made it public at a
Senate Finance Committee meeting. The Republican junior senator from
Texas opposes the plan introduced by U.S. Sen. Max Baucus, D-Mont.
These increases would come from expanding Medicaid eligibility. But what no one seems to want to talk about is that almost one quarter of the uninsured are already eligible for Medicaid and not enrolled. In some cases, government has made it difficult to enroll and in others people just don’t want to enroll. A forced mandate — on top of the expansion — may make these numbers even worse for states piling up bigger and bigger deficits.
So to keep one promise, the federal government has to shift deficits and costs to the states. HMMMM, seems a little misleading to me, Mr. President.
President Obama has claimed time and again that part of the issue of health reform is about choice. This poll-tested concept is something fundamental to the American psyche — our stores get bigger and bigger expanding choice. The only retailers that successfully compete against the big box stores compete on expanded choice –perhaps gourmet items, special styles, or labels that are not available in the store. But are the reform bills about expanding choices?
Of course, the suspicious among us — may be we’ll call them Republicans for now — would tells us that it is definitely not about choice. The trusting — we’ll call them Democrats — argue employees do not have many choices from their employers and in some states few insurers are available (less than in some states). But choice has two aspects — a choice of health insurer and a choice of plan. Of course we talked about choice of health insurers in a previous blog piece stating:
If you look at many of the most uncompetitive markets – like
Massachusetts, New York or Washington – the states have something in
common. Government regulation actually CAUSED the uncompetitive market.
You see all of these states heavily regulate their insurance
markets. Washington state passed and repealed modified community rating
and guaranteed issue but kept artificially low limits on administrative
expenses (called loss ratios). New York and Massachusetts have kept
guaranteed issue and modified community rating ensuring the markets
will not attract new health insurance carriers.
But this is their argument for a public plan, a plan that is supposed to expand choice by competing with the private market. (Never mind government has used Medicare to drive most out of the senior market with exception of supplemental plans). What we should also be talking about is whether or not the current proposals will expand the choice of affordable health insurance plans in the market.
The answer is a resounding NO.
You see many of the plans — especially Sen. Baucus’s plan — contain a health care squeeze. On the one hand, the reform plans want to tax “rich” benefit plans — limiting your ability to pick comprehensive plans of your choice. On the other hand, the reform plans also want define a minimum benefit plan — something you have to do if health insurance is mandated. President Obama has also promised to require insurers to pay for routine care and limit deductibles — even if you can save money and insurance premiums by paying for it yourself.
The net result is that your health plans will be squeezed into a narrow box between to rich health insurance plans and plans not rich enough to meet the government’s minimum standards. For consumers, this health care squeeze may mean affordable insurance plans are squeezed out of existence, or their employer-based plans may be subject to new taxes. (leaving them with the public option). Doesn’t sound like much “choice” to me.
This Sunday, President Obama completed what has become known as the full “Ginsberg.” – named for the Monica Lewinsky lawyer who appeared on all the Sunday political talk shows in a single day. President Obama was promoting his health care agenda with appearances on ABC, NBC, CBS, CNN, and Univision (standing in for Fox which the President avoided).So how did it go? What news was made?
Looks like the news made on health care focuses on one of the uglier aspects of the proposed reform — the individual mandate. The George Stephanopoulos interview on ABC hosts the video on this link ( ABC news ). And Politico summed it up this way:
But he could look it up — in the bill.
Page 29, sentence one of the bill introduced by Senate Finance Committee Chairman Max Baucus (D-Mont) says: “The consequence for not maintaining insurance would be an excise tax.”
And the rest of the bill is clear that the Finance Committee does, in fact, consider it a tax: “The excise tax would be assessed through the tax code and applied as an additional amount of Federal tax owed.”
The bill requires every American, with few exceptions, to carry health insurance. To enforce this individual mandate, the Senate Finance Committee created the excise tax as a penalty for people who don’t have insurance – and it can run as much as $3,800 a year per family.
The House bill also refers to the penalties for not carrying insurance as a tax. It calls for a “tax on individuals without acceptable health care coverage” and amends the tax code to implement it.
The questions from ABC’s George Stephanopoulos highlighted a politically dangerous new aspect of the health reform debate for Obama – as critics from Republican leaders to the U.S. Chamber of Commerce say his reform proposals amount to a middle-class tax increase. Obama promised during the campaign that Americans earning less than $250,000 a year would not see any tax increases from an Obama administration.
Obama strongly denied that the mandate amounts to a tax increase – saying it was no different than requiring people to have auto insurance and charging a penalty if they don’t. He also said it was important for everyone to have insurance so that people who do carry insurance don’t have to shoulder the load for people who don’t. The excise tax is designed as an enforcement mechanism to ensure people will carry insurance.
