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4 Controversial Ways to Improve Health Insurance

What else can be done to improve U.S. health insurance? Major pieces of legislation have already been passed to allow (1) tax-deductible employer-reimbursed individual health insurance and (2) high-deductible health insurance with Health Savings Accounts. Additionally, some experts believe the Affordable Care Act (ACA) makes the most changes to the health insurance industry since World War 2.

Here are 4 controversial ways to further ensure better health insurance for every American at less cost. controversial health insurance reform

1. Allow Health Insurance to Be Sold Across State Lines

The largest determinant of the monthly premium for individual health insurance is not the individual’s age or health but the state in which they live. Because of a federal law passed in 1945, it is currently illegal for a carrier to sell health insurance to an out-of-state individual—unless the out-of-state insurer goes through an expensive filing process and meets the unique health insurance requirements of the individual’s state of residence. If this law were repealed, anyone could purchase a health insurance policy from any carrier in any state.

In Michigan in 1908, when Henry Ford produced the Model T costing $825, there were thousands of small auto manufacturers in the United States making cars costing $10,000 or more. To protect their own manufacturers, neighboring states passed laws claiming that the Model T was dangerous and thus not allowed to drive on their roads. Eventually, the federal government stepped in and regulated the automobile industry—mandating that any automobile meeting certain minimum standards could be freely driven in every state.

Allowing consumers to purchase health insurance from carriers in any state might not only increase competition and drive down prices; the increase in competition might also allow millions more individuals with preexisting conditions to get private health insurance without having to rely on more expensive state-guaranteed coverage.

2. Make All Health Insurance Premiums Tax Deductible

Make all health insurance premiums tax deductible for individuals without regard to employment (individual health insurance is already tax deductible via a Section 105 Plan or Section 125 Plan). This extremely simple change would take away the main reason employers are involved in health insurance and level the playing field for all Americans, whether they are employed, self-employed, or unemployed. Overnight, this bill could reduce the after-tax price of individual health insurance for consumers 25 to 50 percent.

Making all health insurance premiums tax deductible for all consumers may be long overdue—this simple change in our tax code could correct an inequity and eventually return responsibility for health insurance to individuals and government instead of employers.

3. Make All Healthcare Providers Disclose Prices

Almost all healthcare providers, from major hospitals to individual doctor’s offices, charge varying prices for the exact same service depending on the network in which the patient is a participant. The same doctor visit might cost a cash-paying un-insured person $110, while a person with an employer-sponsored health plan bargained down the price would pay only $42.

While there is nothing wrong with large customers bargaining for better prices, today there is no longer any true “retail” price in medical care. Providers have inflated their retail prices two to five times just to meet contracts forcing them to give 50 to 80 percent discounts to large purchasers.

In 1934 the Securities Exchange Act created the SEC and mandated that U.S. public companies disclose accurate financial information. This act did not tell businesspeople how to run their business—it merely told them that they must disclose pertinent facts to investors or be subject to criminal prosecution.

Healthcare providers could be required to disclose their prices and all discounts given off these prices. Open disclosure might drive consumerism and lower prices for all. Does a consumer paying a $10,000 hospital bill have a right to know that another person is being charged only $1,000 for the exact same service? Do people standing in line at a pharmacy have a right to know when they are being charged two to three times the price of the person next to them for the exact same drug?

Armed with medical care retail price information, consumers could seek out the best networks and might be able to negotiate with medical providers.

4. End Federal Lifetime Health Benefits for Congressmen, Senators, and Government Officials

When it comes to health insurance, we have created an elite class. This elite class consists of our elected federal and state officials who have voted themselves and their associates unlimited lifetime health benefits paid for by taxpayers. In doing so, they have removed themselves from being participants in solving the current health insurance crisis that affects the rest of American citizens. They do not directly feel the pain of America’s health insurance problems.

*Modified from a Zane Benefits Blog


IT could end up being health reform’s highest hurdle

If state health care exchanges survive the Supreme Court challenge to health care reform, the election and state tea party activists, health policy experts are worried they could still be brought down by a much more mundane problem: information technology. Even states that are solidly committed to pursuing an exchange are facing major logistical challenges in building the computer systems that will be able to handle enrollment when exchanges open for business in 2014.

That’s largely because the system that will actually connect people to the right coverage will have to “talk” to many other systems, and the systems don’t use a common language. This includes a yet-to-be built federal “data hub” with tax and citizenship info, the enrollment systems of multiple private insurers selling exchange plans and — hardest of all — state Medicaid enrollment systems, many of which are not yet fully computerized.

Even if all the states that have taken the biggest steps to launch exchanges — fewer than 20 at the moment — were charging full speed ahead, there’s a lot of concern that they’ll have to switch to a “partnership” exchange model, with the federal Department of Health and Human Services running key functions. That’s because their IT systems could fail final tests in the months before the exchanges open in 2014. And that would mean losing some of the ability to customize the enrollment process for a state’s needs.

“People fear that the technology piece is just not going to be quite there,” said former Maine Insurance Commissioner Mila Kofman, who is now at Georgetown University’s Health Policy Institute. “The states that want the state-based exchange might not be able to be certified” by HHS to open on their own in 2014, she said. This is a major reason that most health consultants estimate that fewer than a dozen states will be running fully state-based exchanges, at least at first.

