Insurance Company News – California

A recent poll sponsored by the American Action Forum, though, shows that the nuts and bolts of consumer decision-making may be its real Achilles heel. Evidence of these changes was gathered in late March and early April of this year, when the American Action Forum sponsored the first national poll of this demographic, specifically testing what effects various premium increases would have on consumers’ willingness to purchase coverage.

At the heart of Obamacare is the goal of expanded health insurance coverage, and the law as originally passed envisioned coverage for an additional 30 million or so Americans.

Younger Americans are central to this vision of broader insurance coverage.

• First, they are supposed to participate in insurance coverage, and the mandate and penalty are there to make sure that this comes to fruition.

• Second, by having the young in the insurance pool with their low health care costs, the insurance offered in the exchanges would be more attractive and affordable to older and sicker Americans. In effect, young Americans are supposed to be both key participants and the piggy bank of the expansion effort.

• Health insurance is a product, not a social vision. What we know to be true thanks to ample survey and analytic research is that in 2014, Obamacare will cause insurance premiums to rise sharply for the healthy and young. When it comes to products, Americans aged 18 to 40 act like consumers of all ages everywhere: They have a price point, and when the price gets too high, they get busy making changes.

• Respondents were those who already purchase insurance and had very specific information regarding their monthly premiums and the penalty they would pay if they failed to continue to buy insurance.In this group of current insurance purchasers, only 83 percent will still purchase if premiums rise 10 percent; 65 percent, if premiums rise 20 percent; and only 55 percent, if premiums rise 30 percent. The economic lesson is simple: As premiums rise, eventually, some consumers reach a price point at which they simply stop buying health insurance.

The policy lesson is twofold.

• First, a law intended to expand coverage will to some extent do exactly the opposite.

• Second, young Americans are exceedingly rational. If premiums rise 10 percent, 7 percent of those polled would pay the penalty, but then turn around and buy insurance (as the law dictates they must be permitted to do) if they got sick. The fraction rises to 11 percent and 20 percent for the larger premium hikes, respectively.

Choosing the penalty over insurance, or conveniently buying insurance (from the ambulance) just when it is needed, has been caricatured as responses only dreamed up by opponents of Obamacare. Not so, as it turns out. While the respondents are price-conscious consumers, they are not anti-Obamacare.

The poll shows a response to the health care law split more or less right down the middle: 29 percent viewing it favorably, 33 percent unfavorably, and 38 percent “half-and-half.” Within the law, some features are viewed favorably (coverage for pre-existing conditions is a positive for 68 percent), while others are frowned on (55 percent have a negative view of the individual mandate and penalty.)

Obamacare is a controversial law whose provisions have received a mixed public reception. These results are echoed by the sentiments of the 18- to 40 year-olds polled by the American Action Forum. Obamacare is intended to expand insurance coverage by mandating that those same young Americans form a lower-cost insurance pool. This group, however, powerfully undercuts this goal. Behaving like all price-conscious consumers, young Americans will drop their insurance in the face of sharp premium increase

*Modified from a Washington Times article

Employers are increasingly recognizing they may be able to avoid certain penalties under the federal health law by offering very limited plans that can lack key benefits such as hospital coverage.

• Benefits advisers and insurance brokers—bucking a commonly held expectation that the law would broadly enrich benefits—are pitching these low-benefit plans around the country. They cover minimal requirements such as preventive services, but often little more. Some of the plans wouldn’t cover surgery, X-rays or prenatal care at all. Others will be paired with limited packages to cover additional services, for instance, $100 a day for a hospital visit.

• Federal officials say this type of plan, in concept, would appear to qualify as acceptable minimum coverage under the law, and let most employers avoid an across-the-workforce $2,000-per-worker penalty for firms that offer nothing. Employers could still face other penalties they anticipate would be far less costly.

• Larger employers, generally with more than 50 workers, need cover only preventive services, without a lifetime or annual dollar-value limit, in order to avoid the across-the-workforce penalty. Such policies would generally cost far less to provide than paying the penalty or providing more comprehensive benefits, say benefit-services firms. Some low-benefit plans would cost employers between $40 and $100 monthly per employee, according to benefit firms’ estimates.

• Administration officials confirmed in interviews that the skinny plans, in concept, would be sufficient to avoid the across-the-workforce penalty. Several expressed surprise that employers would consider the approach.

