Author Archive | John Barrett

1 in 3 Employers Will Drop Health Benefits After ObamaCare Kicks In, Survey Finds

Thirty percent of employers will definitely or probably stop offering health benefits to their employees once the main provisions of President Obama’s federal health care law go into effect in 2014, a new survey finds.

The research published in the McKinsey Quarterly found that the number rises to 50 percent among employers who are highly aware of the health care law.

McKinsey and Company, which identifies itself as a management consultant that aims to help businesses run more productively and competitively, conducted the survey of more than 1,300 employers earlier this year. It said the survey spanned industries, geographies and employer sizes.

But the White House pushed back against the report.

“This report is at odds with the experts from the Congressional Budget Office, the Rand Corporation, the Urban Institute and history,” a senior administration official told Fox News. “History has shown that reform motivates more businesses to offer insurance.”

“Health reform in Massachusetts uses a similar structure, with an exchange, a personal responsibility requirement and an employer responsibility requirement,” the official said. “And the number of individuals with employer-sponsored insurance in Massachusetts has increased.”

According to the survey, at least 30 percent of employers would reap financial gain from dropping coverage even if they compensated employees for the change through other benefit offerings or higher salaries.

The research notes among the new provisions that could spur employers to drop coverage is a requirement of all employers with more than 50 employees to offer health benefits to every full-timer or pay a penalty of $2,000 per worker. Those benefits must also be equal between highly compensated executives and hourly employees – requirements that will increase medical costs for many companies.

The findings are distinct from a Congressional Budget Office estimate that only about 7 percent of employees who currently get health coverage through their jobs would have to switch to subsidized-exchange polices in 2014.

The group said its variance is so wide because shifting away from employer-sponsored insurance “will be economically rational” given the “law’s incentives.” The law requires employers to make insurance available to low-income or part-time employees that may not otherwise be covered.

The research found that contrary to what many employers feared, most employees — more than 85 percent — would stay at jobs that no longer offered health benefits. But 60 percent of employees would expect higher compensation.

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Mckinsey & Company Survey – How US health care reform will affect employee benefits

The shift away from employer-provided health insurance will be vastly greater than expected and will make sense for many companies and lower-income workers alike.

JUNE 2011 • Shubham Singhal, Jeris Stueland, and Drew Ungerman  – McKinsey & Company

Source: Healthcare Payor and Provider Practice

US health care reform sets in motion the largest change in employer-provided health benefits in the post–World War II era. While the pace and timing are difficult to predict, McKinsey research points to a radical restructuring of employer-sponsored health benefits following the 2010 passage of the Affordable Care Act.

Many of the law’s relevant provisions take effect in 2014. Our research suggests that when employers become more aware of the new economic and social incentives embedded in the law and of the option to restructure benefits beyond dropping or keeping them, many will make dramatic changes. The Congressional Budget Office has estimated that only about 7 percent of employees currently covered by employer-sponsored insurance (ESI) will have to switch to subsidized-exchange policies in 2014. However, our early-2011 survey of more than 1,300 employers across industries, geographies, and employer sizes, as well as other proprietary research, found that reform will provoke a much greater response.

 

  • Overall, 30 percent of employers will definitely or probably stop offering ESI in the years after 2014.

 

  • Among employers with a high awareness of reform, this proportion increases to more than 50 percent, and upward of 60 percent will pursue some alternative to traditional ESI.

 

  • At least 30 percent of employers would gain economically from dropping coverage even if they completely compensated employees for the change through other benefit offerings or higher salaries.

 

  • Contrary to what many employers assume, more than 85 percent of employees would remain at their jobs even if their employer stopped offering ESI, although about 60 percent would expect increased compensation.

In this new world, employers must quickly examine the implications of health care reform on their benefit and workforce strategies, as well as the opportunities and risks that reform generates. Of course, the type and extent of the changes employers make will vary by industry, collective-bargaining agreements, and other constraints. Most employers, however, will find value-creating options between the extremes of completely dropping employee health coverage and making no changes to the current offering. Even employers that intend to provide benefits similar to those they currently offer can take no-regrets moves, like tailoring plans to maximize what their employees will value most about ESI after 2014. Employers pursuing more radical changes will have to rethink benefit packages for higher-income employees.

And all employers must continue to keep in mind their employees’ health and wellness needs, even as insurance coverage levels evolve. To serve employers, insurers must retool their business models to provide more consultative support during the transition and develop innovative approaches to support employers’ new benefit strategies (see sidebar “Implications for health insurers”). For employers and insurers, success after 2014 will require a better understanding of employee and employer segments, and the development of the right capabilities and partnerships to manage the transition.

A transformed employer market

Health care reform fundamentally alters the social contract inherent in employer-sponsored medical benefits and how employees value health insurance as a form of compensation. The new law guarantees the right to health insurance regardless of an individual’s medical status. In doing so, it minimizes the moral obligation employers may feel to cover the sickest employees, who would otherwise be denied coverage in today’s individual health insurance market. Reform preserves the corporate tax advantages associated with offering health benefits—except for high-premium “Cadillac” insurance plans.

Starting in 2014, people who are not offered affordable health insurance coverage by their employers will receive income-indexed premium and out-of-pocket cost-sharing subsidies. The highest subsidies will be offered to the lowest-income workers. That reduces the social-equity advantage of employer-sponsored insurance, by enabling these workers to obtain coverage they could not afford on today’s individual market. It also significantly increases the availability of substitutes for employer coverage. As a result, whether to offer ESI after 2014 becomes mostly a business decision. Employers will have to balance the need to remain attractive to talented workers with the net economics of providing benefits—taking into consideration all the penalties and tax advantages of offering or not offering any given level of coverage.