Patrick Howard, of Deloitte Consulting, who is working on exchanges in multiple states, counts only around seven states that have finalized contracts with vendors to build these IT systems. A few more are currently shopping for a contractor. That doesn’t give the others a whole lot of time to tackle a complicated task. “Every month matters now,” Howard said.

California provides one of the most dramatic illustrations of the challenge pro-health reform states are facing. The Golden State was the first to authorize the creation of a state exchange after the health law passed. But it still hasn’t signed a contract with an IT vendor, even though its deadline for announcing a developer passed two months ago, said Micah Weinberg of the Bay Area Council, an advocate close to the exchange development process.

  • And the existing state of its systems for enrolling people in public insurance programs means it’s going to be a huge jump to get ready for 2014. Weinberg illustrates the problem by explaining that if the state’s Children’s Health Insurance Program — Healthy Families — is found to be eligible for the Medicaid program, a paper file is overnighted to the other program’s enrollment office. “That’s our IT system here in California,” Weinberg said ruefully.

States are making a major push to upgrade their Medicaid enrollment systems, thanks in part to funding provided by the stimulus bill. But a January study by the Kaiser Family Foundation found that only one state, Oklahoma, had a fully automated Medicaid enrollment system that could process applications in real time. And the state is fighting the health reform law.

While upgrading their Medicaid enrollment systems, the states are going to have to start using federal tax data to make their eligibility determinations for the first time — the same information that the exchange will use to calculate the premium subsidies for people who are buying private coverage. The need for real-time information creates a second problem for the exchanges. They have to build a way to integrate their system with the feds’ data repository — and that hasn’t even been built yet.

HHS is overseeing the construction of what it’s calling a “data hub” that will combine tax information from HHS with the other information needed to establish that people are eligible for coverage. The technical specifications for transmitting data haven’t been released yet, and HHS officials said at a conference on Wednesday that they still hadn’t reached agreements with some of the other programs that will need to contribute information to the hub.

The data hub, said Deloitte’s Howard, is “a black box we will deal with as it comes up.” There is also no standard format for private health insurers to give details on plan benefits and in-network providers to the exchange — key information an individual is going to want to know about a plan when enrolling in an exchange, Howard said.

This is not unfamiliar territory for insurers, who are used to private insurance portals like eHealthInsurance, but common standards still need to be worked out in every state. Of course, many of these challenges facing state exchanges are also ones that will make it hard for the federal government to build IT systems in states that don’t set up their own. That includes not only the states that try and fail, but also the ones in which the administration will have to set up a federal exchange because the state is not cooperating with implementation.

But HHS has something of a head start on the process, having awarded the development contract back in December to CGI — a company that was already working on building, the informational site about the health care law with limited tools to help people find insurance. And experts think it can move ahead faster by basically telling state Medicaid programs and insurers how they will have to connect to a federal system rather than customizing their system in every state.

HHS had hoped that states would get a head start on the IT challenge through Early Innovator grants, which initially went to six states and a multi-state consortium working with the University of Massachusetts Medical School. But three of these states have since backed out of the program and are now resisting health reform implementation.

Jay Himmelstein, who is directing the New England multi-state grant, is hopeful that the four projects still under way will be able to hand off solutions to states and greatly accelerate their work. But even if they offer such tools, other states will need to get serious about moving ahead fast. “There are very tight timelines,” Himmelstein said. “They’re doable, but they’re very tight.”

*Modified from an article in Politico


Putting the ‘Insurance’ Back in Health Insurance

We understand that it would make no sense to buy auto insurance after we’ve already crashed our car. We appreciate that it would be strange to buy homeowner’s insurance after our house has already burned down. And yet, when it comes to health coverage, many of us think that it makes perfect sense to wait until we’re sick to buy health insurance. If we really want to make health insurance affordable and accessible to everyone, we need to go back to basics, and understand all of the government-induced distortions that have made health insurance look nothing like actual insurance.

The point of insurance, of course, is to pool the risks of a group of people as a mechanism for protecting against uncertain financial loss. If 100 people pool their risks together and the home of one of them burns down costing $100,000, each person ends up paying around $1,000: a hundred thousand divided by 100, plus the overhead costs associated with administering the scheme.

But there’s a twist. Let’s say one of the homeowners lives in a neighborhood where the frequency of arson is high. Let’s say another homeowner lives in an arson-free neighborhood, with a fire station next door. Should these two homeowners pay the same $1,000 for their insurance? The second homeowner would call that a bad deal for him, and would ordinarily refuse to participate, unless the insurance premiums were adjusted so that he paid less, while the first homeowner paid more.

The adjustment of health insurance premiums, based on the risks of each policyholder, is called medical underwriting. In nearly all types of insurance, without underwriting, insurance would be prohibitively expensive. If the price of insurance for low-risk individuals is unfairly high, the low-risk types will sit on their hands, and only high-risk individuals will buy insurance. Because high-risk individuals have higher average costs, the costs of premiums will go up: a process called adverse selection.