We’ll repeat ourselves (again) and put the link to our full piece on the individual mandate issue (here), and point out the auto insurance mandate does not work, andk why would a heal insurance mandate:
State — Uninsured Motorists(normal text) — Without Health Insurance(bold)
President Obama has aggressively claimed that insurance companies drop sick people in order to boost their profits. He seems to imply that anyone could be next. Apparently, he believes states and the federal government do not regulate insurers. In his speech on 9/9, he stated:
Sen. Kennedy partnered with Republican Sen. Nancy Kassebaum to author the Kennedy-Kassebaum Act, otherwise known as the Health Insurance Portability and Accountability Act (HIPAA) . As we point out in our recent piece on guaranteed issue (here), this approach has been successful in providing guaranteed to insurance access to every American in all but 5 states:
Again, we believe there is a better solution to the perception that consumers are uniformly treated unfairly. Insurers have limits on rescissions, but more regulation can be a win-win for consumers and insurers. An external review process for health insurance rescissions can resolve these issues quickly and avoid litigation. It will also eliminate the need for huge subsidies to ensure health insurance is affordable in a guaranteed issue and community rating environment.
If Congress enacted that reform along with new safety net protections under tri-share guaranteed access plans (which we propose in the guaranteed access piece), we would have a system that better protected consumers, guaranteed access to health insurance, and truthfully would not add to the deficit.
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.
In the past Obama repeatedly said, “If you like your health care plan, you’ll be able to keep your health care plan, period.” Now he’s stopping short of that unconditional guarantee by saying nothing in the plan “requires” any change.
And it gets even more clear.. The President’s plan also includes an individual mandate (something we wrote about here). And to repeat again, an individual mandate requires:
Odds are, we’ll face the same with federal reform.
One of the many claims in Pres. Obama’s speech was that a number of states have uncompetitive insurance markets, citing Alabama as a particularly egregious example with Blue Cross holding 90% of the market. His solution is the public insurance option, and more insurance regulations.
Wait a second.
If you look at many of the most uncompetitive markets – like Massachusetts, New York or Washington – the states have something in common. Government regulation actually CAUSED the uncompetitive market.
You see all of these states heavily regulate their insurance markets. Washington state passed and repealed modified community rating and guaranteed issue but kept artificially low limits on administrative expenses (called loss ratios). New York and Massachusetts have kept guaranteed issue and modified community rating ensuring the markets will not attract new health insurance carriers.
(One of the points often missed in discussions about Massachusetts is the fact they liberalized their market. Prior reform efforts limited the choice of benefit plans to just 2 in the individual market)
Of course, the President didn’t cite most of the example of states that have over regulated their markets. It doesn’t match the narrative – that the health reform plan will increase competition – when the evidence points to insurers leaving the market when many of the proposed reforms pass. He specifically cited Alabama – a state with a more reasonable regulatory environment.
Never mind that the Alabama Blues corrected the number – they have a 75% market share (which is often over counted due to out-of-state business) – it is still a significant market share. Alabama is the exception that proves the rule – regulation of insurers may not cause insurers to exit (or to avoid entry), it is rather the so-called judicial “hell-holes” that create a poor legal environment.
Michigan – another uncompetitive market – is an even better example of what regulation can do. In Michigan, the Blue Cross and Blue Shield control up to 70% of the overall market. However, one market is competitive – the individual market. You see the Blues passed legislation ensuring their market share in the small group market will not drop – including favorable tax treatment. However, this favorable tax treatment requires HMO’s and the Blues to provide guaranteed issue coverage in the individual market. Commercial insurers, who pay higher taxes, do not have a similar obligation. This trade off – tax advantaged status in exchange for an obligation – ensures the market is competitive.
What hasn’t worked is guaranteed issue and modified community rating included in a number of the bills before Congress and supported by the President in his speech. Costs rise. Individuals wait until they are sick to get coverage (an acute problem in Massachusetts where they are REQUIRED to keep coverage).
It is clear as day to those of us who have seen this issue in state after state, that it is regulation that has driven out competition.
So Pres. Obama, if you want competition in those states, why not offer health insurance across state lines?
Access to Coverage: Building on Current Protections
Alexandria, VA — When Congress returns after Labor Day, the contentious health care reform issues that they left unaddressed in August will be waiting to welcome them back. There has been and will be intense debate on how to expand coverage to the uninsured.