What the law says

Health care reform imposes several new requirements on employer health benefits. Some changes will be incremental; for example, annual and lifetime limits on care must be eliminated, and coverage must be offered to dependents through age 26. Plans with premiums above certain levels will be subject to a so-called Cadillac tax.1

Other requirements are game changing and could prompt employers to completely reconsider what benefits they offer to employees. Reform requires all employers with more than 50 employees to offer health benefits to every full-timer or to pay a penalty of $2,000 per worker (less the first 30). The benefits must provide a reasonable level of health coverage, and (except for grandfathered plans) employers will no longer be able to offer better benefits to their highly compensated executives than to their hourly employees. These requirements will increase medical costs for many companies. It’s important to note that the penalty for not offering coverage is set significantly below these costs.

Reform also offers options for workers to obtain affordable insurance outside the workplace. Individuals who are unemployed or whose employers do not offer affordable health coverage, and whose household incomes are less than 400 percent of the federal poverty level,2 are eligible for subsidies toward policies they will be able to purchase on newly created state insurance exchanges. These will offer individual and family policies of set benefit levels (bronze, silver, gold, and platinum) from a variety of payers.

The subsidies will cap the amount lower- and middle-income individuals and families will have to spend on health coverage, to 9.5 percent of household income for those at 400 percent of the federal poverty level and less for those at lower income levels. The subsidies will keep the cost of insurance coverage from the exchanges below what many employees now pay toward employer-sponsored coverage, especially for those whose earnings are less than 200 percent of the federal poverty level.

A bigger effect than expected

As we have seen, a Congressional Budget Office report estimated that only 9 million to 10 million people, or about 7 percent of employees, currently covered by ESI would have to switch to subsidized exchange policies in 2014. Most surveys of employers likewise show relatively low interest in shifting employees from traditional ESI.

Our survey found, however, that 45 to 50 percent of employers say they will definitely or probably pursue alternatives to ESI in the years after 2014. Those alternatives include dropping coverage, offering it through a defined-contribution model, or in effect offering it only to certain employees. More than 30 percent of employers overall, and 28 percent of large ones, say they will definitely or probably drop coverage after 2014.

Our survey shows significantly more interest in alternatives to ESI than other sources do, for several reasons. Interest in these alternatives rises with increasing awareness of reform, and our survey educated respondents about its implications for their companies and employees before they were asked about post-2014 strategies. The propensity of employers to make big changes to ESI increases with awareness largely because shifting away will be economically rational not only for many of them but also for their lower-income employees, given the law’s incentives.

We also asked respondents questions about their philosophy and decision-making process for benefits: the current rationale for providing them, which employee group is considered most when decisions are made about them, their importance in the respondent’s industry, and geography. These questions prompted the respondents to consider all the factors that will influence their post-2014 decisions. Finally, we tested options beyond dropping coverage outright. These alternatives will probably be the most effective ones for delivering a reasonable return on a company’s investment in benefit programs after 2014. We would therefore expect to see a level of interest higher than that generated by surveys asking only about plans to keep or drop ESI.

Estimating the employer impact

As employers consider their post-2014 options, they should take a dynamic view by considering how competitors for talent—other employers—and their own employees will react. Many employers will be shifting from ESI; it is unlikely that only one company in an industry or geography will move away from it.

ESI might also be less valuable than most employers assume. Among employers not likely to drop ESI, three of the top five reasons given (and two of the top three) were concerns about talent attraction, employee satisfaction, and productivity. Among employees, however, McKinsey consumer research found that more than 85 percent—and almost 90 percent of higher-income ones—say they would remain with an employer that dropped ESI. Overall, employees value cash compensation several times more than health coverage. Further, many younger employees also value career-development opportunities and work–life balance more than health benefits.

Making employees whole

To make up for lost medical insurance, most employers that drop ESI will increase employee compensation in other ways, such as salary and other benefits like vacation time, retirement, or health-management programs. Employees think this will happen: 60 percent say they would expect employers to increase compensation if health benefits were dropped, our consumer research shows. Employers will do so to remain competitive for talent. In addition, ensuring some level of employee health, through higher investment in wellness programs or another mechanism, helps to maintain the productivity of workers.

Our research found that even with conservatively low assumptions about eligibility for employee subsidies, at least 30 percent of employers would benefit economically by dropping health coverage even if they make employees 100 percent whole. Employers could do so by paying sufficient additional compensation to help employees purchase coverage with no other out-of-pocket expense (less subsidies for employees with household incomes below 400 percent of the federal poverty level), the additional individual income and payroll taxes levied on the increased compensation, and the $2,000 government penalty.

But we believe that employers will not have to provide 100 percent of the value of the lost insurance. If so, even more employers will benefit economically. In the course of our research, we interviewed executives at Liazon, a defined-contribution-benefit company. They have found that when employees are shifted from coverage selected by their employer to a defined-contribution plan (under which the employer provides a fixed dollar amount and the employee can choose how to allocate it among a variety of benefit options), about 70 percent of employees choose a less expensive health plan.

Higher-income employees, who won’t receive subsidies and would have to pay the entire cost of individual coverage out of pocket, will have a greater need to be made whole. These higher-income employees, however, are also more likely to be satisfied with partial compensation or with tax-advantaged forms of compensation, such as retirement benefits.

The need to make employees whole will decrease over time. Subsidies will be awarded to keep premiums below a fixed percentage of an individual’s household income. As long as income continues to rise at a rate lower than that of medical inflation, even employees who initially have to pay more out of pocket toward an exchange policy than they would toward ESI will have less of a difference to make up each year, and the employer will have to provide less to make employees whole.3

This development should not suggest, however, that employers considering the elimination of ESI are focused exclusively on the bottom line, at the expense of their employees. In fact, because of the subsidies, many low-income employees will be able to obtain better health coverage, for less out of pocket, on an exchange than from their employer.