• San Antonio-based Bill Miller Bar-B-Q, a 4,200-worker chain, will replace its own mini-med with a new, skinny plan in July and will aim to price the plan at less than $50 a month, about the same as the current policy, said Barbara Newman, the chain’s controller. The new plan will have no dollar limits on benefits, but will cover only preventive services, six annual doctors’ visits and generic drugs. X-rays and tests at a local urgent care chain will also be covered. It wouldn’t cover surgeries or hospital stays.

• Tex-Mex restaurant chain El Fenix also said it would offer limited plans to its 1,200 workers, covering doctors visits, preventive care and drugs, but not hospital stays or surgery. “What our goal was all along was to make [offering coverage] financially palatable for the company as a whole, so we didn’t do damage and have to let people go or slow down our growth,” said Brian Livingston, chief financial officer of Dallas-based Firebird Restaurant Group LLC, owner of El Fenix.

It is unclear how many employers will adopt the strategy, but a handful of companies have signed on and an industry is sprouting around the tactic. More than a dozen brokers and benefit-administrators in 10 states said they were discussing the strategy with their clients.

“There had to be a way out” of the penalty for employers with low-wage workers, said Todd Dorton, a consultant and broker for Gallagher Benefit Services Inc., a unit of Arthur J. Gallagher & Co., who has enrolled several employers in the limited plans.

Pan-American Life Insurance Group Inc. has promoted a package including bare-bones plans, according to brokers in California, Kansas and other states and company documents. Carlo Mulvenna, an executive at New Orleans-based Pan-American, confirmed the firm is developing these types of products, and said it would adjust them as regulators clarify the law.

The idea that such plans would be allowable under the law has emerged only recently. Some benefits advisers still feel they could face regulatory uncertainty. The law requires employers with 50 or more workers to offer coverage to their workers or pay a penalty. Many employers and benefits experts have understood the rules to require robust insurance, covering a list of “essential” benefits such as mental-health services and a high percentage of workers’ overall costs. Many employers, particularly in low-wage industries, worry about whether they—or their workers—can afford it.

But a close reading of the rules makes it clear that those mandates affect only plans sponsored by insurers that are sold to small businesses and individuals, federal officials confirm. That affects only about 30 million of the more than 160 million people with private insurance, including 19 million people covered by employers, according to a Citigroup Inc. report.

“For certain organizations, it may be an ideal solution to minimize the cost of opting out,” said David Ellis, chief executive of Youngtown, Ariz.-based LifeStream Complete Senior Living, which employs about 350 workers, including low-wage housekeepers and kitchen staff. Mr. Ellis, who was recently pitched a low-benefit plan, said it is one option the firm may consider to lower costs and still comply with the law, he said.

“We wouldn’t have anticipated that there’d be demand for these types of band-aid plans in 2014,” said Robert Kocher, a former White House health adviser who helped shepherd the law. “Our expectation was that employers would offer high quality insurance.” Part of the problem: lawmakers left vague the definition of employer-sponsored coverage, opening the door to unexpected interpretations, say people involved in drafting the law.

The low-benefit plans are just one strategy companies are exploring. Major insurers, including UnitedHealth Group Inc., Aetna Inc., and Humana Inc. are offering small companies a chance to renew yearlong contracts toward the end of 2013. Early renewals of plans, particularly for small employers with healthy workforces, could yield significant savings because plans typically don’t need to comply with some health law provisions that could raise costs until their first renewal after Jan. 1, 2014.

Insurers and health-benefits administrators are also offering small companies a chance to switch to self-insurance, a form of coverage traditionally used by bigger employers that will face fewer changes under the law. Employers are also considering limiting workers’ hours to avoid the coverage requirements that apply only to full-time employees.

Regulators worry that some of these strategies, if widely employed, could pose challenges to the new online health-insurance exchanges that are a centerpiece of the health law. Among employees offered low-benefit plans, sicker workers who need more coverage may be most likely to opt out of employer coverage and join the exchanges. That could drive up costs in the marketplaces.

Officials at the Department of Health and Human Services said they haven’t seen widespread evidence of such strategies. They said the health law would bring new options, including the subsidized exchange plans, to low-income workers, and that most employers who offer coverage now choose to provide much more robust benefits.