The Council for Affordable Health Insurance believes a foundation already exists to cover the uninsured and reduce costs. In our new paper, “Access to Coverage: Building on Current Protections,” we outline how policymakers can build on exisiting reforms such as HIPAA and how states can also play a significant role. Using these reforms as a roadmap can help us seal the cracks that some Americans fall through without adding a huge fiscal burden.
Click the following link to read: Access to Coverage: Building on Current Protections
About the Council for Affordable Health Insurance
Founded in 1992, CAHI is a nonprofit, nonpartisan research and advocacy association whose mission is to promote access, affordability and choice in American health care. CAHI’s membership includes health insurance companies (active in the individual, small group, HSA and senior markets), small businesses, physicians, actuaries and insurance producers and brokers.
In January of this year, we asked the question “Should the Government Force You to Buy Health Insurance?” We pointed out that mandating coverage is much more complicated than people like to think. For example the government will be required to:
Republican gubernatorial candidate Chris Christie is trying to make health insurance more accessible and expand coverage for
This suggestion has set off fireworks, with special interest groups and concerned activists claiming that Chris Christie is against women and certain health insurance benefits.
While this issue may lend itself to political sound biting and news coverage, it has nothing to do with the medical needs of
I know as a former congressional staffer that every special interest group (and I don’t mean that pejoratively) has a lobby and works hard to ensure its specialty is covered.
Now before we go any further, I have a daughter with a disease and have my own personal special interest issues. Heck, I dream about reducing our monthly food and pharmacy bills for her gluten-free food and medicines that are not part of our health insurance formulary. However, knowing what I know about mandates, having studied them for over 20 years, I’d say that a number of therapies should be included in a standard health insurance policy. But where do you or should you draw the mandate line?
The most common reason cited for not purchasing health insurance is cost, and mandates play a big role. The Council for Affordable Health Insurance (CAHI) has been tracking the health insurance mandate issue since 1992. At that time, there were about 1,200 state mandated benefits nationwide. Today, we count 2,133.
CAHI has an actuarial working group that estimates the cost of each mandate — a tool we find useful when looking at mandate-lite or mandate-free policy legislation. What they advise CAHI is that while mandates make health insurance more comprehensive, they also make it more it more expensive because mandates require insurers to pay for care consumers previously funded out of their own pockets. They estimate that mandated benefits currently increase the cost of basic health coverage from a little less than 20% to perhaps 50%, depending on the number of mandates, the benefit design and the cost of the initial premium.
Christie is only suggesting that
The idea of providing a limited-mandate option is not new, states are increasingly scrutinizing mandate legislation because they know mandates drive up costs.
In fact, 30 states now require an extra review process before implementing new health insurance mandates. There are at least six states that have mandate-free policies and 13 have mandate-lite policies on the books. There are a handful of other states, including
For example, in Virginia the Small Business Commission — established to study, report and make recommendations on issues of concerns to small businesses in the Commonwealth — decided last year to endorse a bill that would allow the sale of mandate-lite health insurance policies as well as voted to adopt the position that no additional mandates should be enacted during the next legislative session.
In April of this year, effective July 1, Virginia enacted a mandate-lite law (HB 2024/SB 1411) that allows health insurers to offer group policies that do not include state mandates to employers with fewer than 51 employees to provide coverage for those who have been uninsured for at least six months. The law requires full disclosure of excluded benefits and requires insurers to report on the premium costs and the number of participants.
This bill is something that
Chris Christie also proposes that
–Tory Bunce, Director of Research and Policy
Calling all slackers…oops! I mean adults 30 years old and younger. Today the WSJ posted an article
http://online.wsj.com/article/SB125098113262151655.htmlSB125098113262151655.html
about states not waiting for Washington to pass health care reform. They have passed their own measures to allow young adults to remain on their parents’ health insurance policies –
New York being the latest state to fall victim to this “slacker mandate.”The Journal cites Joel Cantor, a
Now, don’t get me wrong, there are plenty of reasons to allow an adult in their 20s to remain on a parent’s policy – if they are a student, or happen to be a legal dependent such as those who are handicapped or disabled … perhaps even veterans in some cases.
Since the early 1990s CAHI has tracked health insurance mandates in all 50 states. Our last count shows that there are 2,133 state mandated benefits nationwide, and there are 20 or so states that offer what we call “the slacker mandate.” But what states are doing is increasing the dependent age limit regardless of student status.
However, there is cause for concern when states pass laws allowing families to keep children up to age 30 on their health insurance policies if they are not one of the special categories mentioned above. And the reason is cost.
When adding a child to a family policy, there is little additional premium. According to our actuaries, children between the ages of 2 and 18 are the healthiest segment of the population and therefore use very little health care. And the premium reflects the limited utilization associated as such.
