Author Archive | John Barrett

Crass Market – How ObamaCare’s exchanges undermine quality health care

When Barack Obama pitched his health care overhaul last year, he declared, “My guiding principle is…that consumers do better when there is choice and competition.” But judging by the legislation he signed into law, his idea of a competitive marketplace is one that’s run by the government.

ObamaCare calls for each and every state to set up a “health exchange,” a highly regulated, government-run marketplace where individuals can shop for health insurance, by 2014. Each state is required to either show progress on building an exchange by 2013 or make way for the federal government to build and manage one directly.

These exchanges are the chief method by which the federal government will exert control over the insurance marketplace. Despite being operated at the state level (provided they choose to set up the exchange), state governments won’t entirely be in charge. The Department of Health and Human Services will have the authority to determine minimum health insurance requirements for most medical services and providers as well as cost-sharing details for plans offered through the exchanges. By the end of the decade, the Congressional Budget Office estimates that 24 million individuals will be served by these exchanges.

In theory, they will expose health insurance customers to greater competition while protecting them through regulation. Insurers participating in the exchanges, for example, will face strict limits on how they can price their premiums according to individual risk factors. In practice, they will likely prove difficult to design and implement, and may ultimately undermine the country’s quality of care. No matter what, there is little doubt that the exchanges will fundamentally alter the health insurance landscape across the states.

Already, some state insurance regulators—including the head of the National Association of Insurance Commissioners’ exchange task force—are openly advocating banning insurance companies from selling individual policies outside the exchanges, leaving the state-run exchanges as the sole market for individual health insurance.

Others simply propose applying exchange regulations to all health insurers, even if they operate outside the exchanges. The effect of both policies would be the same: to get rid of individual insurance sales outside the purview of the exchanges and their rules.

States tasked with building the exchanges can expect the process to be tricky at best. Because the exchanges will be the vehicle through which individuals receive ObamaCare’s new health insurance subsidies, they will be expected to quickly and accurately determine an individual’s eligibility. That will require the exchanges to rapidly verify such variables as family size, location, smoking status, and income.

Income verification will be the biggest challenge of all, as eligibility is based on family income—a major problem for dual income homes. Will states ask employed women to provide their husband’s tax returns? What if she’s separated but not divorced?

Meanwhile, there’s evidence that the sort of government-managed competition fostered by exchanges does little to prevent adverse selection. Indeed, because insurers will be limited in terms of how they can charge based on health risk factors, the new rules may encourage plan providers to avoid investing in resources that help the sick. 

For example, a 1997 New England Journal of Medicine study looked at billing records for elderly Americans participating in Medicare HMOs in Florida. The study found that, despite exchange-like regulations guaranteeing access to any HMO plan and prohibiting insurer cherry picking (or “medlining,” as it’s sometimes called), insurance companies managed to lure in the healthiest—and cheapest—patients, while leaving the sickest, most expensive patients on publicly funded Medicare.

Individuals enrolled in the HMOs used two-thirds less care than those on traditional Medicare. And those who eventually rejoined the publicly funded Medicare rolls went on to use 180 percent once back on the public program. In other words, despite rules that were designed to ensure equality, private insurers had still managed to attract the healthiest, cheapest patients while pushing the sickest, most expensive patients away.

But how do they do this? As John Goodman, president of the National Center for Policy Analysis, explained in his book Lives at Risk, plan providers in managed care environments offer benefits likely to attract healthy people, like sports club memberships, but avoid or dump services that will attract sick and expensive individuals.

In 1998, for example, the Kaiser Family Foundation released a study suggesting that Medicare HMOs tailored their advertising to “target physically and socially active seniors, rather than beneficiaries in poor health.” That same year The Washington Post reported on one health plan in Minnesota that offered easy access to obstetricians, but quickly dropped the service after it lost millions by attracting too many pregnant women. Another health plan in California quit dealing with a university hospital that had developed a reputation for pursuing complex, expensive treatments.

Or look at the case of Shelby Rogers, as noted by the Cato Institute’s director of health policy studies, Michael Cannon. In 2008, The Washington Post reported on the story of the 13-year-old with muscular atrophy whose private duty nurse was initially paid for by her family’s federally-provided insurance. Eventually, though, the insurer tried to back out. Why? According to a representative, the reason was because coverage for private duty nurses made the plan too likely to attract patients with similar maladies as Shelby’s.

ObamaCare’s defenders will likely argue that such practices merely prove the need to get tough with insurers. The ominous warnings against insurers from Health and Human Services Secretary Sebelius surely count. But in ObamaCare’s exchanges, which force insurers to take all comers and charge similar prices regardless of health history, pressure to avoid the sick by any means will be fierce. Squeezed by federally-required regulations, insurers will certainly compete—but only to avoid the sick.

Peter Suderman is an associate editor at Reason magazine and a 2010 Robert Novak Journalism Fellow.

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California Assumes Lead Role in National Reform

by David Gorn, California Healthline Sacramento Bureau

When a number of national health care reform provisions took effect last week, identical provisions had already been passed by the California Legislature and were sitting on the governor’s desk, waiting for a signature.

Yesterday, the governor signed those bills and a slew of other health care reform measures that moved California into the forefront of the national health care reform movement.

While other states have been convening task forces and taking a wait-and-see approach to health care reform, California has acted. Among its first-in-the-nation accomplishments:

  • Expanding on the idea of its smaller state program, California set up a much larger federal high-risk health insurance pool program in record time. The Pre-Existing Condition Insurance Plan has been taking applications for a month now and is expected to enroll patients starting Oct. 7;
  • Following the lead of federal health care reform, the state passed laws to extend dependent coverage to age 26; eliminate pre-existing conditions as a reason to refuse coverage in children under 19; eliminate rescission of health coverage once a patient is covered; and expand preventive care coverage; and 
  • Taking its biggest step forward through the health care reform door, the governor yesterday approved the creation of the California Health Benefit Exchange, a consortium of individuals and small businesses that will pool their buying power through a state agency in order to get better health care coverage at lower prices.