Limited plans may not appeal to all workers, and while employers would avoid the broader $2,000-per-worker penalty for all employees not offered coverage, they could still face a $3,000 individual fee for any employee who opts out and gets a subsidized policy on the exchanges.

But the approach could appeal to companies with a lot of low-wage workers such as retailers and restaurant operators, who are willing to bet that those fees would add up slowly because even with subsidies, many workers won’t want to pay the cost of the richer exchange coverage.

A full-time worker earning $9 an hour would have to pay as much as $70 a month for a midlevel exchange plan, even with the subsidies, according to Kaiser. At $12 an hour, the workers’ share of the premium would rise to as much as $140 a month.

Firms now offering low-cost policies known as mini-meds, generally plans that cap benefits at low levels, could favor the tactic. Companies sought federal health department waivers to cover nearly four million with mini-meds and other similar plans, which will be barred next year.

Because the coverage is limited, workers who need richer benefits can still go to the exchanges, where plans would likely be cheaper than a more robust plan Bill Miller has historically offered to management and that costs more than $200 per month. The chain plans to pay the $3,000 penalty for each worker who gets an exchange-plan subsidy.

Many more workers will continue to go without insurance, despite the exchanges and the limited plan. Currently, only one-quarter of workers eligible for the mini-med plan take it.

*Modified from a WSJ article

Months after the president’s reelection, a variety of unions are publicly balking at how the administration plans to implement the landmark law. They warn that unless there are changes, the results could be catastrophic.

The United Food and Commercial Workers International Union (UFCW) — a 1.3 million-member labor group that twice endorsed Obama for president — is very worried about how the reform law will affect its members’ healthcare plans.

• In a new op-ed published in The Hill, UFCW President Joe Hansen homed in on the president’s speech at the 2009 AFL-CIO convention. Obama at the time said union members could keep their insurance under the law, but Hansen writes “that the president’s statement to labor in 2009 is simply not true for millions of workers.”

• Last month, the president of the United Union of Roofers, Waterproofers and Allied Workers released a statement calling “for repeal or complete reform of the Affordable Care Act.”

• Republicans have long attacked Obama’s promise that “nothing in this plan will require you to change your coverage or your doctor.” But the fact that unions are now noting it as well is a clear sign that supporters of the law are growing anxious about the law’s implementation.

•  Many UFCW members have what are known as multi-employer or Taft-Hartley plans.According to the administration’s analysis of the Affordable Care Act, the law does not provide tax subsidies for the roughly 20 million people covered by the plans. Union officials argue that interpretation could force their members to change their insurance and accept more expensive and perhaps worse coverage in the state-run exchanges.

Hansen, who is also the head of the Change to Win labor federation, told The Hill that his members often negotiate with their employers to receive better healthcare services instead of higher wages. Those bargaining gains could be wiped away because some employers won’t have the incentive to keep their workers’ multi-employer plans without tax subsidies.

“You can’t have the same quality healthcare that you had before, despite what the president said,” Hansen said. “Now what’s going to happen is everybody is going to have to go to private for-profit insurance companies. We just don’t think that’s right. … We just want to keep what we already have and what we bought at tremendous cost.”

If the administration were to expand the subsidies to cover the Taft-Hartley plans, it’s likely that the price tag for ObamaCare would rise, though it’s unclear by how much.

Union angst over the healthcare law is being matched by some Democrats on Capitol Hill. Senate Finance Committee Chairman Max Baucus (D-Mont.) has said the law’s implementation could be a “train wreck,” while other senior Democrats, including House Minority Whip Steny Hoyer (D-Md.), have expressed reservations.

Both parties agree that ObamaCare is going to be a major issue in the 2014 midterm elections, especially because the bulk of the law is scheduled to go into effect on Jan. 1 next year.

Labor recently shared its concerns with senior Democrats. Earlier this month, the subject of how multi-employer health plans would be treated under ObamaCare was brought up at a private May 8 meeting between union leaders and the Senate Democratic Steering and Outreach Committee.

“A number of people were making this point at that meeting. People said that their members are upset about this and the more they learn about it, the more upset they are,” said one union official.

“I was pretty blunt about it,” said Hansen. “I told them it was a very serious issue. That it was wrong. Taft-Hartley plans should be deemed as qualified healthcare providers and I also said it’s going to have political repercussions if we don’t get this fixed.”