However, when those children reach adulthood, our actuaries advise us that their expected health care costs rise – particularly for women who are in their child-bearing years. If insurers are forced to include adults to age 30 in a premium originally intended for children, actuarially speaking their health insurance premiums will have to reflect this change and so premiums will actually increase, not decrease. This in turn, could affect families with young children, thereby increasing the number of uninsured.
As CAHI Director Merrill Matthews recently pointed out in the
And in 2008 President George W. Bush signed “Michelle’s Law,” which allows seriously ill college students on their parents’ health plan to continue that coverage for up to a year even if they have to take a medically necessary leave from college.
–Tory Bunce, Research and Policy director, Council for Affordable Health Insurance
Today’s Wall Street Journal
published a great editorial on the Dirigo program in Maine. (By the way
the information is largely based on the excellent work of the Maine Heritage Policy Center and Tarren Bragdon. We published a similar piece with Mr. Bragdon here.) The full WSJ piece is here, but here is an excerpt:
After five years, fiscal realities as brutal as the waves that crash along Maine’s famous coastline have hit the insurance plan. The system that was supposed to save money has cost taxpayers $155 million and is still rising
CAHI’s piece focuses on the undelivered promises — promises that look like the promises in the current health reform debate:
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In order to get health care reform passed, the Obama administration appears to be “willing to consider backing off” of a government-run health care system or “public option” in favor of health care cooperatives such as promoted by Senator Kent Conrad (D-ND).
Last night, while my family was listening to the car radio, the health care co-op issue was reported on. My fifth grade son, Casey, a fan of politics mind you, turned to me and asked, “What is a health care co-op? Does it mean that the federal government would cooperate with you to get health care?”
So I had to explain Economics 101 to Casey: A co-op is a business entity owned, controlled and operated by a group of individuals who use its services or work for it – all for their mutual benefit.
For several years, we have belonged to a < ?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />
In
While the idea of a health care cooperative has been around for decades, and we have seen several health care co-ops exist as a laboratory in a handful of states, it looks like as if federal seed money is on the table. That means control of the co-op would be appointed by the federal government. So, in other words, we are talking about a nationalized health care co-op that would not be independent from government control.
If the government sets the rules under which a health care co-op would operate, you can see where this is headed: a wolf in sheep’s clothing, a back door government-run public option or even worse – a single payer system. So really, is it just another name for basically the same thing?
As I further explained to Casey, the real issue before us is if a government run “public option” is replaced with a health care co-op, who eventually controls the co-op? Is it the federal government or is it those who maintain and utilize the co-op?
Casey looked a bit perplexed so I put it in terms Casey could understand. “I give you 10 dollars for an allowance. I go to pay you the money. Instead of just handing you the money, I say to you, ‘You can only spend this money in the ways in which I say because it is my house, my rules and my money – so you can put it in the bank, donate it to charity, or shop at the local book store. You cannot give it away to a friend to then in turn spend on you, nor can you spend it at the toy or game store.’”
To which Casey replied glumly, “That doesn’t sound anything like co-operation to me.”
Exactly.
–Tory Bunce, Director of Research and Policy, Council for Affordable Health Insurance
Can Companies Compete with the Post Office?
During his town hall meeting in New Hampshire, President Obama claimed
that the post office is a great example of a case in which private
companies compete effectively against government entities: “I mean, if
you think about — if you think about it, UPS and FedEx are doing just
fine, right? No, they are. It’s the post office that’s always having
problems.” His point was that critics shouldn’t oppose the
government-run public option because the private sector can compete
with government-sponsored entities.
But while the president was right that the post office has had
extensive financial problems and growing losses, he completely
misrepresented the facts.
U.S. law gives the post office exclusive access to your mailbox (which
is why packages are delivered to your door), and exclusive delivery of
first and third class mail. So sure, UPS and FedEx can deliver
packages, but that doesn’t mean they’re competing against the post
office.
It’s this role of the government as both referee and competitor that
creates problems. The post office has a monopoly, and it is only
through a loophole that companies are even allowed to deliver packages
to your house at all.
Some may argue that the postal monopoly is justified, in part because
of its universal service obligation. The post office loses money
delivering in some areas, such as rural and sparsely populated areas,
and so it needs to make up for those loses by charging more in urban
areas. But according to FedEx’s website, it’s home delivery system
“serves virtually 100 percent of the U.S. population,” and the company
seems to do so without losing money.
Equally problematic is the way the post office modifies its own rules
to ensure it keeps business. A 1997 New York Times article cited the
effort to protect “junk mail.”