“There are many reasons why California has been so proactive,” Janet Coffman, professor at the UCSF Institute for Health Policy Studies, said.

“For one thing, it’s helpful to draw down the federal dollars,” she said. “And it’s an opportunity to be a model for the nation, in thinking through and proposing solutions to meet the health care needs of its people.”

Been Here Before

California HHS Secretary Kim Belshé said California is ahead of the health care reform curve in part because of its significant efforts to set up health care reform in the recent past.

“California has been at the forefront of efforts to improve health outcomes since the governor and [then Assembly Speaker Fabian] Nuñez proposed health care reform back in 2007,” she said.

The California effort to set up major reform failed to become law, but Belshé said its impact is still being felt.

“While it was unsuccessful,” she said, “it still helped contribute to the model that eventually became federal law.”

That 2007 effort made a big difference in California lawmakers’ willingness to move on working to incorporate national health care reform, once it became law. Since politicians were familiar with the language and concepts of reform, and since the funding was federal, it was easier for California to move quickly.

Because the state already had a high-risk health insurance pool, it had the institutional knowledge of how to run one. In addition, “California has the benefit of having run an exchange program before, so we have the history, the experience and expertise to help develop the legislation,” Belshé said. Belshé was referring to the Health Insurance Plan of California (later called PacAdvantage), which formed in 1992 and operated until 2006.

Other States Are Watching

According to researcher Coffman, it’s difficult to track all efforts in all states. She said about 15 states so far have passed laws of varying authority on the issue of mandating maternity care benefits. Maryland passed a law limiting pre-existing conditions as a basis for denial of health care coverage for children. Connecticut and Massachusetts had established exchanges before the national health care reform law passed.

“But beyond that,” Coffman said, “the most states have done, really, is to set up a task force commission to study things.”

John Arensmeyer, founder and CEO of Small Business Majority, a California-based advocacy organization, said many eyes are trained in this direction.

“I do think the rest of the country is looking to California — looking at what California does in terms of ideas and strategies, and how to structure things,” Arensmeyer said.

“Every state will need, at some point, to do what California is doing,” John Ramey, executive director for Local Health Plans of California, said. “Each state is going to create its own exchange, with some degree of variance between the states. It’s a question of how it’ll be set up, state to state.”

Belshé  said she has traveled across the nation, and the interest in following California’s lead is undeniable. “I’ve been informed by meetings around the country,” she said. “All these things are issues they’re looking at closely. But clearly California is not only going first with the exchange, but in a number of health care reform-related laws,” she said.

“All of the states are thinking and talking about it,” Belshé  said. “But California has moved ahead of thinking and talking.”

Why Go First?

If other states are going to learn from California’s example, and possibly develop better systems and law language, and since national reform isn’t due to kick in until 2014, why would California step on the national stage first?

There are benefits to being first, Coffman said.

“In some cases, passing laws now will enable California to move faster and set up reforms before 2014,” she said. “For instance, with maternity care coverage — the federal government hasn’t yet specified what it wants, exactly, but it’s reasonable to assume maternity will be there. Well, if that change goes into effect in January in California, and we change every policy starting in January, from the point of view of those consumers who stand to benefit from it, that’s a really good thing.”

Some of the federal laws begin this year, such as extending dependent health care coverage to age 26. California’s passage of the same law, basically, is an effort to cut down on ambiguity or contradiction between state and federal law and to eliminate unnecessary lawsuits. The sooner that happens, Coffman said, the better it is for California.

And one other thing: Even though the national health reform law must be implemented by 2014, a lot of federal dollars are available now. To cash-strapped California, that is a tune to which it can dance.

“There are benefits to consumers who could take advantage of these things — for instance, more childless adults will be enrolled more quickly,” Coffman said. “That’s an advantage for people in California, but also for the state in terms of drawing down federal dollars.”

There has also been speculation in Sacramento that, since the national health care reform law is still under fire, the final version in 2014 might be slightly watered down — so it makes sense for the state to act now and be the first state to secure reform funding.

“Given our budget crisis, the state needs every federal dollar it can get,” Coffman said.

“You already see some effort to chip away bits and pieces [of federal reform], like the prevention and public health fund recently. There was activity in the Senate earlier this month to repeal that fund. That was defeated, but it was a skirmish,” Coffman said. “There’s something to be said for getting the good stuff now.”

To Belshé, the work on health care reform in California has provided a strong counterpoint to the contentious and partisan national debate.

“We’ve proven that we can move implementation of health care reform forward,” Belshé said. “But we’ve also shown that you really can bring disparate groups together and agree on things.”

And that’s the lesson Belshé hopes other states monitor most closely — how to include all stakeholders and avoid the partisan infighting that has marked national health care reform.

“I know there’s a tremendous amount of interest in how California has approached and structured the reform principles,” she said. “There are issues around the authority given to an exchange, for instance, and other states are already looking at this to inform their own thinking.

“Every state’s approach to enforcement really varies,” she said. “California has placed priority on setting high standards, and those standards represent a strong foundation you don’t see in other states.”

But as those states move forward with reform implementation, she said, you might see those standards put in place more often, and California’s effort now might eventually help produce a higher level of cooperation, based on mutual interest, around the rest of the country.