The range of coverage options for employers

In fact, employers indicating that they will definitely or probably drop (or otherwise shift from) ESI post-2014 are more likely to consider the impact on low-income workers (as opposed to other groups of employees) when making benefit decisions and two to three times more likely to view benefits as important to attracting talent in their industry and geography. These employers are considering shifting from ESI not because they don’t care about their employees but because they recognize that, after 2014, ESI may not be the most efficient way to provide health coverage (see sidebar “The range of coverage options for employers”).

Getting ready for the new world

To prepare for 2014, employers should explore the economics of benefits after reform, maximize the return on investment (ROI) of benefit packages, design them for higher-income employees, and satisfy the health and wellness needs of the whole workforce.

Explore the economics of post reform benefits

Employers must understand, at the microsegment level, the eligibility of employees for subsidies under different scenarios—for example, when the employer provides no coverage at all, coverage defined as “unaffordable” (at a premium above 9.5 percent of the household income) for some employees, or coverage above the Cadillac-plan threshold. Companies must determine the cost of making employees whole, using market research tools to find out how much they value ESI, cash compensation for it, and a variety of other benefits. The importance for workers of a given benefit may not correlate directly with its tax-adjusted cost to the employer.

Maximize the ROI of the benefit package

The discussion to date has largely focused on dropping versus keeping coverage, but for most employers the most value-creating options lie in between. Employers should evaluate the economic impact not only of expanding ESI to every employee (compared with dropping it completely) but also of shifting toward part-time labor, allowing lower-wage employees to qualify for exchange subsidies through setting premiums above 9.5 percent of their household income, or adopting defined-contribution models. These intermediate options will probably be the most effective way to secure a reasonable ROI for benefits after 2014, because they enable employers to provide the best possible result for each segment of employees—ESI for higher-income ones not eligible for subsidies, as well as affordable coverage from a subsidized exchange for lower-income workers.

Even employers that continue to offer ESI—and many will, especially in heavily unionized industries where flexibility may be limited—could make no-regrets moves to maximize the ROI of benefits after 2014. Market research tools could be used to determine the preferences of employees, so that the benefit plan emphasizes what they value most while minimizing other features. Other strategies would involve designing plans and enrollment features to reduce costs, pricing plans to promote responsible use, and ensuring that wellness spending produces a positive return. Retiree medical benefits could be shifted from traditional ESI toward Medicare (the federal government’s health care program for those 65 and older) and Medicare Advantage (the private-sector version of the government plan).

Design benefit packages for higher-income employees

Because lower-income employees will be eligible for exchange subsidies if their employers don’t offer them affordable health coverage, we expect that ESI will shift toward higher-income employees. This group will have more demanding expectations for service levels and convenience, as well as different attitudes toward benefits covered.

Employers should tailor their ESI offering to include navigation tools that make it easier to identify and get appointments with high-quality health care providers and fast access to well-informed people for assistance with billing or coverage issues. These services could be provided through partnerships with enterprises that specialize in explaining medical bills and pricing. Higher-income employees may also value preferred-access or other enhanced-care physician services more than a traditional Cadillac ESI plan. These alternative benefits may be more cost effective for employers once the Cadillac tax comes into effect, in 2018.

Satisfy employee health and wellness needs

Even for an employer that drops ESI for all or some employees, maintaining their health, productivity, and satisfaction will continue to be important. Employers could not only expand or refine wellness programs to focus on elements that have a substantive, positive, and documentable impact on employee health and satisfaction but also provide the right incentives to encourage participation. In addition, employers could establish clinics at work sites, or partnerships with local providers or pharmacies so that employees can easily and affordably receive preventative care, such as flu shots or annual physicals. Another way to keep employees satisfied and avoid disrupting their lives would be to partner with a broker or another enterprise that helps them understand their benefit options and enroll for coverage on insurance exchanges.

Employers should recognize that as the ESI market changes after 2014, the system will react dynamically. If many companies drop health insurance coverage, the government could increase the employer penalty or raise taxes. Employers will need to be aware of actions by participants at any point along the health care value chain and prepare to adapt quickly.

Whether your company is poised to shift from employer-sponsored insurance or will continue to offer the same benefit package it does now, health care reform will change the economics of your workforce and benefits, as well as how your employees value coverage. Understanding these changes at a granular level will enable your company to gain or defend a competitive advantage in the increasingly dynamic market for talent.

About the Authors

Shubham Singhal is a director in McKinsey’s Detroit office, Jeris Stueland is a consultant in the New Jersey office, and Drew Ungerman is a principal in the Dallas office.

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USE OF URGENT CARE GROWING IN SOUTHERN CALIFORNIA

California Healthline –

May 13: Los Angeles – Having matured from their early 1970s image of “Docs in a Box,” urgent care centers are growing in popularity with patients who would rather not wait to see a doctor whether in an office or in the emergency department.

Urgent care’s growth is partly attributable to immediate and projected shortages of primary care physicians. California barely meets the nationally recognized standard for the number of primary care physicians. According to a July 2010 California HealthCare Foundation report, only the Orange, Sacramento, and Bay Area regions meet the recommended supply. Los Angeles falls just below.

Long waits in hospital EDs also are a factor in urgent care’s growth. The Hospital Association of Southern California reports that the average wait time for non-emergency care at a Los Angeles County hospital without a fast-track triage system is seven hours.

Only 29% of primary care doctors have after-hours coverage, according to the American Academy of Urgent Care Medicine. Most urgent care centers are open from 8 a.m. to 8 p.m. and see patients usually within 30 minutes, according to industry literature.