Adverse selection is a serious problem. According to the U.S. Census, 55 percent of Americans without health insurance are under the age of 35. 72 percent are under the age of 45. It’s these generally healthy people, in the first halves of their lives, who elect to go without insurance, because it is far too expensive, relative to their current health status. Older Americans are much more likely to be insured, because they get a great deal: the cost of their insurance is heavily subsidized by the young.

How government policies create adverse selection

Thanks to a number of unwise policies adopted by state and federal governments in the United States, adverse selection is a huge problem in American health insurance. Let’s go through these policies.

Community rating. Community rating provisions prevent insurers from varying premiums on the basis of a policyholder’s age, gender, or health status. For example, Massachusetts in 1996 enacted a law requiring that insurers charge their oldest customers only 2 times what they charge their youngest ones. Obamacare imposes a similar 3:1 rating band based on age, and prohibits insurers charging different rates based on health status.

The problem is that the oldest individuals in the private market (those younger than 65), on average, spend six times as much on health care as the youngest ones do (those older than 18). Hence, 3:1 community rating forces the youngest people to pay 75 percent more for insurance, so that oldest people can pay 13 percent less.

Above is a simplified illustration of how community rating causes adverse selection. In the first bar, there is a classically underwritten distribution of insurance costs: the 18-year-old pays $800 in premiums, and the 64-year-old pays $4,800: six times as much. Then, in the second bar, 3-to-1 community rating is imposed, which redistributes the cost of premiums. Now, 18-year-olds must pay $1,400 for insurance—a 75 percent increase—so that 64-year-olds can pay 13 percent less.

When a young person’s average annual health expenditures are $700 a year, and he is asked to pay $800 a year for insurance, it’s a reasonable deal. But when that same person is asked to pay $1,400 a year for his $700-a-year expenditures, it’s an unreasonable deal. You can’t blame young people for balking at that offer. If 50 percent of the young people drop out of the insurance pool, but all of the older people stay in, you get the third bar, in which adverse selection drives up—by 17 percent—the average premium costs for the people remaining in the insurance pool.

What’s telling in the above illustration is that, after adverse selection, the oldest policyholder ends up paying more than he would have under free-market underwriting: $4,900 instead of $4,800. A government policy aimed at forcing young people to subsidize premiums for the elderly ends up driving up costs for everybody.

Guaranteed issue. For the same reason, forcing insurers to cover everyone with pre-existing conditions drives premiums upward. If you know you can buy insurance after you’re sick, you have every incentive to drop out of the system now, and wait until you’re sick to buy insurance.

Benefit mandates. Coverage mandates also create adverse selection. For example, some states force all plans in a state to cover acupuncturists and chiropractors. Others force insurers to cover substance abuse treatment and smoking cessation programs. Lobbyists convince state legislatures to adopt these mandates, in order to enrich their service-providing clients. If you’re a drug addict, it’s a great deal. If you’re not, it’s another reason for you not to bother buying insurance.

The typical benefit mandate adds 4 percent to the cost of an insurance plan. According to a study by Victoria Bunce of the Council for Affordable Health Insurance, 106 new insurance mandates were enacted by the states in 2011. Rhode Island and Virginia lead the nation with 70 mandates each, as of 2011. Idaho and Alabama are last, with 13 and 19 mandates, respectively.

Other benefit mandates are financial, such as Obamacare’s requirement that all plans sold on the new exchanges have a “minimum actuarial value” of 60 percent. This means that insurers must cover more of your care, which means that premiums need to be higher. Young, healthy people have little interest in such plans.

Any willing provider. “Any willing provider” mandates restrict the ability of insurers to exclude certain doctors and hospitals from their networks. If insurers have to work with everyone, they lose some of their negotiating leverage with hospitals to keep prices down.

Contractual breakdown. An underappreciated issue that drives adverse selection is that of contractual breakdown. Under Obamacare, policyholders are able to terminate their insurance coverage at any time. But insurers are forced to honor their policies if their beneficiaries get sick. As Richard Epstein puts it,

The least risky individuals, therefore, have every incentive to get out of the system, which is regrettably accommodated by the [Affordable Care Act] rules that allow people to terminate coverage unilaterally at any time for any reason. A sounder system would have allowed health-insurance carriers to require the insureds to pay a penalty to withdraw from coverage, or to insist that they remain in the plan for some minimum period.

What phone companies can routinely do is thus systematically denied to health-insurance carriers.

Again, if insurers can’t count on policyholders to stay on their plans for the length of their contracts, insurers have to charge more money to make up for the fraction of people who game the system by dropping out.

In addition, carriers have no incentive to enter into long-term contracts with beneficiaries. When it comes to health care, long-term policies would do much to improve the system.

Let’s say you buy a health insurance policy that lasts for five years, which neither side can unilaterally terminate. That’s a system that is common in Switzerland. There, contracts are signed for one to five years, and can’t be broken unless you leave the country.

Under a five-year contract, the insurer has a much greater incentive to make sure you stay healthy, because it will be more liable for the bills if your health deteriorates. One-year contracts, on the other hand, incentivize an insurer to simply hope that you don’t get sick, with little eye to the long term.