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HIGHER HEALTHCARE BILLS AHEAD

Chicago Tribune –

Sept. 26: Workers can expect to pay hundreds of dollars more for their health care coverage next year. In 2011, the combined average of premium and out-of-pocket costs for health care coverage for an employee is projected to climb to $4,386, according to an annual study by Hewitt Associates to be released this week. That’s a 12.4 percent increase, or $486, over this year.

Companies, meanwhile, will see their health insurance costs go up nearly 9 percent, to an annual tab of $9,821 per employee, or double the employer’s annual worker tab from nine years ago, according to Lincolnshire-based Hewitt.

“The practical reality is we are now getting to the point where the average employee is costing the average employer $10,000 a year for health care,” said John Vlajkovic, principal in Hewitt’s health management practice.

Overall health care costs continue to rise 6 percent to 8 percent annually, primarily because advances in medical technology and the increasing use of medical services by an aging population.

And in the wake of the recession, employment trends also are affecting health care costs: Companies are hiring fewer younger people, so premiums paid by this segment of the working population who typically use fewer health services are not absorbing the costs of older employees who do.

“An older population tends to have chronic conditions like diabetes,” Vlajkovic said. “And when your hiring rates have slowed, you are not bringing in a younger work force.”

Premiums are being affected by the implementation of the new federal health care law, but the impact is expected to be minimal. “Health care reform has added to the cost burden, but that is only an additional percent or two,” Vlajkovic said.

Industry analysts have said the health law could temper cost increases for everybody once the more than 30 million uninsured have coverage because it will spread risk over a larger population. But that will take time. Although several major new consumer benefits started last week, this broadened coverage will not go into effect until 2014.

“Reform creates opportunities for meaningful change in how health care is delivered in the U.S., but most of these positive effects won’t be felt for a few years,” said Ken Sperling, Hewitt’s health care practice leader. “In the meantime, employers continue to struggle to balance the significant health care needs of an aging work force with the economic realities of a difficult business environment.”

Next year, workers are expected to contribute about $184 a month, 12 percent more than they do now. Their out-of-pocket costs will jump, too, rising 12.5 percent, to $181 a month in expenses, which include covering deductibles as well as co-payments and co-insurance for prescriptions and visits to the doctor.

Workers will get a first glimpse of health care costs during the coming weeks of open-enrollment season, the annual corporate ritual that allows employees to select or change their benefit plans for the following year.

Hewitt’s projections are calculated using data from 350 major employers and more than 14 million health plan participants spending more than $50 billion annually on health care, and they are averaged out per worker. Employees with family coverage tend to pay more, and workers with single coverage tend to pay less.

And because Hewitt’s survey focuses on employers with an average of 16,000 employees, businesses with fewer workers tend to have higher costs than those highlighted in the survey.

Some companies are warning workers to expect cost changes in their health care coverage. Boeing Co., the Chicago-based aerospace giant, will ask certain nonunion employees to shoulder more of the burden of health costs in 2011.

“Health care coverage for employees represented by unions is governed by collective bargaining agreements and will be discussed as those contracts are renegotiated,” Jim Albaugh, president of Boeing’s commercial airplane division, said in a Sept. 13 e-mail to employees. Boeing declined to disclose the increases ahead of informing its workers in October.

This year, Boeing is paying 89 percent of total health care costs for employees, which is well above the national average. Most employers pay about 78 percent of the total premium, according to Hewitt’s survey.

“The soaring cost of health care, which for decades has exceeded the rate of inflation, has had a profound impact on our company and our ability to offer superior products at competitive prices,” Albaugh said in the e-mail.
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Examiner Editorial: Obamacare is even worse than critics thought

Much more has been revealed about Obamacare since President Obama, Harry Reid and Nancy Pelosi pushed the bill on Americans six months ago. (J. Scott Applewhite/AP file)

Six months ago, President Obama, Senate Majority Leader Harry Reid and House Speaker Nancy Pelosi rammed Obamacare down the throats of an unwilling American public. Half a year removed from the unprecedented legislative chicanery and backroom dealing that characterized the bill’s passage, we know much more about the bill than we did then. A few of the revelations:

» Obamacare won’t decrease health care costs for the government. According to Medicare’s actuary, it will increase costs. The same is likely to happen for privately funded health care.

» As written, Obamacare covers elective abortions, contrary to Obama’s promise that it wouldn’t. This means that tax dollars will be used to pay for a procedure millions of Americans across the political spectrum view as immoral. Supposedly, the Department of Health and Human Services will bar abortion coverage with new regulations but these will likely be tied up for years in litigation, and in the end may not survive the court challenge.

» Obamacare won’t allow employees or most small businesses to keep the coverage they have and like. By Obama’s estimates, as many as 69 percent of employees, 80 percent of small businesses, and 64 percent of large businesses will be forced to change coverage, probably to more expensive plans.

» Obamacare will increase insurance premiums — in some places, it already has. Insurers, suddenly forced to cover clients’ children until age 26, have little choice but to raise premiums, and they attribute to Obamacare’s mandates a 1 to 9 percent increase. Obama’s only method of preventing massive rate increases so far has been to threaten insurers.

» Obamacare will force seasonal employers — especially the ski and amusement park industries — to pay huge fines, cut hours, or lay off employees.

» Obamacare forces states to guarantee not only payment but also treatment for indigent Medicaid patients. With many doctors now refusing to take Medicaid (because they lose money doing so), cash-strapped states could be sued and ordered to increase reimbursement rates beyond their means.

» Obamacare imposes a huge nonmedical tax compliance burden on small business. It will require them to mail IRS 1099 tax forms to every vendor from whom they make purchases of more than $600 in a year, with duplicate forms going to the Internal Revenue Service. Like so much else in the 2,500-page bill, our senators and representatives were apparently unaware of this when they passed the measure.