Hansen wants the Obama administration to use its regulatory powers to address the matter; a legislative remedy is all but impossible in the divided 113th Congress. “When [the Obama administration] started writing the rules and regulations, we just assumed that Taft-Hartley plans — that workers covered by those plans, especially low-wage workers — would be eligible for the subsidies and stay in their plans and they’re not,” Hansen said.

Union anger on multi-employer plans has been percolating for months. In January, The Wall Street Journal reported that UNITE HERE and the Teamsters were pressing the administration. UFCW was also mentioned in that report.

Asked why he decided to raise the volume on his worries about ObamaCare, Hansen said he needed to speak out in support of his members. “I owe it to my members to do everything I can to see if we can make this law better,” Hansen said.

He added, “[Administration officials] have given us a lot of time and attention. We just don’t agree and I still think that I have taken the correct position. They have been responsive as far as trying to get the meetings. It’s just we can’t get it across the finish line and we need to do that.”

Hansen, however, said he has no regrets about endorsing Obama or supporting the healthcare reform law. UFCW is a major Democratic donor, contributing to several of the party’s candidates and giving to last year’s convention in Charlotte, N.C., and this year’s inauguration.

The union president said changes to his members’ health insurance might lead to problems at the ballot box for candidates.

“What happens in 2014 could be at issue here. … There is going to be a lot of disenchantment with how did this happen and who was in power when it happened. No matter what I say, that’s going to be there,” Hansen said. “They are upset already and it hasn’t even taken effect already.”

*Modified from a Hill.com article

• Internal cost estimates from 17 of the nation’s largest insurance companies indicate that health insurance premiums will grow an average of 100 percent under Obamacare, and that some will soar more than 400 percent, crushing the administration’s goal of affordability.

• The report found that individuals will face “premium increases of nearly 100 percent on average, with potential highs eclipsing 400 percent. Meanwhile, small businesses can expect average premium increases in the small group market of up to 50 percent, with potential highs over 100 percent.”

• One company said that new participants in the individual market could see a premium increase of 413 percent when new requirements on age rating and required benefits are taken into account, said the report. “The average yearly cost for a new customer in the individual market grows from $1,896 to $3,708 — a $1,812 cost increase,” it added.

New regulations, policies, taxes, fees and mandates are the reason for the unexpected “rate shock,” according to the House Energy and Commerce Committee, which released a report Monday based on internal documents provided by the insurance companies. The 17 companies include Aetna, Blue Cross Blue Shield and Kaiser Foundation.

The key reasons for the surge in premiums include providing wider services than people are now paying for and adding less healthy people to the roles of insured, said the report.

It concluded: “Despite promises that the law will lower costs, [Obamacare] will in fact cause the premiums of many Americans to spike substantially. The broken promises are numerous, and the empirical data reveal that many Americans, from recent college graduates to older adults, will not be able to afford the law’s higher costs.

* Modified from a US House of Representatives Committee Report Summary.

• A new fight is brewing over health insurance companies letting millions of Americans renew their current coverage for another year — and thereby avoid changes under the federal healthcare law.That may offer a short-term benefit for certain consumers and shield some of those individual policyholders from potentially steep rate increases.

• Some of the nation’s biggest health insurers are looking to take advantage of this delay, and certain State officials are encouraging companies to do this by resetting customers’ renewal dates for the end of December.
  

• This issue could affect some of the 15 million people nationwide who purchase their own coverage and millions more of the uninsured who are expected to join government exchanges next year. It would not pertain to the 150 million Americans who get health benefits through their employers.

• If an insurer offers this option, it would then be up to consumers to decide whether they want to renew an existing policy into 2014. The length of any renewal may depend on what month their annual plan year begins.

But critics say this maneuver could undermine government efforts to remake the insurance market next year and keep premiums affordable overall.

At issue is a little-known loophole in President Obama’s landmark legislation that enables health insurers to extend existing policies for nearly all of 2014. This runs contrary to the widespread belief that all health insurance must immediately comply with new federal rules starting Jan. 1, when most provisions of the law take effect.

Some policy experts are expressing concern about this practice for fear that insurers will focus on renewing younger and healthier policyholders and hold them out of the broader insurance pool next year. Their absence could leave a sicker and older population in new government insurance exchanges, driving up medical costs and premiums there.