Says Harvard Business School’s Regina Herzlinger,

Why don’t you get rewarded [for healthy behavior, in the U.S. system]? So here’s a Swiss health policy, a five-year policy, they measure your health in the beginning of the five years, they predict how healthy you will be five years from now. You have to stay with them for five years, because they’re going to make you healthy. They’re going to help you get healthy. And they want you to be around with them when you’re finally healthy. Here’s the deal: at the end of the five years, if you’re as healthy as they predicted, or healthier, they give you half your money back.

Because Americans don’t buy insurance for themselves, they have no incentive to buy plans like these.

What can be done?

Reforming the system involves, first and foremost, encouraging people to buy insurance for themselves, by eliminating the tax-code discrimination against individually purchase health insurance. Second, people should be able to buy insurance across state lines. When individuals are buying their own policies, they will vote with their feet for policies that have fewer mandates and fewer problems with adverse selection. Third, we should eliminate federal mandates that drive up insurance costs, especially in the individual market.

In addition, we should eliminate the barriers against long-term insurance contracts: (1) the ability of policyholders to terminate their coverage at will; and (2) policies that discourage the formation of multi-year insurance contracts.

One possible reform is to encourage more innovation with guaranteed-renewable insurance, such that a person who buys insurance for one year is contractually guaranteed the opportunity to renew that policy at previously-agreed-to rates. The existing forms of guaranteed-renewable coverage tend to increase up-front costs in exchange for lower costs on the back end, which can still cause adverse selection. The goal would be to preserve the incentives for people to buy insurance in the first place, and encourage long-term encourage contracts.

Free markets continually make all sorts of goods cheaper and more plentiful. Some cling to the belief that this can’t be achieved with health insurance. But it can.

*Forbes Article


Why HRAs Will Become the Foundation of Employee Health Benefits

New business methods and technology now allow employers to enroll employees in a single HRA software platform from which employees access their:

  1.     HRA benefits
  2.     HSA link to any financial institution
  3.     A Private Exchange for purchasing individual/family health insurance

HRAs started out as supplements to employer health benefit plans for incidental items not covered by traditional health insurance plans. However, because of their enormous legal flexibility and new technology designed to take advantage of this flexibility, HRAs will become the foundation of every employer’s health benefit plan.

For employers who offer group insurance, HRAs will become the front-end delivery vehicle of primary health benefits for fully-insured and self-insured plans. For employers who cannot afford a group health plan, HRAs are becoming the basis of a defined contribution health plan that enables millions of employees to purchase individual/family health insurance policies directly from an insurance company.

Whether as the front-end of an employer-sponsored group plan or defined contribution health plan, here are just a few ways HRAs can deliver better and more cost-effective health benefits to employers and their employees today.

(1) HRAs Improve Retention

The greatest challenge for employers today is retaining qualified employees. HRAs are extremely powerful for retention because employees accumulate for their future what they don’t spend today, but lose their accumulated balance when they quit (unless they meet employer-specified HRA retiree vesting requirements).  Additionally, employers can vary HRA benefits by class of employee to create further incentives for employees to stay and grow.

(2) HRAs Boost Recruiting Success

The second greatest challenge facing employers today is recruiting quality employees, whether for salaried and hourly positions. HRAs are the ultimate employee recruiting tool because they allow employers to afford and offer much better health benefits than their competition. In addition, using HRAs enables employers with group plans to offer better coverage to new employees by doing the following:

HRAs Eliminate Waiting Periods – New employees can enroll, submit claims, and have their claims approved for reimbursement, but not actually be reimbursed until the waiting period (e.g. six months) is complete.
HRAs Provide Coverage for Hourly, Part-time, or Seasonal Employees – Employees can receive HRA allowances tied to their hours worked but forfeit their entire HRA balance unless they work a minimum number of hours or return (after a seasonal layoff) within a specified time period.

(3) Allocate HRA Benefits by Class

Employers have always been allowed to allocate health benefits by using reasonable classifications with wages and retirement, giving different health benefits to employees based of job categories, geographical locations, etc.

But, before HRAs, employers lacked the technology and systems to offer health benefits packages tailored for each Class of Employee based on their recruiting and retention objectives. New HRA technology allows employers to set-up a completely different benefits plan for each Class of Employee (e.g. call center staff, managers, executives) and electronically administer such a different HRA benefits plan with electronic signatures and customized per-class plan documents and HRA SPDs (Summary Plan Descriptions).

(4) HRAs Improve Coverage for All Employees

Besides rising costs, every employee and employer has something they don’t like about their health benefits. HRAs allow employers virtually unlimited flexibility to add benefits (such as smoking cessation, weight loss programs, maternity supplements, or improved coverage for out-of-network providers).  Online tools connected to the claims processing system allow employers to monitor and control the cost of these additional benefits in real-time.