» Obamacare allows the IRS to confiscate part or all of your tax refund if you do not purchase a qualified insurance plan. The bill funds 16,000 new IRS agents to make sure Americans stay in line.

If you wonder why so many American voters are angry, and no longer give Obama the benefit of the doubt on a variety of issues, you need look no further than Obamacare, whose birthday gift to America might just be a GOP congressional majority.

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John C. Goodman: How Seniors Will Pay for ObamaCare – WSJ.com

By JOHN C. GOODMAN

Today marks the six-month anniversary of the enactment of the Patient Protection and Affordable Care Act, widely known as ObamaCare. It is a day when the first significant round of benefits kicks in, and the Obama administration is taking every opportunity to tout them to the American public.

Insurers, we are being told, will no longer be able to impose annual limits or lifetime caps on benefits, and they will face a higher standard before than can drop anyone’s coverage. Children will be guaranteed access to insurance, regardless of health condition. And there is more to come in the future.

Yet the administration is strangely silent about who will bear the cost of these benefits. Search the government’s own health-reform website and you’ll get the idea that the whole thing is one big free lunch.
The reality is that the cost of ObamaCare will be quite high for some people. By 2017, thousands of people in Dallas, Houston and San Antonio will be paying more than $5,000 a year in lost health-care benefits to make ObamaCare possible, according to a study published this month by Robert Book at the Heritage Foundation and James Capretta at the Ethics and Public Policy Center. For some New York City dwellers, the figure will exceed $6,000 a year. Unfortunate residents of Ascension, La., will pay more than $9,000 in lost benefits.

Who are these people? Are they the rich and the comfortable—the folks presidential candidate Barack Obama told us could afford to pay for health reform? Are they people who have excessively profited during a recession that’s caused hardships for so many? Are they the ones who gained the most from the Bush tax cuts?

None of the above. According to the Book/Capretta study, the people getting hit with these very expensive tabs live in predominately low-income households. They are disproportionately minorities. They have trouble paying their own medical bills.

These are the enrollees in Medicare Advantage plans, health plans operated by private insurers (Cigna, Aetna, United Health, etc.) that provide extra benefits to the elderly and the disabled on top of standard Medicare coverage. The price they will pay for health reform will be a double whammy: less spending on Medicare coupled with reduced subsidies for their Medicare Advantage plans. In many areas, Medicare Advantage enrollees will lose about one-third or more of their health-insurance benefits.

Despite its popularity, conventional Medicare is actually a lousy health-insurance plan. It doesn’t cover most drugs and it leaves beneficiaries exposed to thousands of dollars in potential out-of-pocket expenses. To protect themselves, most seniors purchase additional coverage known as “Medigap” insurance (either from an employer or purchased directly) and buy drug coverage (Medicare Part D) as well.

Many low-income seniors, however, have trouble paying three premiums to three plans, and all too often they find a decent Medigap plan unaffordable. For these retirees (about one in every four Medicare beneficiaries) Medicare Advantage plans have been a godsend. They have been able to enroll in comprehensive health plans that resemble the coverage many nonseniors have—often with no extra premium.

The hostility of the White House and many congressional Democrats toward these health plans is hard to explain. Ostensibly, they do everything President Obama says he wants to accomplish with health reform. They provide subsidized coverage to low- and moderate-income people who could otherwise not afford it. They have no pre-existing condition limitations, and some plans actually specialize in attracting and caring for patients with multiple illnesses. They provide an annual choice of plans.

On measures of quality and efficiency, they also score well. According to a study published in June by America’s Health Insurance Plans (a trade group that represents Medicare Advantage insurers):

• Medicare Advantage enrollees had 33% more doctor visits (presumably representing more primary care), yet experienced 18% fewer hospital days and 10% fewer hospital admissions than conventional Medicare patients.

• They had 27% fewer emergency-room visits, 13% fewer avoidable admissions, and 42% fewer readmissions.

Other studies report similarly impressive results.

This is not to say that the Medicare Advantage programs could not be improved. Right now, almost all the enrollees are in HMOs. Very few have a health savings account plan. And there is no practical way for the chronically ill to manage their own budgets. By contrast, the Medicaid disabled—as part of pilot programs that have been in force for a decade—can hire and fire the people who provide them with services, and use any money they save to purchase other medical care.

Some complain that the government has been paying Medicare Advantage plans about 13% more than what would have been spent under conventional Medicare. This is partly explained by the influence of members of Congress who represent rural areas that would not otherwise be able to support these plans. In any event, these “overpayments” allow members to get about $825 in extra benefits each year, including lower out-of-pocket payments and better coverage for drugs, preventive care, and chronic disease care.

According to a report published in April by the administration’s own Medicare Office of the Actuary, about 7.4 million people who would have been enrolled in Medicare Advantage plans in 2017 will lose their coverage completely. Those who are able to retain their coverage will lose significant benefits. These cuts are financing lavish subsidies for health insurance for young people at about the same income level as the seniors who are being penalized.

To those economic libertarians who view this as an entitlement wash, don’t be misled. Many of the seniors losing their health plans will enroll in taxpayer-funded Medicaid, in addition to Medicare. The rest will be on the steps of Capitol Hill in the near future asking to have their benefits reinstated.

Mr. Goodman is president, CEO and a fellow at the National Center for Policy Analysis.

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Big health insurers to stop selling new child-only policies

By Duke Helfand, Los Angeles Times

Major health insurance companies in California and other states have decided to stop selling policies for children rather than comply with a new federal healthcare law that bars them from rejecting youngsters with preexisting medical conditions.

Anthem Blue Cross, Aetna Inc. and others will halt new child-only policies in California, Illinois, Florida, Connecticut and elsewhere as early as Thursday when provisions of the nation’s new healthcare law take effect, including a requirement that insurers cover children under age 19 regardless of their health histories.