“This could undermine the Affordable Care Act, and it opens the door for exacerbating potential rate shock in the exchanges,” said Christine Monahan, a senior analyst at Georgetown University’s Health Policy Institute. “The health insurers can cherry-pick some healthy people and it raises prices for everyone else.”

Many health insurers are still mulling over their options on how to handle these individual renewals. “Some carriers will require everyone to switch plans Jan. 1, and other carriers will allow customers to stay on their existing plan as long as possible,” said Bob Hurley, senior vice president of carrier relations at online site eHealthInsurance. “We are trying to nail this down with the carriers. I think it would be better for consumers to have that choice to carry their policy forward.”

The nation’s largest health insurer, UnitedHealth Group Inc. of Minnetonka, Minn., said, “We are currently looking at the best way to serve our customers’ best interests while continuing to comply with the Affordable Care Act going into 2014.”

WellPoint Inc., the Indianapolis insurance giant that runs Blue Cross plans in California and 13 other states, said its renewal practices will vary by state. In California, the company said its Anthem Blue Cross unit may allow individual policyholders to renew through March 31.

Kaiser Permanente, a major nonprofit health plan based in Oakland, said it doesn’t plan to renew policies beyond Jan. 1 in California and most of the other states where it sells coverage.

Many lower-income people will qualify for federal premium subsidies, which will be available only when purchasing new coverage available in state- or federal-run insurance exchanges. It would make financial sense to take advantage of that government aid. Individuals earning less than $46,000 or families below $94,000 annually would be eligible for subsidies.

However, many people who are middle income or above could face significantly higher premiums next year with no subsidies. Those premium increases are tied to federal requirements that insurers accept all applicants regardless of their medical condition and the inclusion of more comprehensive benefits.

Renewing an older policy could mean forgoing some of those richer benefits and new limits on out-of-pocket medical expenses.

Last week, California officials estimated that premiums may rise 30% on average for about 1.3 million existing policyholders primarily because of those changes in the federal law. Insurers have warned that some customers could see their premiums double depending on their age and other factors.

Citing that threat of higher rates, Arkansas officials issued a bulletin to insurers last month describing how they could extend individual policies until Dec. 30, 2013, and then renew them for another year.

These health plans “would not be required to comply with the [Affordable Care Act] market reforms until 12/31/2014,” according to the Arkansas bulletin.

“For those folks who don’t qualify for subsidies, this is a consumer-friendly thing because the premium rates for 2014 will be substantially higher,” said Dan Honey, deputy commissioner of compliance for the Arkansas Insurance Department. “You will be exposed to rate shock.”

Other states may oppose that approach, further underscoring the uneven implementation of the federal healthcare law across the country. Oregon Insurance Commissioner Louis Savage said these renewals could be problematic and his office issued a rule barring any extension beyond March 31, 2014.

“We want to get as many people as possible into the exchange,” Savage said. “I think having renewals go deep into 2014 is counterproductive to the goals of the federal healthcare law.”

In California, state lawmakers are working on legislation that could address this renewal issue and other details about how individual policies comply with the federal overhaul.

These questions over renewals are separate from “grandfathered” health policies that existed before the federal law passed in March 2010. Those plans don’t have to meet all the requirements of the healthcare law as long as insurers or employers don’t make significant changes to them.

*Modified from a Los Angeles Times article

Many part-timers are facing a double whammy from President Obama’s Affordable Care Act.

• The law requires large employers offering health insurance to include part-time employees working 30 hours a week or more. But rather than provide healthcare to more workers, a growing number of employers are cutting back employee hours instead.

• The result: Not only will these workers earn less money, but they’ll also miss out on health insurance at work.

• Across the nation, hundreds of thousands of other hourly workers may also see smaller paychecks in the coming year because of this response to the federal healthcare law. The law exempts businesses with fewer than 50 full-time workers from this requirement to provide benefits.

• Overall, an estimated 2.3 million workers nationwide, including 240,000 in California, are at risk of losing hours as employers adjust to the new math of workplace benefits, according to research by UC Berkeley.

• Employers say these cutbacks are necessary given the high cost of providing benefits. The average annual premium for employee-only coverage was $6,540 in California last year. Family coverage topped $16,000 a year. Those premiums have shot up 170% in the past decade, more than five times the rate of inflation in the state.