So while the Postal Service is legally bound to cover
its costs on each class of mail, it bends the rules to keep down rates
by allocating proportionally less overhead to junk mail. In 1996,
third-class mail represented 40 percent of postal volume but carried
just 18 percent of what the Government calls ‘”institutional costs.” As
a result, much of the fixed costs of the system are borne by first-
class mail.
So the post office not only has financial problems, but it limits
competition and hides its true costs — just like Medicare. Will it be
any different if the government competes against private insurers?
In the end, President Obama’s analogy about the post office probably is more apt that he would like to admit.
– JP Wieske, Director of State Affairs, Council for Affordable Health Insurance
Will Covering Young Adults Make Health Insurance More Affordable?
As one of his “Health Insurance Consumer
Protections,” President Obama intends to extend a
family-policy’s coverage to young adults up to 26 years
old.
He’s following a state trend. The Council for Affordable
Health Insurance tracks all state health insurance
mandates — there are currently 2,133 state mandates
nationwide — and more and more states are
mandating health insurers cover young adults. Some
states are even pushing the age limit up to 30. It’s
often called the “slacker mandate” because these
adults are still on their family’s policy.
But far from making health insurance less expensive –
remember, the president promised family premiums
would go down $2,500 a year by the end of his first
term — imposing this mandate makes coverage
more expensive, especially for young families,
which tend to be least able to afford the additional
costs.
When a couple chooses “family coverage” they are
given the option of adding children to the policy for
relatively little additional premium. There’s a good
actuarial reason for those low prices: Children
between the ages of 2 and 18 are the healthiest
segment of the population. As a group they use very
little health care and the premiums reflect that limited
utilization.
When those children become adults, their expected
health care costs go up, including the fact that women
at age 26 are well into their child-bearing years. If
health insurers are forced to include young adults in a
premium intended for children, premiums will rise.
And that will hurt families with the youngest children,
which typically have the lowest incomes.
Moreover, this Obama “protection” simply isn’t
needed because provisions have been made for most
of the special cases. For example, many health
insurance policies voluntarily cover “dependent
children” who are attending college and even
graduate school. Plus young men and women too old
to continue on their family’s policy can transfer
(assuming it’s “creditable coverage” under
federal law) to a policy under their own name and
cannot be denied coverage. And in 2008 President
George W. Bush signed “Michelle’s Law,” which
allows seriously ill college students on their parents’
health plan to continue that coverage for up to a year
even if they have to take a medically necessary leave
from college.
President Obama and the Democratic leadership
continue to demonize the health insurance industry for
engaging in practices the Democrats think are wrong,
even “immoral.” But those practices are based on
actuarial science, not politics — which is more than we
can say for the president’s consumer protections.
– Dr. Merrill Matthews, Executive Director, Council
for Affordable Health Insurance
Can Health Insurers Refuse to Renew a Policy?
One of President Obama’s recently proposed “Health Insurance Consumer
Protections” is “Guaranteed Insurance Renewal,” which requires
insurance companies to “renew any policy as long as the policyholder
pays their premiums in full.”
We agree that’s an important issue. What the president hasn’t explained
– and maybe neither he nor his advisors are aware of it (which would
be a real cause for concern) — is why he thinks the public needs this
“consumer protection” since guaranteed renewability has been the law of
the land for 13 years.
In the Health Insurance Portability and Accountability Act (HIPAA) of
1996 it says with regard to the “individual” (i.e., non-group) health
insurance market:
In General — Except as provided in this section, a health insurance
issuer that provides individual health insurance coverage to an
individual shall renew or continue in force such coverage at the option
of the individual.
And of the small and large group market, HIPAA says:
In General — Except as provided in this section, if a health
insurance issuer offers health insurance coverage in the small or large
group market in connection with a group health plan, the issuer must
renew or continue in force such coverage at the option of the plan
sponsor of the plan.
As noted above, there are some exceptions. Non- payment of premiums is
one. Fraud is another. And occasionally an insurer will cancel its
whole block of business, perhaps because it’s getting out of the health
insurance line but more often because a state has passed such onerous
restrictions that the company feels it can no longer do business in the
state. In that case, everyone is dropped, not just one person. And an
insurer can cancel a specific plan provided it offers a replacement
plan.
But as a general principle, health insurers must renew policies if an
insured person or group wants to do so. So why has the president
included guaranteed renewability in his list of consumer protections?
If he thinks the law has some loopholes, he needs to explain what those
are and suggest ways to fix them. But, as seems more likely, if neither
the president nor his staff is even aware that guaranteed renewability
is federal law, well, maybe these aren’t the best people to be
attacking health insurers and radically restructuring the whole health
care system.
– Dr. Merrill Matthews, Executive Director, Council for Affordable Health Insurance