The action will apply only to new coverage sought for children and not to existing child-only plans, family policies or insurance provided to youngsters through their parents’ employers. An estimated 80,000 California children currently without insurance — and as many as 500,000 nationwide — would be affected, according to experts.
Insurers said they were acting because the new federal requirement could create huge and unexpected costs for covering children. They said the rule might prompt parents to buy policies only after their kids became sick, producing a glut of ill youngsters to insure. As a result, they said, many companies would flee the marketplace, leaving behind a handful to shoulder a huge financial burden.

The insurers said they now sell relatively few child-only policies, and thus the changes will have a small effect on families.

“Unfortunately, this has created an un-level competitive environment,” Anthem Blue Cross, California’s largest for-profit insurer, said in a statement declaring its intention to “suspend the sale of child-only policies” on Thursday, six months after the healthcare overhaul was signed.

The change has angered lawmakers, regulators and healthcare advocates, who say it will force more families to enroll in already strained public insurance programs such as Medi-Cal for the poor in California.

The White House weighed in Tuesday, condemning Anthem corporate parent WellPoint Inc. and others that plan to stop selling child-only policies.

“It’s obviously very unfortunate that insurance companies continue to make decisions on the backs of children and families that need their help,” White House Press Secretary Robert Gibbs said at a news briefing.

The Obama administration had told insurers they could solve the problem by issuing policies only during designated enrollment periods. Some White House officials, however, noted that families who can’t find policies might be able to sign up for high-risk pools being set up around the country as part of the new healthcare law.

In California, the stakes may be particularly high for insurers who abandon child-only policies. A bill awaiting Gov. Arnold Schwarzenegger’s signature would bar such companies from selling insurance in the lucrative individual market for five years. A Schwarzenegger spokeswoman said the governor had not yet taken a position on the measure.

Assemblyman Mike Feuer (D- Los Angeles), the bill’s author, voiced frustration over the insurers’ plans and singled out Anthem Blue Cross, whose corporate parent notified brokers nationwide Friday of its decision to exit the child-only business in 10 states, including Colorado, Connecticut, Missouri, Nevada and Georgia as well as California.

“At a time when we are launching a national approach to ensure that all children have access to healthcare, Anthem’s actions represent a step backwards,” Feuer said. “By threatening to drop child-only policies in California, the company jeopardizes the health of families and children. I call on Anthem to reconsider its plan.”

Other regional and national insurers also plan to stop selling insurance policies exclusively for children. Among the companies is UnitedHealth Group Inc., the nation’s largest insurer by revenue. It did not say which states would be affected.

“We continue to believe that regulations can be structured that will enable child-only plans to be offered, and we are working toward that goal,” spokesman Tyler Mason said.

Aetna said that effective Oct. 1 it would no longer offer policies in the 32 states where it conducts business, including California, Florida, Illinois, Virginia and Pennsylvania.

Cigna Corp. will halt the policies in 10 states, including California, Arizona, Colorado, Tennessee and Texas.

“We made a decision to stop offering child-only policies to ensure that we can remain competitive in the 10 markets where we sell individual and family plans,” Cigna spokeswoman Gwyn Dilday said. “We’ll continue to evaluate this policy and could reconsider changing this position as market dynamics change.”

The explanations left healthcare advocates fuming. They accused insurers of trying to skirt the law’s new requirement to cover children with health problems.

“Insurers need to decide if they are in the business of providing care or denying coverage,” said Anthony Wright, executive director of Health Access California, a consumer group. “In California, we hope our insurers come to an equitable compromise that allows access for all children and affordability for those with preexisting conditions.”

In Colorado, regulators and insurance carriers are trying to work out such a compromise. The state’s insurance commissioner met Friday with several insurers, including Anthem, Cigna and Aetna. The two sides did not reach an agreement, but officials remain hopeful they can broker a deal before Thursday.

“Obviously this deadline looms large,” said Jo Donlin, director of external affairs for the Colorado Division of Insurance. “The commissioner wants families to have access to the insurance they need. Both sides of this want to find a solution.”

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Health Care Bill: Bad Policy in a Bad Economy

R. Bruce Josten

When President Obama signed the $940 billion, 2,400 page health care bill into law six months ago, the business community warned that the bill was fundamentally flawed. We said that this legislation would fail to fix what’s broken in our health care system, and that it would threaten to break what works. Unfortunately, our worst fears are already starting to come true.

Just a few weeks ago, the U.S. Centers for Medicare and Medicaid Services released a report indicating that health care spending will increase by an average annual rate of 6.3%, up from the 6.1% growth rate projected before the health care bill was passed. While the change is modest, it clearly disproves the claims that this legislation would reduce spending. With the United States already knee deep in red ink, we can’t afford to add to our debt.

Looking for more evidence that Congress passed a bad bill? Then consider the premium increases that health insurance companies are asking for, due, in large part, to new benefits required by the law. But instead of working with these companies to find ways to minimize the cost passed along to families, HHS Secretary Kathleen Sebelius fired a warning shot over the bow of the insurance industry. She suggested that insurers who increase rates in excess of what the administration deems acceptable could be excluded from the health insurance exchange–and as many as 30 million customers. This could be seen by some as an attempt to move toward government-run health care.

Even small businesses have suffered. One of the provisions included to offset the cost of the bill imposed a burdensome new 1099 tax form filing mandate on small businesses. In 2012, when new reporting requirements come into effect, businesses will have to keep track of all purchases not made with a credit card that exceed $600 per vendor in a calendar year. This includes goods as well as services and also applies to purchases from a corporation. If, for example, your business buys $600 in office supplies from a single retailer, you will be required to file a 1099 form. Multiply this by the number of vendors that you do business with and you have a big headache. As a result, these job creators will be forced to spend more time and resources on accounting and tax compliance and less time on growing their businesses and hiring new workers.