AAUCM reports that approximately 8,700 walk-in, stand-alone urgent care centers exist in the U.S. compared with about 4,600 hospital EDs. AAUCM and the Urgent Care Association of America, a trade group, estimate that 400 to 800 new urgent care clinics open each year across the country.

Most urgent care centers accept insurance and all accept cash, according to Lou Ellen Horwitz, executive director of the trade group. The treatment cost is usually comparable to a primary care visit, and less expensive than the ED, according to urgent care organizations. Charges vary according to insurance coverage, and patients are urged to learn about payment options before visiting.

‘A Market in Great Need of Access to Care’

With conditions in Southern California ripe for improved access, urgent care providers have taken notice. Centers in Los Angeles and Orange counties operate under several business models, ranging from independent to hospital-affiliated.

Charges range from $80 to $130 for a “basic” visit; additional diagnostics can cost more, and some centers offer enhanced “tiers” of service.

Doctor’s Express, which bills itself as the nation’s first urgent care medical franchise, plans to open a clinic soon in Santa Clarita in Los Angeles County.

“It’s a market in great need of access to care,” according to Scott Burger, Doctor’s Express co-founder and chief medical officer. “Southern California is no stranger to urgent care, with many successful clinics,” said Doctor’s Express franchise owner Paul Arvanitis.

Concentra, the nation’s largest urgent care provider, continues to see an increase at all of its centers, including those in Southern California. It operates four centers in Los Angeles.

CEO Jim Greenwood said the company aims to deliver “an accessible and welcoming health care experience that meets the needs of busy patients, without sacrificing personal service and quality of care.”

U.S. Healthworks Medical Group, based in Valencia, reports that urgent care business in 13 states is good and that expansion continues. The company has five urgent care centers in Orange County and 16 in Los Angeles.

Although urgent care, also known as episodic care, can help patients with some ailments, it should not replace regular care for chronic conditions, according to U.S. Healthworks Regional Medical Director Alicia Wagner.

“Health care professionals in episodic care may not realize that you’ve gained 10 pounds. We encourage patients to work with a physician for continuing care,” Wagner said.

A 2009 RAND study reported 14% to 27% of ED visits could be handled by urgent care centers or retail clinics, saving up to $4.4 billion annually in health care costs.

“We’re not here to replace the ER,” Horwitz said. “The cut-off is that we won’t treat life- or limb-threatening situations. There is very little we take care of that can’t wait until the next day.” She said that if an emergency patient shows up, clinic staff will call 911.

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Twentysomethings should weigh health insurance options

Graduates under age 26 can go (or stay) on their parents’ plan, buy an individual policy or be covered by their employer. A little homework will help decide which plan is right.
By Kathy M. Kristof Personal Finance

May 8, 2011

Jay Carey, 23, had the option of going back on his parents’ health insurance plan when he left his last job to become a freelance graphics designer.

But that didn’t mean he should have.His family, and its health insurer, were based in Chicago. That meant a long commute for the Los Angeles-based Carey to see a plan physician. Besides, his dad, who probably would have to pay more for “family” coverage if Carey were to boomerang back onto the policy, wasn’t wild about the idea.

“It seemed like it would be a lot easier for me to get my own plan,” Carey said.

In this post-health reform era, millions of twentysomethings are likely to be faced with a similar choice. Thanks to changes implemented in the nation’s health law, people under the age of 26 can rejoin their parents’ healthcare plans. But they might have better options.

“You can’t just assume that going on your parents’ plan is the best choice,” said Carrie McLean, manager of customer service at EHealthInsurance in Mountain View, Calif. “There are a lot of things to consider.”

How do you wisely evaluate health insurance choices?

• Know your options

There are three good ways to get coverage if you’re a graduate under the age of 26. You can be covered by your own employer; you can go (or stay) on your parents’ plan; or you can buy an individual policy for yourself.

• Consider your health

If you have chronic health issues — diabetes, asthma, a heart condition or bipolar disorder, to name a few — you can make the evaluation simpler by dropping the individual policy option from consideration.

Individual policies are individually “underwritten,” which means they’re cheap when you’re young, healthy and not likely to use much in the way of medical care. Carey, for example, pays just $107 a month.

But they can be prohibitively expensive, if available at all, for those who are on medications and need regular medical attention.

Health insurance offered through employers, on the other hand, is group coverage. Group plans usually charge the same to every member of the group, regardless of whether they’re sick or healthy. That can make group insurance a great deal if you’ve got medical issues. But it can make it comparatively expensive if you don’t — even, in some cases, when the employer is subsidizing the coverage.

That’s one of the reasons that 20-year-olds should shop before joining a group plan. They might pay less on their own.

• Health insurance plans are not all alike

Some provide sweeping coverage, small co-payments and minuscule deductibles, while others restrict coverage for certain conditions (most commonly pregnancy) and require policyholders to pay a significant amount of costs upfront through substantial co-payments and deductibles.

Getting familiar with the details of each plan is pivotal to figuring your annual cost. That cost will hinge on five things: the premiums you pay, your deductible, your co-payments, the cost of filling prescriptions and whether all the health services you need are covered.

Be sure to pay attention to any restrictions the plan might impose on where you get care, particularly if you’re planning to piggyback on an out-of-town parent’s plan.

• Add up the parts

To evaluate your annual cost of coverage, make a grid with the plans you’re considering listed horizontally. On the vertical axis, you’ll want to leave ample space for several categories — premiums, deductibles, co-payments, prescriptions and projected cost for uncovered services. Your final line will be for the section totals.