(5) Implement and capture savings from high deductible plans using HRAs

Using HRAs enables employees to move to high deductible plans.  Employers with fully-insured group plans can immediately save up to 50% on their existing group premium without reducing any benefits by switching to a higher annual deductible, and using their HRA to pay employee medical expenses under the new deductible. Employers who do this typically then give back about 1/3 to 1/2 of their savings to maintain the same level of benefits—for a net savings of 15%-30% after HRA reimbursements. Similarly, employers who use HRAs without a group plan can provide employees with funds to offset out of pocket expenses associated with lower-priced high deductible personal health policy.

These compelling benefits make HRAs a logical vehicle for employers of all sizes.

*Modified from a Zane Benefits Blog



Immigration status is a health policy challenge

The Obama administration’s drive to cut down on America’s uninsured is about to get multilingual. Come 2014, when core provisions of the Affordable Care Act kick in, millions of legal immigrants will have new options for gaining health coverage. And like U.S. citizens, most will be subject to the individual mandate, under which they will be required to get coverage to avoid a penalty.

The national health law explicitly excludes illegal immigrants — a politically explosive topic — and bans them from the new state insurance exchanges, even if they use their own money. They will make up a big chunk of the remaining uninsured population. But advocates say states have good reasons to reach out and get uninsured legal residents covered — especially as the federal government picks up most of the tab.

“States with high immigrant populations are definitely looking forward to seeing how the Affordable Care Act is going to be able to provide the state more options for those immigrants,” said Sonal Ambegaokar, a health policy attorney at the National Immigration Law Center. According to the Henry J. Kaiser Family Foundation, non citizens — legal and illegal — are three times as likely as native-born citizens to be uninsured.

In 2014 — assuming the health law survives the Supreme Court and hasn’t been undone by a new administration — legal immigrants will be able to shop for health coverage through the new state insurance exchanges. They can get the same income-linked subsidies as citizens.

Legal immigrants’ five-year federal waiting period for Medicaid, approved in 1996, won’t change. But for legal immigrants who have been here five years, Medicaid may be more accessible because it’s being expanded and the eligibility rules are being broadened. Traditionally, the states and Washington have split the costs of covering this low-income population, but Washington will pay more for the newly eligible.

States have the option of waiving the five-year rule for legal immigrants, but they must use their own funds, and only about 15 have done so, according to Kaiser. More have lifted the rules for children and pregnant women in the Children’s Health Insurance Program, Kaiser found.

Health policy experts say states have reasons to encourage legal immigrants to enroll in their exchanges. Most eligible immigrants are relatively young and healthy — part of a population states want to have in an insurance pool to spread the risk and make the market work.

“The overall benefit of having the legal resident population in is it tends to be younger, and therefore, it can be healthier,” said Ruselle Robinson, a Boston-based health care attorney. “That is the group that the individual mandate is trying to bring in.”

“It’s to a state’s advantage to really outreach and make sure all those immigrants who are eligible get enrolled,” agreed Ambegaokar.

One policy challenge has to do with “mixed-status” families. Those are families in which the children are legal, but one or both parents are not. About 6 million kids were in such families in 2010, the Urban Institute estimated. According to Kaiser report, those children are “are at increased risk of being uninsured.” The reason, Ambegaokar said, is many families with mixed status are hesitant to access the health care system, and others aren’t clear that some of their relatives may be eligible for coverage.

Even if states have energetic outreach efforts and boost enrollment among legal immigrants, they will face the daunting problem of care for undocumented immigrants — about 10 million in 2010, according to the Pew Hispanic Center. Payments to hospitals that treat disproportionate numbers of poor and uninsured patients will be cut under the health law because there will be fewer without coverage. But hospitals must provide emergency care to everyone. Any solutions will unfold in the charged environment that immigration policy engenders.

Even health care for legal residents can create political storms. Massachusetts state lawmakers tussled with Gov. Deval Patrick in 2009 when they attempted to strip subsidized health insurance from tens of thousands of lawful immigrants to help balance the budget. At Patrick’s insistence, those immigrants were instead placed in a program with reduced benefits. This year, the Massachusetts high court ruled the less-generous program is discriminatory and ordered state officials to return the immigrants to the state’s insurance exchange.

*Modified from a article


Ravenous Congress Will Tax Jobs Out Of Existence For ObamaCare

By George Will

BLOOMINGTON, Ind. — Bill Hewlett and David Packard, tinkering in a California garage, began what became Hewlett-Packard. Steve Jobs and a friend built a computer in the California garage that became Apple’s birthplace. Bill Cook had no garage, so he launched Cook Medical in a spare bedroom in an apartment in this university town.

Half a century ago, in flight from Chicago’s winters, he settled here and began making cardiovascular catheters and other medical instruments. One thing led to another, as things have a way of doing when the government stays out of the way, and although Cook died last year, Cook Medical, with its subsidiaries, is the world’s largest family-owned medical devices company.

In 2010, however, Congress, ravenous for revenues to fund ObamaCare, included in the legislation a 2.3% tax on gross revenues — which generally amounts to about a 15% tax on most manufacturers’ profits — from U.S. sales of medical devices beginning in 2013.

This will be piled on top of the 35% federal corporate tax, and state and local taxes. The 2.3% tax will be a $20 billion blow to an industry that employs more than 400,000, and $20 billion is almost double the industry’s annual investment in research and development.