And the list goes on …

Requiring small businesses to provide insurance that they cannot afford–or else pay steep fines–will eliminate jobs.

Requiring states–which are already running huge deficits–to add millions of new enrollees to Medicaid will lead to tax increases and program cuts.

Raising taxes by $569 billion as the nation grapples with nearly 17% unemployment and struggles to emerge from a deep recession is an affront to economic common sense.

So what happens next? While some have discussed repeal, the U.S. Chamber believes the most effective approach is to work through all available and appropriate avenues–regulatory, legislative, legal, and political–to fix the bill’s flaws and minimize its harmful impacts.

We will strongly encourage citizens to hold their elected officials accountable when they vote this November. There is every indication that the public is ready to do so–a USA Today/Gallup poll conducted at the end of August found that 56% of Americans opposed the health care overhaul, while only 39% supported it.

We will also continue to promote real health care reform that curbs costs, reins in frivolous lawsuits, expands consumer choice, and removes the heavy hand of government from decisions that should be made by doctors and patients.

Like it or not, the health care debate is not over.

Bruce Josten is the executive vice president for Government Affairs at the U.S. Chamber of Commerce

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Medicare and ObamaCare

By Marcia Sielaff

Facts are stubborn things; and whatever may be our wishes, our inclinations, or the dictates of our passions, they cannot alter the state of facts and evidence.   John Adams


The problem with the truth is that it keeps breaking out at inconvenient times. The most recent breakout occurred just as the Obama administration launched another campaign to persuade a skeptical populace that the Affordable Health Care Act really is.

If most people missed the event, it is because the mainstream media did its best to downplay what the WSJ called “the most damning fiscal indictment to date of the Affordable Care Act.”

For the first time in recorded history, Medicare’s Chief Actuary found it necessary to append a dissent to the laboriously named “Annual Report of the Board of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds.”

In the 18-page addendum, the Office of the Actuary contests the claim that the Act “improves the financial outlook for Medicare substantially.” According to the Actuary, the trustee’s projections “do not represent the best estimate of actual future Medicare spending,” and the assumptions that are the basis of the trustee’s optimism are “implausible.” Chief Actuary Richard Foster’s detailed addendum explains why.

There are three major problems. First, the trustees ignore “secondary impacts”; second is their assumption that significant savings can be achieved by reducing payments for health services; and third is that productivity increases in health services will help to offset the cost of care.

The Actuary’s dissent explains the “secondary impacts” and why they are important.

It is important to note that the current-law estimates shown in the 2010 Medicare Trustees Report comprise only the direct impacts of the current-law payment reductions. Not included are possible secondary impacts, such as reduced beneficiary access to Medicare services, reduced quality of care, and/or increased morbidity or mortality rates. For example, the negative physician payment updates could potentially result in physicians reducing the number of traditional fee-for-service Medicare patients that they see each day.

Foster describes the scale of the reductions.

Among the most important factors in projecting Medicare expenditures are the annual payment updates to Medicare providers. The estimates shown in the 2010 Trustees Report are complicated substantially by mandated reductions in these payment updates for most Medicare services. In particular, Medicare payment rates for physician services as determined by the Sustainable Growth Rate (SGR) system are scheduled to be reduced by roughly 30 percent over the next 3 years. For most of the other categories of Medicare providers, the recently enacted Patient Protection and Affordable Care Act (ACA), as amended, calls for a reduction in payment rate updates equal to the increase in economy-wide multifactor productivity… in our view (and that of the independent outside experts we consulted), neither of these update reductions is sustainable in the long range, and Congress is very likely to legislatively override or otherwise modify the reductions in the future to ensure that Medicare beneficiaries continue to have access to health care services.

And warns that such reductions are untenable,

… [W]e talked informally with several prominent health economists … [A]ll of them believed that the payment reductions were unsustainable, …Writing in a National Journal blog, Dr. David Cutler, the Otto Eckstein Professor of Applied Economics at Harvard University, stated that “as the actuaries … note, traditional payment reductions are not a long-term source of financing. Prices can be reduced only so far before they become unreasonably low.” Similarly, Dr. Joseph Newhouse wrote in an article for Health Affairs, “…it is equally hard to imagine cutting only Medicare spending while spending by the commercially insured under age sixty-five continues to grow at historic rates, which would lead to a marked divergence between what providers are paid for treating the commercially insured relative to what they are paid for Medicare beneficiaries. This gap could jeopardize Medicare beneficiaries’ access to mainstream medical care.” The other experts we spoke with also foresaw that the Medicare payment limitations would become unworkable.

In several detailed paragraphs, Foster also explains why it is unrealistic to expect greater productivity gains to offset costs. “For the health sector, measured productivity gains have generally been quite small, given the labor-intensive nature of health services and the individual customization of treatments required in many instances. ” He finds that neither evidence nor experience supports the trustee’s optimistic prognostications.

The technical details of the Actuary’s dissent tend to be soporific, but the message is clear. As summarized by the Wall Street Journal, the alleged cuts “exist only on paper and were written so they could pretend to reduce the deficit and perform the miracles the trustees dutifully outlined.”

…Which brings up the Independent Payment Advisory Board (IPAB). The Goldwater Institute points out that “… the chief actuary must predict future growth in Medicare enrollment and spending each year, and give that information to a new federal agency created by health care reform called the Independent Payment Advisory Board (IPAB). That board will have virtually unchecked power to adopt laws setting prices and payments for nearly all medical services.”  According to the terms set forth in the Act, IPAB’s task is to reduce expenditures to limits prescribed in the Act. IPAB’s recommendations to that end, if not specifically overridden by Congress within a limited period of time, become law.