To figure out your total cost, you have to project your healthcare use over the course of the coming year. Unfortunately, the only cost you know for sure is the monthly premium, so start there. Multiply each plan’s premium by 12 and put the annual cost in the total for premiums.

You’ll have to guesstimate the other costs, based on how often you typically use healthcare and what you use. For example, if you normally see a doctor just once a year for a check-up, you’d examine the plan details to see if that visit is covered completely (which is increasingly common) or whether it would be subject to a deductible and co-payments.

If a plan covers it, note the item and a zero. If the plan wouldn’t cover it or would impose a co-payment or deductible, plug in the appropriate amount. Do the same with any other anticipated healthcare use, from prescriptions to surgeries.

Of course, you can’t foresee all your possible healthcare needs for the year. But this exercise can give you the opportunity to make apples-to-apples comparisons of plan costs. And that can help you make a wise decision about which health insurance plan works best for you.

business@latimes.com

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Couple’s health insurance choices are bad and worse

Stuart and Cathy Selter recently learned that Anthem Blue Cross is cutting off sales of their plan, which costs them about $1,500 a month with a $2,500 deductible. They can either stick with that plan and pay higher premiums or switch to another plan with a higher deductible.

By David Lazarus – L.A. Times

April 19, 2011

Stuart and Cathy Selter of Agoura Hills were satisfied with their Anthem Blue Cross health insurance plan, which cost them about $1,500 a month in premiums and had a $2,500 deductible.

Now, they say, Anthem is moving the goal posts for their coverage. The insurer informed them recently that because it’s no longer selling their plan, the risk pool is shrinking and their premiums will rise.

Anthem didn’t specify how much the Selters’ rates could increase. But if fewer people are sharing the risk of an insurance plan, costs could rise dramatically.

“A shrinking risk pool will eventually mean that the only people left in the plan will be ones with preexisting conditions,” said John Barrett, a Pasadena health insurance broker. “Over time, rates would go up more than other plans.”

The Selters are in exactly that situation. Cathy is a Type 2 diabetic, making her uninsurable elsewhere — at least until a provision of the new healthcare reform law guaranteeing coverage takes effect in 2014.

So their only choice is to stick with their current insurance plan and face the prospect of rising premiums, or to switch to a different Anthem plan with a higher deductible or out-of-pocket expenses.

“Our choices are bad and worse,” Stuart Selter, 61, told me. “Why? Why do those have to be the only choices?”

Well, because health insurance in this country is primarily a for-profit business, and the Selters, along with about 14 million other people with individual insurance policies, aren’t profitable enough for multibillion-dollar insurance companies. So they’re being steered (“forced” would be another word) into more profitable plans.

“I’m a for-profit, capitalist kind of guy,” said Selter, who works as executive director of an educational foundation. “But I don’t believe you have to gouge the people who keep you in business.”

Peggy Hinz, an Anthem spokeswoman, said only that “sometimes we need to modify the range of plans we offer.”

She declined to discuss the rationale for no longer selling the Selters’ PPO 2500 plan or how high the premiums might rise with a dwindling risk pool.

Barrett, the insurance broker, said that when a plan is closed to new policyholders, most people simply switch to a different plan with the same or a different insurer.

“The only people who suffer are the ones with preexisting conditions,” he said. “They can’t go anywhere else.”

Like the Selters, who suddenly find themselves being squeezed.

“Anthem isn’t doing this because it’s evil,” Barrett said. “This is a business decision. That’s what capitalism is.”

True. But capitalism shouldn’t be unfair.

In the case of individual health insurance, policyholders enjoy no group rates or safety in numbers. They are at the mercy of their insurers, which is why rates have soared in recent years.

Nearly 151,000 Anthem policyholders in California will see their rates go up as much as 26% on May 1. Under pressure from state officials, Blue Shield of California recently dropped plans for another rate hike that would have meant cumulative increases of as much as 87% for some policyholders.

The average rate increase for renewals of individual polices last year was 20%, according to a survey by the Kaiser Family Foundation. Switching to a cheaper plan still entailed an average rate hike of 13%, the survey found.

“The individual insurance market is not a fair playing field,” said Ken Stuart, chairman of the California Health Care Coalition, a nonprofit organization that represents large purchasers of health insurance such as school districts, labor unions and the California Public Employees’ Retirement System.

“The inequities of the individual insurance market have been terrible for a long time,” he said. “People are at the mercy of the marketplace.”

I’ve long believed that a Medicare-for-all approach is the most equitable way of providing health coverage for people. At the very least, some sort of public option should be available for the millions of people who lack employer-provided insurance.

They’ll presumably have improved access to healthcare several years from now when so-called insurance exchanges are created under the reform law and insurers are prevented from denying coverage to people with preexisting conditions.

But that’s only if there’s a mandate for everyone to enter the system, and a number of lawsuits are pending that challenge Congress’ authority to impose such a requirement. Without a mandate, it’s difficult to see how these exchanges would operate if people could just wait until they get sick before seeking coverage.

In the meantime, insurers get to keep calling all the shots, and people like the Selters are presented with the miserable choice of having to pick between higher premiums and higher deductibles if they want to remain insured.

That’s capitalism. I get it.

But you’d think we’d be able to agree that there are some things — access to safe food, clean water, affordable healthcare — that shouldn’t be first and foremost about profits.

Or do I have that wrong?

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OBAMA SIGNS REPEAL OF HEALTHCARE LAW’S ‘1099’ TAX-REPORTING RULE

The Washington Post –

Apr. 14: President Obama on Thursday signed into law a measure that repeals the unpopular 1099 tax-reporting provision of the national health-care law.