• There has been widespread speculation that many businesses would drop health coverage entirely in favor of paying a federal penalty of $2,000 per worker. Benefit consultants and insurance brokers say many companies examined that scenario. But they say most rejected it because of the disruption it would cause for employees and the potential for putting an employer at a competitive disadvantage in luring talented workers.

Consider the city of Long Beach. It is limiting most of its 1,600 part-time employees to fewer than 27 hours a week, on average. City officials say that without cutting payroll hours, new health benefits would cost up to $2 million more next year, and that extra expense would trigger layoffs and cutbacks in city services.

But big restaurant chains, retailers and movie theaters are starting to trim employee hours. Even colleges are reducing courses for part-time professors to keep their hours down and avoid paying for their health premiums.

All this comes at a time when part-timers are being hired in greater numbers as U.S. employers look to keep payrolls lean.

One consolation for part-timers is that many of them stand to benefit the most from the healthcare law’s federal premium subsidies or an expansion of Medicaid, both starting in January.

The law will require most Americans to buy health insurance or pay a penalty. Yet many lower-income people will qualify for government insurance or be eligible for discounted premiums on private policies.

“For people losing a few hours each week, that’s lost income and it has a real impact,” said Ken Jacobs, chairman of the UC Berkeley Center for Labor Research and Education. “But many low-wage, part-time workers will also have some affordable options under the federal law.”

Bill Dombrowski, chief executive of the California Retailers Assn., said employers are reducing hours because “it’s the only way to survive economically.”

The full effect of these changes in the workplace isn’t known yet because many employers are still considering what to do. Many companies waited to see whether the landmark legislation would survive a Supreme Court challenge and the outcome of last fall’s presidential election.

Now many employers are scrambling to understand the latest federal rules on implementation and are analyzing what makes the most sense for their workforce and for running their business. Instead, pruning the hours of part-timers has attracted far more interest.

“That will be a widespread strategy,” said Dede Kennedy-Simington, vice president at Polenzani Benefits in Pasadena. “Employers will be making sure their payroll system can flag when part-time workers are getting close to the cap they set.”

Long Beach officials said they studied the various budget options and opted for a plan that should affect only a small portion of its workforce. The city estimates about 200 part-time workers will be among the most affected by a reduction in hours, representing about 13% of its overall part-time staff. The city calculated that the federal penalty for dropping coverage completely for its 4,100 full-time employees would have been about $8 million.

Some California lawmakers worry that the federal penalties for not providing health coverage aren’t enough of a deterrent. They have proposed additional state fines to prevent major retailers, restaurant chains and other employers from restricting hours and dumping more of their workers onto public programs such as Medi-Cal. Opponents say the proposal is unnecessary and could deter companies from adding workers.

Some supporters of the Affordable Care Act say they welcome a gradual shift away from employer-sponsored coverage if new government-run exchanges give consumers a choice of competitively priced health plans. Some low- and middle-income workers who qualify for federal subsidies may end up paying less by buying their own policy next year compared with their contribution toward employer coverage.

*Modified from a Los Angeles Times article

Millions of Americans will pay more for health insurance, lose their coverage, or have their hours of work cut back.

In recent weeks, there have been increasing expressions of concern from surprising quarters about the implementation of ObamaCare. Montana Sen. Max Baucus, a Democrat, called it a “train wreck.” A Democratic colleague, West Virginia’s Sen. Jay Rockefeller, described the massive Affordable Care Act as “beyond comprehension.” Henry Chao, the government’s chief technical officer in charge of putting in place the insurance exchanges mandated by the law, was quoted in the Congressional Quarterly as saying “I’m pretty nervous . . . Let’s just make sure it’s not a third-world experience.”

These individuals are worried for good reason. The unpopular health-care law’s rollout is going to be rough. It will also administer several price (and other) shocks to tens of millions of Americans.

• Start with people who have individual and small-group health insurance. These policies are most affected by ObamaCare’s community-rating regulations, which require insurers to accept everyone but limit or ban them from varying premiums based on age or health. The law also mandates “essential” benefits that are far more generous than those currently offered.

• Single adults age 21-29 earning 300% to 400% of the federal poverty level will be hit with an increase of 46% even after premium assistance from tax credits.