An axiom of scarcity is understood by people not warped by working for the federal government, which can print money when it wearies of borrowing it. The axiom is: A unit of something — time, energy, money — spent on this cannot be spent on that.

So the 2.3% tax, unless repealed, will mean not only fewer jobs but also fewer pain-reducing and life-extending inventions — stents, implantable defibrillators, etc. — which have reduced health care costs.

The tax might, however, be repealed. The medical device industry is widely dispersed across the country, so numerous members of Congress have constituencies affected by developments such as these:

Cook Medical is no longer planning to open a U.S. factory a year. Boston Scientific, planning for a more than $100 million charge against earnings in 2013, recently built a $35 million research and development facility in Ireland and is building a $150 million factory in China. (Capital goes where it is welcome and stays where it is well-treated.)

Stryker Corp., based in Michigan, blames the tax for 1,000 layoffs. Zimmer, based in Indiana, is laying off 450 and taking a $50 million charge against earnings. Medtronic expects an annual charge against earnings of $175 million. Covidien, now based in Ireland, has cited the tax in explaining 200 layoffs and a decision to move some production to Costa Rica and Mexico.

Already 235 members of the House of Representatives — 227 Republicans and eight Democrats — are co-sponsors of a bill to repeal the tax. Twenty-three Republican senators, but no Democratic senators, favor repeal.

The Democrats who imposed this tax on a single manufacturing sector justified this discrimination by saying ObamaCare would be a boon to the medical devices industry because, by expanding insurance coverage, it would stimulate demand for devices. But those insured because of Obama-Care will be disproportionately young and not needing, say, artificial knees. And well before ObamaCare, the law had long required hospitals to provide devices to the needy who are uninsured.

Unsurprisingly, Sen. Scott Brown, R-Mass., supports repeal of the tax. Surprisingly, so does his opponent, Elizabeth Warren, an impeccably liberal ObamaCare enthusiast who notes that in Massachusetts, the medical devices industry has 24,000 employees and accounts for 13% of the state’s exports.

Warren is experiencing another episode of New England remorse: “When Congress taxes the sale of a specific product through an excise tax … it too often disproportionately impacts the small companies with the narrowest financial margins and the broadest innovative potential.”

Well, yes. In 1990, when President George H.W. Bush’s recanted his “no new taxes” pledge, he enabled the Democratic-controlled Congress, with a legion of New England liberals in the lead, to impose a 10% tax on yachts costing more than $100,000.

Yacht sales plunged 70% in six months, a third of all yacht-building companies — many in New England — stopped production and more than 20,000 workers lost their jobs. In 1993, the tax, although not the damage, was repealed.

Given humanity’s fallen condition, almost everyone’s tax policy is: “Don’t tax you, don’t tax me, tax that fellow behind the tree.” There are, however, vulnerable wealth-and-job-creating businesses behind most


GAO: 32% of Americans Currently Uninsurable

Healthcare Business News, By Jessica Zigmond –

April 26, 2012: Hypertension, mental health disorders and diabetes are the most commonly found medical conditions among adults that could lead to a health insurer denying coverage, the Government Accountability Office concluded in a new report about pre-existing conditions (PDF).

GAO analysts found that between 36 million and 122 million adults—representing a range between 20% and 66% of the U.S. adult population—reported having medical conditions that could result in health insurance coverage restrictions. The midpoint of that spectrum is estimated to be about 32%.

Hypertension was the leading condition that could result in an insurer denying coverage, and GAO analysts found that about 33.2 million adults between the ages of 19 and 64, or about 18%, reported having hypertension in 2009. Those individuals reported average annual expenditures to treat the condition of about $650, although maximum reported expenditures were calculated to be about $61,540. Cancer had the highest annual treatment expenditures at about $9,000.

Starting in 2014, the Patient Protection and Affordable Care Act won’t allow insurers in the individual market to deny coverage, increase premiums or restrict benefits because of a pre-existing condition.

“The estimated number of adults with pre-existing conditions varies by state, but most individuals, 88% to 89% depending on the list of pre-existing conditions included, live in states that do not report having insurance protections similar to those in PPACA,” the report noted. “Compared to others, adults with pre-existing conditions spend thousands of dollars more annually on healthcare, but pre-existing conditions are common across all family income levels.”

In a letter to the GAO (PDF), Jim Esquea, HHS’ assistant secretary for legislation, said HHS does not have any “substantive or technical comments,” about the report’s findings.


If Supreme Court rejects Obama’s health law, employers, insurers will drive their own overhaul

Chicago Tribune, By Ricardo Alonso-Zaldivar

April 24, 2012: If the Supreme Court strikes down President Barack Obama’s health care overhaul, don’t look to government for what comes next.

Employers and insurance companies will take charge. They’ll borrow some ideas from Obamacare, ditch others, and push even harder to cut costs.

Here’s what experts say to expect:

— Workers will bear more of their own medical costs as job coverage shifts to plans with higher deductibles, the amount you pay out of pocket each year before insurance kicks in. Traditional insurance will lose ground to high-deductible plans with tax-free accounts for routine expenses, to which employers can contribute.