The move marked the first successful effort by Congress to repeal a portion of Obama’s signature health-care legislation. The Senate earlier this month voted 87-to-12 to repeal the 1099 provision. The House passed the measure in March on a bipartisan 314-to-112 vote.

The White House released a statement announcing the Obama had signed the measure, which it said “repeals the expansion in the Affordable Care Act of requirements for businesses to report information to the Internal Revenue Service on payments for goods of $600 or more annually to other businesses and increases the amount of overpayment subject to repayment of premium assistance tax credits for health insurance coverage purchases through the Exchanges established under the Affordable Care Act.”

Obama’s signing of the legislation into law marks the end of a nearly eight-month-long effort by lawmakers to do away with the 1099 tax-reporting provision. Sen. Mike Johanns (R-Neb.) had led the effort in the Senate, but each time repeal seemed close, the parties reached an impasse over how to pay for the repeal, which would result in the loss of an estimated $22 billion over the next decade.

The law signed by Obama on Thursday would pay for repeal by forcing greater repayment of health insurance subsidies for families whose income unexpectedly exceeds certain thresholds.

Johanns lauded the signing in a statement Thursday evening. “Job creators can finally celebrate: the 1099 tax paperwork mandate is officially off the books,” Johanns said.

“Because of the resilience of small business owners everywhere in keeping this issue at the forefront, because of the good judgment of my colleagues in both houses in recognizing the foolishness of this mandate, and now because of the President’s signature, our job creators can go about their business without fear of being hammered by mountains of additional, unnecessary tax paperwork.”

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High-Deductible Plans Not More Risky for Medically Vulnerable

Tuesday, April 19, 2011

Medically vulnerable individuals enrolled in high-deductible health plans are not at a greater risk for cutting back on necessary health services than non-vulnerable enrollees in high-deductible plans, according to a new study by RAND Corporation, Modern Healthcare reports (Vesely, Modern Healthcare, 4/18).

The California HealthCare Foundation provided support for the study. CHCF publishes California Healthline (RAND release, 4/18).

For the study, researchers analyzed data on more than 360,000 U.S. families enrolled in high-deductible health plans through 59 large employers between 2003 and 2007.

In particular, researchers examined how high-deductible plans affected families living in low-income areas and families that had a member with a serious chronic condition.

Key Findings

Some health advocates have expressed concern that high-deductible plans could spur low-income families and people with chronic illnesses to forgo necessary medical care.

However, Amelia Haviland — lead author of the study and a statistician at RAND — said researchers “did not find greater cutbacks for medically vulnerable families.”

The study found that some high-deductible plan enrollees with chronic illnesses were more likely to obtain certain preventive services than low-income and non-vulnerable enrollees (Tocknell, HealthLeaders Media, 4/19).

Researchers noted that policyholders of all income levels tended to use recommended preventive services less frequently after switching to a high-deductible plan (Hobson, “Health Blog,” Wall Street Journal, 4/18).

In addition, the study found that the size of the deductible affected spending on health services among non-vulnerable families. According to Haviland, medically vulnerable families reduced spending on prescription drugs only when deductibles were at least $1,000 per person.

Implications

Haviland said the study “suggests that non-vulnerable families, low-income families and high-risk families are equally affected under high-deductible plans.”

Researchers noted that the findings could become more pertinent over the next few years because the state health insurance exchanges mandated under the federal health reform law could start offering high-deductible health plans in 2014 (HealthLeaders Media, 4/19).

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HIGH-END MEDICAL OPTION PROMPTS MEDICARE WORRIES

Associated Press –

Apr. 3: Every year, thousands of people make a deal with their doctor: I’ll pay you a fixed annual fee, whether or not I need your services, and in return you’ll see me the day I call, remember who I am and what ails me, and give me your undivided attention.

But this arrangement potentially poses a big threat to Medicare and to the new world of medical care envisioned under President Barack Obama’s health overhaul.

The spread of “concierge medicine,” where doctors limit their practice to patients who pay a fee of about $1,500 a year, could drive a wedge among the insured. Eventually, people unable to afford the retainer might find themselves stuck on a lower tier, facing less time with doctors and longer waits.

Medicare recipients, who account for a big share of patients in doctors’ offices, are the most vulnerable. The program’s financial troubles are causing doctors to reassess their participation. But the impact could be broader because primary care doctors are in short supply and the health law will bring in more than 30 million newly insured patients.

If concierge medicine goes beyond just a thriving niche, it could lead to a kind of insurance caste system. “What we are looking at is the prospect of a more explicitly tiered system where people with money have a different kind of insurance relationship than most of the middle class, and where Medicare is no longer as universal as we would like it to be,” said John Rother, policy director for AARP.

Concierge doctors say they’re not out to exclude anyone, but are trying to recapture the personal connection shredded by modern medicine. Instead of juggling 2,000 or more patients, they can concentrate on a few hundred, stressing prevention and acting as advocates with specialists and hospitals.

“I don’t have to be looking at patient mix and how many are booked per hour,” said Dr. Lewis Weiner, a primary care physician in Providence, R.I., who’s been in a concierge practice since 2005.

“I get to know the individual,” Weiner said. “I see their color. I see their moods. I pick up changes in their lives, new stressors that I would not have found as easily before. It’s been a very positive shift.”

Making the switch can also be economically rewarding. If 500 patients pay $1,500 apiece, that’s gross revenue of $750,000 for the practice. Many concierge doctors also bill Medicare and private insurance for services not covered by their retainer.

For now, there may be fewer than 2,000 doctors in all types of retainer practice nationally. Most are primary care physicians, a sliver of the estimated 300,000 generalists.

The trend caught the eye of MedPAC, a commission created by Congress that advises lawmakers on Medicare and watches for problems with access. It hired consultants to investigate.