• Six million of the 19 million people with individual health policies are going to have to pay more—and this even after accounting for the government subsidies offered under the law.

• In total, it appears that there will be 30 million to 40 million people damaged in some fashion by the Affordable Care Act—more than one in 10 Americans.

Determining the number of individuals who will be harmed by changes to the small-group insurance market is harder. According to the Medical Expenditure Panel Survey, conducted by the Department of Health and Human Services, around 30 million Americans work in firms with fewer than 50 employees, and so are potentially affected by the small-group “reforms” imposed by ObamaCare.

Around nine million of these people, plus six million family members, are covered by employers who do not self-insure. The premium increases for this group will be less on average than those for people in the individual market but will still be substantial.

• According to analyses conducted by the insurer WellPoint for 11 states, small-group premiums are expected to increase by 13%-23% on average.

While some firms (primarily those that employ older or sicker workers) will see premium decreases due to community rating, firms with younger, healthier workers will see very large increases: 89% in Missouri, 91% in Indiana and 101% in Nevada.

Because the government subsidies to purchasers of health insurance in the small-group market are significantly smaller than those in the individual market, I estimate that another 10 million people, the approximately two-thirds of the market that is low- or average-risk, will see higher insurance bills for 2014.

Higher premiums are just the beginning, because virtually all existing policies in the individual market and the vast majority in the small-group market do not cover all of the “essential” benefits mandated by the law. Policies without premium increases will have to change, probably by shifting to more restrictive networks of doctors and hospitals. Even if only one third of these policies are affected, this amounts to more than five million people.

In addition, according to Congressional Budget Office projections in July and September 2012, three million people will lose their insurance altogether in 2014 due to the law, and six million will have to pay the individual-mandate tax penalty in 2016 because they don’t want or won’t be able to afford coverage, even with the subsidies.

None of this counts the people whose employment opportunities will suffer because of disincentives under ObamaCare. Some, whose employers have to pay a tax penalty because their policies do not carry sufficiently generous insurance, will see their wages fall. Others will lose their jobs or see their hours reduced.

Anecdotal evidence already suggests that these disincentives will really matter in the job market, as full-time jobs are converted to part time. Why would employers do this? Because they aren’t subject to a tax penalty for employees who work less than 30 hours per week.

There is some debate over how large these effects will be, and how long they will take to manifest. However, the Bureau of Labor Statistics reports on a category of workers who will almost surely be involuntarily underemployed as a result of health reform: the 10 million part-timers who now work 30-34 hours per week.

These workers are particularly vulnerable. Reducing their hours to 29 avoids the employer tax penalty, with relatively little disruption to the workplace. Fewer than one million of them, according to calculations based on the Medical Expenditure Panel Survey, get covered by ObamaCare-compliant insurance from their employer.

When that reality becomes clearer, the law is going to start losing its friends in the media, who are inclined to support the president and his initiatives. We’ll hear about innocent victims who saw their premiums skyrocket, who were barred from seeing their usual doctor, who had their hours cut or lost their insurance entirely—all thanks to the faceless bureaucracy administering a federal law.

The allure of the David-versus-Goliath narrative is likely to prove irresistible to the media, raising the pressure on Washington to repeal or dramatically modify the law. With the implementation of ObamaCare beginning to take full force at the end of the year, there will be plenty of time before the 2014 midterm elections for Congress to consider its options.

For those like Health and Human Services Secretary Kathleen Sebelius, who told a gathering a few weeks ago at the Harvard School of Public Health that she has been “surprised” by the political wrangling caused so far by ObamaCare, there are likely to be plenty of surprises ahead.

*Modified from a WSJ article by Daniel Kessler

• Few aspects of the Affordable Care Act are more critical to its success than affordability, but in recent weeks experts have predicted costs for some health plans could soar next year.

• A study published last month by the Society of Actuaries (SOA) predicting that, thanks to sicker patients joining the coverage pool, medical claims per member will rise 32 percent in the individual plans expected to dominate the ACA exchanges next year. In some states costs will rise as much as 80 percent, the report said.

• Using predictive math, actuaries try to make sure insurers of all kinds don’t run out of money to pay claims. Many actuaries also work for consultants whose clients include insurance companies.

• But health law supporters are pushing back, noting close ties between the actuaries making the forecasts and an insurance industry that has been complaining about taxes.