— Increasingly, smokers will face financial penalties if they don’t at least seriously try to quit. Employees with a weight problem and high cholesterol are next. They’ll get tagged as health risks and nudged into diet programs.

— Some companies will keep the health care law’s most popular benefit so far, coverage for adult children until they turn 26. Others will cut it to save money.

— Workers and family members will be steered to hospitals and doctors that can prove that they deliver quality care. These medical providers would earn part of their fees for keeping patients as healthy as possible, similar to the “accountable care organizations” in the health care law.

— Some workers will pick their health plans from a private insurance exchange, another similarity to Obama’s law. They’ll get fixed payments from their employers to choose from four levels of coverage: platinum, gold, silver and bronze. Those who pick rich benefits would pay more.

“Employers had been the major force driving health care change in this country up until the passage of health reform,” said Tom Billet, a senior benefits consultant with Towers Watson, which advises major companies. “If Obamacare disappears … we go back to square one. We still have a major problem in this country with very expensive health care.”

Business can’t and won’t take care of America’s 50 million uninsured.

Republican proposals for replacing the health care law aren’t likely to solve that problem either, because of the party’s opposition to raising taxes. The GOP alternative during House debate of Obama’s law would have covered 3 million uninsured people, compared with more than 30 million under the president’s plan.

After the collapse of then-President Bill Clinton’s health care plan in the 1990s, policymakers shied away from big health care legislation for years. Many expect a similar reluctance to set in if the Supreme Court invalidates Obama’s Affordable Care Act.

Starting in 2014, the law requires most Americans to obtain health insurance, either through an employer or a government program or by buying their own policies. In return, insurance companies would be prohibited from turning away the sick. Government would subsidize premiums for millions now uninsured.

The law’s opponents argue that Congress overstepped its constitutional authority by requiring citizens to obtain coverage. The administration says the mandate is permissible because it serves to regulate interstate commerce. A decision is expected in late June.

The federal insurance mandate is modeled on one that Massachusetts enacted in 2006 under then-Gov. Mitt Romney. That appears to have worked well, but it’s unlikely states would forge ahead if the federal law is invalidated because health care has become so politically polarized. Romney, the likely Republican presidential nominee, says he’d repeal Obamacare if elected.

That would leave it to employers, who provide coverage for about three out of five Americans under age 65.

“With or without health care reform, employers are committed to offering health care benefits and want to manage costs,” said Tracy Watts, a senior health care consultant with Mercer, which advises many large employers. “The health care reform law itself has driven employers, as well as the provider community, to advance some bolder strategies for cost containment.”

First, employers would push harder to control their own costs by shifting more financial responsibility to workers.

Data from Mercer’s employer survey suggests that a typical large employer can save nearly $1,800 per worker by replacing traditional preferred provider plans with a high-deductible policy combined with a health care account. “That is very compelling,” said Watts.

It won’t stop there. Many employers are convinced they have to go beyond haggling over money, and also pay attention to the health of their workers.

“As important as it is to manage the cost of medical services and products, and eliminate wasteful utilization, there has been a strong recognition that ultimately healthier populations cost less,” said Dr. Ian Chuang, medical director at the Lockton Companies, advisers to many medium-size employers. His firm touts programs that encourage employees to shed pounds, get active or quit smoking.

Employer health plans were already allowed to use economic incentives to promote wellness, and the overhaul law loosened some limits.

A Towers Watson survey found that 35 percent of large employers are currently using penalties or rewards to discourage smoking, for example, and another 17 percent plan to do so next year. The average penalty ranges from $10 to $80 a month, but one large retailer hits smokers who pick its most generous health plans with a surcharge of $178 a month, more than $2,100 a year.

Overall, one of the most intriguing employer experiments involves setting up private health insurance exchanges, markets such as the health care law envisions in each state. Major consulting firms such as Mercer and Aon Hewitt are developing exchanges for employers.

As under the health care law, the idea is that competition among insurers and cost-conscious decisions by employees will help keep spending in check. Aon Hewitt’s exchange would open next January, with as many as 19 companies participating, and some 600,000 employees and dependents.

“The concept of an exchange does not belong to Obamacare,” said Ken Sperling, managing the project for Aon Hewitt. “We’re borrowing a concept that was central to the health care law and bringing it into the private sector. Whether the law survives or not, the concept is still valid.”
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Health Care Reform: Workers May Trade Health Insurance For Raises

Would you give up your health insurance for a raise?

A minority of big companies offered extra pay to workers who waived their health benefits last year. This practice, which was common decades ago, could see a resurgence once the biggest parts of President Barack Obama’s health care reform law take effect in 2014 and start to rearrange the health insurance market.

Last year, 17 percent of employers with at least 500 workers gave a little extra money to those who turned down an offer of health insurance, according to a survey conducted by the human-resources advisory firm Mercer that will be published later this month. The Huffington Post obtained early access to the data. The median amount of extra pay was $1,000, which is considerably less than the $11,664 average cost an employer and worker incur for job-based health insurance this year, according to the consulting company Towers Watson.