Their report, delivered last fall, found listings for 756 concierge doctors nationally, a five-fold increase from the number identified in a 2005 survey by the Government Accountability Office.

The transcript of a meeting last September at which the report was discussed reveals concerns among commission members that Medicare beneficiaries could face sharply reduced access if the trend accelerates.

“My worst fear and I don’t know how realistic it is is that this is a harbinger of our approaching a tipping point,” said MedPAC chairman Glenn Hackbarth, noting that “there’s too much money” for doctors to pass up.

Hackbarth continued: “The nightmare I have and, again, I don’t know how realistic it is that a couple of these things come together, and you could have a quite dramatic erosion in access in a very short time.”

Another commissioner at the meeting, Robert Berenson, called concierge medicine a “canary in the coal mine.” Several members said it appears to be fulfilling a central goal of Obama’s overhaul, enhancing the role of primary care and restoring the doctor-patient relationship.

Yet the approach envisioned under the law is different from the one-on-one attention in concierge medicine. It calls for a team strategy where the doctor is helped by nurses and physician assistants, who handle much of the contact with patients.

John Goodman, a conservative health policy expert, predicts the health care law will drive more patients to try concierge medicine. “Seniors who can pay for it will go outside the system,” he said.

MedPAC’s Hackbarth declined to be interviewed. But Berenson, a physician and policy expert, said “the fact that excellent doctors are doing this suggests we’ve got a problem.”

“The lesson is, if we don’t attend to what is now a relatively small phenomenon, it’s going to blow up,” he added. When a primary care doctor switches to concierge practice, it means several hundred Medicare beneficiaries must find another provider.

Medicare declined an interview on potential consequences. “There are no policy changes in the works at this time,” said spokeswoman Ellen Griffith.

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A SHIFT TOWARD SMALLER HEALTH INSURANCE NETWORKS

Los Angeles Times –

Apr. 4: Thousands of employers in California and across the country are slashing expensive doctors and hospitals from their insurance rosters in a move to hold down rising healthcare costs a trend that is gaining favor with corporate bosses, if not the rank and file.

The savings on insurance premiums nearly 25% in some cases are gained when companies switch their health plans to “narrow network” HMOs that offer fewer choices of medical providers.

California, with nearly 21 million people in health maintenance organizations, is driving the rapid expansion of these networks. More than 10,000 California employers and public agencies have enrolled, mostly since the recession struck in 2008.

While many workers welcome the cheaper HMOs, the savings come at the price of fewer healthcare choices.

Beverly Prange chose a slimmed-down network in January offered through her employer, the San Diego County Office of Education. The change cut her insurance premiums but meant switching physicians, something she was reluctant to do.

“I have less flexibility now than I had in the past,” said Prange, a migrant education specialist. “I liked the doctor where I was.”

The narrow networks have attracted some of California’s largest employers. Two of the biggest users the University of California and the California Public Employees’ Retirement System have offered their members the option of slimmer plans sold by Health Net Inc. and Blue Shield of California, and say the cost-cutting alternatives have found wide acceptance.

“It’s a better use of healthcare dollars for our members,” said Kathleen Billingsley, a CalPERS benefits official.

Insurers and employer groups say the networks have grown fastest among small businesses, allowing them to save money and still get high-quality medical care for their employees.

California Furniture Galleries, a small home furnishings store in Canoga Park, chose the “Silver” network from Health Net last year rather than asking 14 employees to pay more for their health insurance. The change roughly cut in half an expected 13% increase in premiums, and most employees were able to keep their doctors, who were part of the smaller network.

“It was a no-brainer,” manager Mike Katz said of the decision to switch.

The availability of doctors varies by each narrow network. Woodland Hills-based Health Net, one of the first to promote the strategy in California, features 47,000 doctors in its full HMO network but just 7,000 physicians in its Silver plan.

That network available in 10 counties, including Los Angeles, Orange, San Bernardino and Riverside can save businesses as much as 14% on insurance premiums, a spokesman said.

An even smaller network, Bronze, has 1,600 doctors in Los Angeles, San Diego and San Bernardino counties, and can shave as much as 24% off insurance bills.

“We know we have a popular, growing concept,” said Health Net spokesman Brad Kieffer, who noted the company’s plans to expand beyond California.

Other insurance companies, seeing a trend in the making, are eagerly promoting their own versions of narrow networks nationwide. Three of the largest national providers in particular WellPoint Inc., Aetna Inc. and UnitedHealth Group Inc. are quickly expanding the niche to capture millions of new customers.

UnitedHealthcare alone has signed up about 75,000 employer groups nationwide, the bulk of them in the last two years, including more than two dozen Southern California school districts that joined in January.

“We are revving up that engine,” said Dr. Sam Ho, UnitedHealthcare’s chief medical officer. “There is an aggressive appetite for new solutions and new opportunities to manage healthcare costs.”

California regulators said consumers were protected from potential abuses by a state law that requires narrow networks to abide by the same rules set for broader HMO systems — for example, providing access to doctors and hospitals close to patients’ homes.

Healthcare experts and consumer advocates warn that eliminating doctors and hospitals from insurance lists could harm patients, particularly those who depend on specific providers to treat chronic or life-threatening conditions.

They note that HMO patients who seek care from doctors outside their networks typically must foot the entire cost of their treatments.

“The real question is, can people who are really sick and need high-end specialty care … still get the care they need in these narrower networks?” asked Drew Altman, president of the Kaiser Family Foundation, a nonprofit research organization in Northern California. “That will depend on the details of how they work.”

Insurers say they have designed the smaller networks with healthcare quality in mind, relying on clinical benchmarks from outside organizations to ensure that customers receive high-quality care.