Further details are best obtained by reading the Actuary’s dissent and/or the various commentaries. The Goldwater Institute, the Cato Institute, the Heritage Foundation, and the Wall Street Journal have all weighed in

It is no surprise that the trustee’s optimistic conclusions are at odds with real-world consequences. This administration’s policies often fall short of predicted outcomes. Consequently, we have stimulus bills designed to create jobs (but don’t), a heavily subsidized and enormously expensive electric car (that people don’t seem to be rushing to buy), and now a Medicare system which is supposed to save money by insuring millions more people with fewer doctors to treat them, no reduction in service, and insurance companies that are prohibited from raising premiums.

It is now manifest that the claims of cost savings are untenable. It is also clear, as many have long suspected, that under the terms of this legislation, it is not physicians who will be in charge of health care, but panels of experts with the souls of bookkeepers.

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KEY HEALTH LAW PROVISIONS BEGIN SEPT. 23

Kaiser Daily Health News –

Sept. 14: For many years, Ric and Jill Lathrop held their breath when the annual open enrollment period for their health insurance plan rolled around. Their two boys, now 12 and 14, have severe hemophilia, and each needs twice-weekly injections of a blood clotting replacement factor that costs roughly $250,000 per person per year. The couple lived in fear that their health plan would put a lifetime limit on their benefits.

In 2005, that’s what happened. The Oshkosh, Wis., hospital where Ric Lathrop worked as an MRI technician instituted a $2 million lifetime cap on benefits for the entire family. Rather than wait for their benefits to run out, the Lathrop family relocated to Illinois, where Ric Lathrop got a job at a hospital in Peoria; along with the job came insurance without lifetime limits.

If that coverage had changed, the Lathrops might have had to move again… and maybe again. But the federal health-care overhaul makes further wandering unnecessary. Starting Sept. 23, the new law requires that when health plans renew their coverage for the coming year, they eliminate lifetime limits on coverage.

“It gives us a lot of reassurance to know our kids can have more freedom,” says Jill Lathrop. The elimination of lifetime caps on benefits is one of several provisions that will begin to take effect Sept. 23, six months after enactment of the law. Health plans don’t have to implement the provisions until their next annual renewal date; since most plans begin their coverage year on Jan. 1, that’s when many consumers will start to see changes.

As you sign up for coverage this fall, here’s what to look for:

Extension Of Young Adult Coverage

All health plans must permit adult children to remain on their parents’ plans until age 26. It makes no difference if the young adults are married or financially independent. As long as children don’t have an offer of coverage from their own employer, parents can keep them on their plan.

If you want to put an adult child on your plan, you’ll be given an opportunity to do so during a special enrollment period. At most companies that will coincide with open enrollment, say benefits consultants. Even if it doesn’t, insurers and employers are required to notify you of the special enrollment period. Look for that notice.

Under the law, plans can’t charge more for adult children than for dependents younger than 19. But they can increase the cost of family coverage overall, and many will do so, according to an employer survey released last week by the benefits consulting firm Mercer. The survey found that more than half of employers that plan to shift more costs onto employees’ shoulders will do so by disproportionately increasing the cost of family coverage compared with employee-only coverage.

As part of their efforts to rein in costs, employers are also more likely than before to ask employees to verify that dependents are eligible for coverage, say experts. More than 40 percent of ineligible dependents are children younger than 19, says Karen Frost, health and welfare practice leader for human resources consultant Hewitt Associates.

Often the eligibility change is part of the fallout from divorce. Children may no longer live with or be financially dependent on the parent whose insurance covered them, for example, potentially making them ineligible under plan rules. “Most of the time, employees are covering ineligible dependents because they don’t know the rules” of their plan, says Frost.

This can also be true for adult children on their parents’ plans.

Prohibition On Coverage Exclusions For Children With Preexisting Conditions

Employer plans can no longer refuse to cover children younger than 19 because they were born with or develop a serious medical condition. The ban on coverage exclusions also applies to new individual policies purchased for a child.

However, even though the new law allows adult children to remain on their parents’ plan until age 26, once they are 19 they could be refused coverage for a preexisting condition, says Tracy Watts, a partner at Mercer.

A similar ban on coverage exclusions for adults goes into effect in 2014.

Restriction On Annual Dollar Coverage Limits

In general, employer plans can’t impose annual coverage limits of less than $750,000 for “essential” health benefits, including hospital services, drugs, emergency services and maternity and newborn care. The maximum limits increase every year and they are eliminated in 2014. These limits apply to new individual policies, too.

Additional provisions take effect on or after Sept. 23 for new plans offered by employers or purchased by individuals since March 23. These include requirements that insurers:

*Cover the full cost of preventive services that have the highest recommendation of the U.S. Preventive Services Task Force.

*Allow women to see an OB-GYN without a referral.

*Do not make plan members pay higher co-payments or coinsurance for out-of-network emergency services.

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Health Insurers Plan Hikes

Rate Increases Are Blamed on Health-Care Overhaul; White House Questions Logic

Health insurers say they plan to raise premiums for some Americans as a direct result of the health overhaul in coming weeks, complicating Democrats’ efforts to trumpet their signature achievement before the midterm elections.

Insurers say they plan to raise premiums on some Americans due to the health overhaul, complicating Democrats’ efforts to trumpet their signature achievement before elections.

Aetna Inc., some BlueCross BlueShield plans and other smaller carriers have asked for premium increases of between 1% and 9% to pay for extra benefits required under the law, according to filings with state regulators.

These and other insurers say Congress’s landmark refashioning of U.S. health coverage, which passed in March after a brutal fight, is causing them to pass on more costs to consumers than Democrats predicted.