Jobs are the most common source of health insurance for working-age Americans and provide 154 million people with coverage, according to the Congressional Budget Office. But the implementation in 2014 of new benefit requirements on employers and individuals, along with the creation of health insurance “exchanges” and federal subsidies for individuals, families, and small businesses, will change how many Americans get health plans, unless the Supreme Court strikes down the law on constitutional grounds.

The health care reform law includes a “pay or play” requirement that companies with at least 50 employees must either provide employees with health benefits or pay penalties as high as $3,000 per worker to offset the government’s cost of subsidizing insurance coverage. Although jobs are projected to remain the number-one source of health coverage, some workers will be affected, since the penalty is less money than the insurance coverage.

In some cases, that will mean higher paychecks to make up for lost benefits. In 2006, Dallas resident Red Coine was offered that deal by Cisco Systems, where he was a network engineer working as a contractor. Coine, who is now 35, got an extra $200 a month and bought his own health insurance for $88, so he came out $112 ahead. “I never regretted giving up the company insurance, and no one ever mentioned to me or complained about not having it,” he told HuffPost via email.

The connection between jobs and health insurance has been weakening over the years for reasons unrelated to Obama’s health care reform law. Rising health care costs have led more employers to drop coverage: Between 2001 and 2011, the percentage of companies offering health benefits dropped from 68 percent to 60 percent.

The health care reform law created incentives that will lead some employers to maintain coverage or begin offering benefits, but cost pressures will likely cause other companies to stop providing health insurance to some or all of their workers. According to another Mercer survey, 91 percent of firms with at least 500 workers are likely to keep offering health benefits.

Employees of smaller companies are more likely to lose coverage, but are already more likely to not have it in the first place, according to Mercer.

Overall, 14 million fewer workers will get insurance from their jobs as a result of health care reform, and all but 2 million will find coverage elsewhere, thanks to the law’s federal subsidies and insurance market reforms, according to the Congressional Budget Office. Economists also predict companies that drop insurance for some or all of their workers will boost their compensation by raising pay or strengthening other fringe benefits.

People earning between 133 percent and 400 percent of the federal poverty level — $30,657 to $92,200 for a family of four this year — would qualify for federal tax credits to defray the cost of health insurance, which could make it cheaper than the coverage available at work, said Tom Billet, a senior consultant at Towers Watson.

Modified from Huffington Post


Most Small Businesses Not Planning for Health Care Reform According to Survey

Survey of true “small businesses” explores how employers feel about health care reform, why they provide coverage, and how far they’re willing to go to save money

Mountain View, CA – March 21, 2012 – The majority (85%) of small businesses are not making changes or long-term plans based on health care reform legislation, according to a recent survey of small business owners released today by eHealth, Inc.

Beginning in 2014, the Patient Protection and Affordable Care Act of 2010 (ACA) requires businesses with the equivalent of fifty or more full-time employees to provide health insurance coverage for their workers. However, businesses with fewer than 50 employees are exempt from this requirement, although employees may be required to purchase their own coverage.

eHealth’s Small Employer Health Insurance Survey focuses on these small businesses, many of them family-run. Nearly nine-in-ten (88%) of the small businesses responding to the survey had ten employees or fewer. The survey was conducted anonymously online between February 10 and March 13, 2012 and gathered responses from a total of 236 small businesses that had purchased group health insurance policies through

Based on their size (fewer than 50 employees) none of the businesses surveyed would be required by the ACA to offer health insurance coverage to employees in 2014. However, the majority (60%) planned to continue offering coverage for their employees in 2014. Among those employers who considered themselves knowledgeable about aspects of the ACA, a larger majority (69%) said they had no plans to stop offering coverage to employees. According to the survey, most employers feel they have a moral obligation to provide health insurance for employees or feel they need to continue to do so in order to recruit and retain talented workers.

Small businesses are still sensitive to health care costs, however, with nearly all respondents (95%) citing “affordability” as one of the two most important factors when choosing a plan. Small businesses are also open to creative solutions to reduce health coverage costs. Many are willing to drop benefits like dental and vision (58%) or consider raising deductibles and offering accident or critical illness coverage (74%) in order to keep costs lower and continue offering employees health insurance.
eHealth’s Small Employer Health Insurance Survey report can be downloaded in full here or through the eHealth, Inc. Media Center.

Additional Survey Results

  • Nearly eight-in-ten small businesses (79%) report spending $200 or more for health insurance per insured employees or dependent each month
  • A majority (53%) said they required employees to contribute 10% or less of the total cost for their own or their dependents’ monthly health insurance premiums
  • More than six-in-ten (61%) reported that enrollee deductibles on their group health insurance plans were $1,500 or less per year
  • One-third of respondents (34%) said they might consider dropping employer-based group health insurance beginning in 2014
  • A majority of respondents (53%) said that they always or sometimes impose waiting periods before allowing new employees to join the company health insurance plan
  • More than four-in-ten (44%) said they felt a “moral obligation” to provide employees with health insurance
  • Most small businesses identified “affordability” (95%) and “richness of benefits” (68%) as the two most important factors when choosing a health insurance plan
  • Only six percent considered the insurer’s brand a top-two factor when choosing a plan