In California, for instance, insurers say they often look to the state’s Office of the Patient Advocate for quality guidelines. Every year, the state agency issues a report card on HMOs to help consumers evaluate health coverage.

Insurers also say these narrow networks don’t dramatically cut people’s choices, and that the slimmed-down lists of doctors and hospitals often feature many of the providers in the broader HMO systems.

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Health law cost still a wild card

By DAVID NATHER | 3/29/11 4:42 AM EDT

Anyone who claims to know how much the health care law will cost is missing one big piece of information: the exact cost of the benefits.

They can’t know it, because the benefits package is still being worked out, and its final shape will determine whether the Congressional Budget Office estimate was in the ballpark or not even close.

Starting in 2014, all health plans offered through the state health insurance exchanges will have to offer the “essential health benefits package” — a set of minimum services all individuals and small businesses are supposed to have in their coverage. That package will have a direct impact on the cost of the law, because people will get subsidies to help them buy coverage if they can’t afford it on their own.

Make the benefits package too stingy, and consumer advocates will say the law failed in its goal of protecting people from big gaps in coverage. Make it too generous, though, and the premiums for those plans will go up — and the federal government will have to spend that much more on the subsidies.

If that happens, the CBO projections that the law will pay for itself — and actually reduce the deficit by $143 billion over 10 years — might underestimate the actual costs. That’s critical, because Democrats are making so much of the CBO’s estimate that the law will reduce the deficit while Republicans suggest it will actually drown the nation in red ink.

Or the higher premiums could just scare people away from buying coverage and make them decide the fines under the individual mandate would be cheaper. In that scenario, there wouldn’t be as many subsidies to pay — but not as many newly insured people, either.

“If you make the benefit package rich, you make the premiums high, and that makes it more likely that people will skip health insurance altogether,” said Mark Pauly, a health care economist at the Wharton School of the University of Pennsylvania. “From my point of view, it’s more important to get takeup.”

The law doesn’t try to spell out the exact package. Instead, it lists several categories of benefits and leaves it to the Department of Health and Human Services to figure out exactly what to cover within those categories and what kind of limits the coverage should have. So the exact cost of the package won’t be known until HHS makes those decisions.

The department is getting some help. The Institute of Medicine, an independent, nonprofit health care analysis group, has put together a committee of health care analysts, consumer advocates and other experts to look at how the package should be designed. They held a conference call to discuss draft recommendations on March 21. The final report is expected in September.

But even though the committee is keeping a tight lid on its deliberations — with strict orders to members not to make even general comments about the trade-offs they face — the institute’s report won’t actually recommend what should be in the package. All it will do is suggest what HHS officials should think about when they design the package.

The committee members are gathering important information to pass along to HHS, though. Jonathan Gruber, an economist at MIT, told the committee that for every 10 percent increase in the cost of the essential benefits package, the cost of the government subsidies would rise by 14.5 percent — or $67 billion over 10 years. It would also cause the number of insured people to fall by 1.5 million, he said.

The law says the benefits package should be roughly equal to the coverage in “a typical employer plan.” HHS would define that, too, though most health economists believe it’s going to be based on what’s covered in typical large employer health plans.

The problem is that there is no good data available on what a typical large employer plan covers and what the limits are, according to Gary Claxton, director of the Henry J. Kaiser Family Foundation’s Health Care Marketplace Project. The law requires that the Department of Labor conduct a survey to find out.

The CBO cost estimate doesn’t actually say how its analysts figured out what the benefit package would cost and how it would affect the federal spending on subsidies. And the budget office wouldn’t make any of its analysts available to talk about its assumptions on the record or even on a not-for-attribution basis.

“It’s a guess, like a lot of things,” said Joseph Antos, a health care analyst at the American Enterprise Institute and a former CBO analyst.

But Kenneth Thorpe, an expert on health care costs at Emory University, said there are plenty of surveys that would have given CBO a key piece of information: the average premiums for large employer plans. For firms with 200 or more employees, the average premiums in 2010 were $5,050 for single coverage and $14,038 for family coverage, according to an annual survey by the Henry J. Kaiser Family Foundation and the Health Research & Educational Trust.

The other issue is that the kind of coverage usually available only at large companies will now be extended to small group and individual coverage — many of which would have to add entire categories of benefits that they haven’t previously offered.

Some of the benefits categories required by the law are fairly standard: doctor visits, emergency care, other hospital coverage and pediatric care. But as CBO pointed out, the law also requires the package to include services that aren’t always covered by individual policies, including prescription drug coverage, maternity care, and mental health and substance abuse services.

And mental health is one of the classic benefits that can be open-ended if an insurance plan doesn’t limit it. Gruber said, however, the package can place limits on certain benefits that could become too costly, for example, capping the number of outpatient mental health visits or physical therapy sessions.

“You’re going to see benefits covered now that typically have not been covered in this market,” said Claxton. “It doesn’t mean they can’t be managed.”

It would be easy for HHS to avoid mandating the kinds of services that would most boost costs, such as chiropractic services and fertility treatments, according to Paul Van de Water, a senior fellow at the Center on Budget and Policy Priorities. Neither one is required under the law, though the law doesn’t restrict HHS from adding other benefits.

“If you sort of found all of these marginal things and pushed them to the max, I suppose you could affect the costs,” Van de Water said. But it’s more likely that HHS would resist those calls, he said, leaving federal officials with “a fairly small range” of benefit decisions to make.

Antos said that even though HHS could affect the cost of the law by throwing too much into the benefit package, the Institute of Medicine probably will advise the department against getting too specific — and HHS probably will take that advice.

“How deep do you go? I think the answer is, not very deep,” Antos said.

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