Insurers say the law mandates free preventive care that raises premiums.

The rate increases largely apply to policies for individuals and small businesses and don’t include people covered by a big employer or Medicare.

About 9% of Americans buy coverage through the individual market, according to the Census Bureau, and roughly one-fifth of people who get coverage through their employer work at companies with 50 or fewer employees, according to the Kaiser Family Foundation. People in both groups are likely to feel the effects of the proposed increases, even as they see new benefits under the law, such as the elimination of lifetime and certain annual coverage caps.

Many carriers also are seeking additional rate increases that they say they need to cover rising medical costs. As a result, some consumers could face total premium increases of more than 20%.

While the increases apply mostly to the new policies insurers write after Oct. 1, consumers could be subject to the higher rates if they modify their existing plans and cause them to lose grandfathered status.

The rate increases are a dose of troubling news for Democrats just weeks before an election in which they are at risk of losing their majority in the House and possibly the Senate.

In an interview with WSJ’s Alan Murray, Aetna Chairman and CEO Ronald Williams says that a side effect of the health-care reform bill is that costs will increase. He also criticizes leaders in Washington for the demagoguery of his industry that persisted during the health-care debate.

In addition to pledging that the law would restrain increases in Americans’ insurance premiums, Democrats front-loaded the legislation with early provisions they hoped would boost public support. Those include letting children stay on their parents’ insurance policies until age 26, eliminating co-payments for preventive care and barring insurers from denying policies to children with pre-existing conditions, plus the elimination of the coverage caps.

Weeks before the election, insurance companies began telling state regulators it is those very provisions that are forcing them to increase their rates.

Aetna, one of the nation’s largest health insurers, said the extra benefits forced it to seek rate increases for new individual plans of 5.4% to 7.4% in California and 5.5% to 6.8% in Nevada after Sept. 23. Similar steps are planned across the country, according to Aetna.

Regence BlueCross BlueShield of Oregon said the cost of providing additional benefits under the health law will account on average for 3.4 percentage points of a 17.1% premium rise for a small-employer health plan. It asked regulators last month to approve the increase.

In Wisconsin and North Carolina, Celtic Insurance Co. says half of the 18% increase it is seeking comes from complying with health-law mandates.

The White House says insurers are using the law as an excuse to raise rates and predicts that state regulators will block some of the large increases.

“I would have real deep concerns that the kinds of rate increases that you’re quoting… are justified,” said Nancy-Ann DeParle, the White House’s top health official. She said that for insurers, raising rates was “already their modus operandi before the bill” passed. “We believe consumers will see through this,” she said.

Previously the administration had calculated that the batch of changes taking effect this fall would raise premiums no more than 1% to 2%, on average.

[RATEHIKE]

After Regence mailed a letter notifying plan administrators of its intention to raise group insurance rates in Washington state, the White House contacted company officials and accused them of inaccurately justifying the increase. Kerry Barnett, executive vice president for Regence BlueShield, said the insurer is changing the letter to more precisely explain the causes of the increase.

The industry contends its increases are justified. “Anytime you add a benefit, there are increased costs,” said Karen Ignagni, president of America’s Health Insurance Plans, the industry’s lobbying group.

Massachusetts, which enacted universal insurance coverage several years ago, also has seen steadily rising insurance premiums since then. Proponents of that plan attribute the hikes there to an overall increase in medical costs, while insurers cite it as a cautionary example of what can happen when new mandates to improve benefits aren’t coupled with a strong enough provision to force healthy people to buy coverage.

Republicans, who have sought voter support by opposing the health law, say premium increases could help in November’s congressional races. “People are finding out what’s in [the law], they don’t like it, and I think it’s going to play a big factor in this election,” said Iowa Sen. Charles Grassley, the top Republican on the Senate Finance Committee.

About half of all states have the power to deny rate increases. Ms. DeParle pointed out that the law awards states $250 million to bolster their scrutiny of insurance-rate proposals, saying that will eventually curb premiums for people.

“In Kansas, I don’t have a lot of authority to deny a rate increase, if it is justified,” said Kansas Insurance Commissioner Sandy Praeger. She recently approved a 4% increase by Mennonite Mutual Aid Association to pay for the new provisions in the health law.

The process of reviewing rate increases varies by state. For instance, Ms. Praeger said she can deny only rate increases that are unreasonable or discriminatory.

Some regulators say not all insurers have adequately justified their increases. “A lot of it is guesswork for companies,” said Tom Abel, supervisor at the Colorado Division of Insurance. “I was anticipating the carriers to be more uniform.”

Regence BlueCross BlueShield of Oregon, which estimates its increase covers 57,000 members, said its goal is to “anticipate the financial needs of our members as accurately as possible and to collect just enough premiums to cover costs,” said a spokeswoman. Other insurers offered similar explanations or declined to discuss their increases.

A small number of insurers have submitted plans to lower rates and cite the new mandates in the legislation as the reason. HMO Colorado, a Blue Cross Blue Shield plan owned by WellPoint Inc., submitted a letter to state regulators saying small group rates would fall 1.8% starting Oct. 1 because of changes from the law.

Democrats had hoped to sell the bill in the fall elections. But in recent weeks, some Democrats who voted for the bill have shied away from advertising that fact, while the handful of House Democrats who cast “no” votes see it as a potential boost to their re-election bids.

“I think it’s a question of short term versus long term,” said North Carolina Insurance Commissioner Wayne Goodwin, a Democrat up for re-election in 2012. “Thankfully we’re seeing people get more coverage and protections than they’ve ever had before. But until we see the medical-cost inflation affected, you’re likely to see rate increases as long as they are not excessive and in violation of the law.”

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