• Even supporters of the health act worry about premium increases next year, when many of its provisions take effect. But the debate fits into a larger discussion about actuaries’ public role. Actuaries are self-regulated, which some say makes them unaccountable.

Undisclosed in the SOA report was the fact that about half the people who oversaw it work for the health insurance industry that is warning about rate shock. The chairman of society committee supervising the project was Kenny Kan, chief actuary at Maryland-based CareFirst BlueCross BlueShield.

Others on the committee work for firms with insurer clients. The report included committee members’ names but not their affiliations.

To perform the research, the society hired Optum, sister company of UnitedHealthcare, the country’s biggest private health insurer.

Society spokeswoman Kim McKeown said the project was overseen by credentialed actuaries “from a cross-section of industry organizations” and was “exposed for review and comment to the broad health care actuarial community.”

Their associations set conduct standards and investigate malpractice in confidential proceedings. During the previous two decades the Actuarial Board for Counseling and Discipline, which works with the Society of Actuaries, has recommended public disciplinary measures for fewer than two people a year, according to its annual report.

Yet actuaries play many public roles. By calculating the adequacy of employer pension contributions they affect the retirement of millions. And they’ll act as virtual referees for important aspects of implementing the health act.

While the Obama administration has developed a calculator plans must use for determining whether insurance plans meet the health act’s standards for benefits and value, recently finalized regulations give insurer-employed actuaries the power to override it by substituting one benefit for another.

Insurance company actuaries calculate rates when plans file with states, which act as the industry’s primary regulators. Charged with making sure the prices are justified, state insurance departments often have far less actuarial expertise at their disposal than the insurers.

Health-act supporters complained that that the actuary society’s study predicting a 32 percent increase in claims didn’t account for key factors, including the potential for competition to lower prices, the subsidies people will receive to buy the coverage and the fact that next year’s plans will be more generous than this year’s.
*Modified from a Everydayhealth.com and Kairer Health News articles.

The health care system of the future will likely come with fewer guarantees, said Bruce Broussard, CEO of Humana Inc.

• In other words, rather than offering a health plan, employers will probably begin offering specified payments and telling their employees to buy their own insurance.

•  “What happened to retirement is probably going to happen to health care,” Broussard told me Wednesday. The shift, from defined-benefit to defined-contribution plans, is exactly what happened when 401k retirement accounts replaced pensions.

Broussard figures that change will take a decade to kick in fully. Corporations will increasingly use wellness offerings, he said, to differentiate themselves in recruiting.

Questions that insurance companies already face, such as whether their customer is the employer or the individual, will be amplified. “Our role becomes a role around health more than just the financing of health care,” he said.

*Modified from a Cincinnati Business Courier article

• The $1.3 trillion U.S. health-care system overhaul is getting more expensive and will initially accomplish less than intended.

• Costs for a network of health-insurance exchanges, a core part of the Affordable Care Act, have swelled to $4.4 billion for fiscal 2012 and 2013 combined, and will reach $5.7 billion in 2014, according to the budget President Barack Obama yesterday sent to Congress. That spending would be more than double initial projections, even though less than half the 50 U.S. states are participating.

The unanticipated spending is a consequence of an ambitious timetable dictated by Congress and a complex new way of offering people medical coverage, say analysts, lobbyists and administration officials. Combine that with a majority of Republican governors declining to cooperate with a Democratic president and U.S. regulators are left grasping to get the 2010 health law up and running by a Jan. 1, 2014, deadline.

“Once you’re behind schedule, the way you solve problems is you write checks,” said Doug Holtz-Eakin, a former Congressional Budget Office director who is now president of the American Action Forum, which has opposed the health law.

• For the areas that money can’t solve, the Obama administration is opting for delay. It temporarily backed off some provisions of the law, including restrictions on coverage for executives and a promise to offer small businesses greater choices of health plans.

The basic requirements of the health law must function by Jan. 1, even if all the bells and whistles aren’t complete, said Ron Pollack, executive director of Families USA, a consumer advocacy group that backs the overhaul.

Long-Term Strategy

“The Affordable Care Act is not a short term, temporary fix of America’s health-care system,” he said in an interview. “It’ll have long-term benefits, and so the administration clearly is making sure the most essential elements of the new law are effectively in place on a timely basis.”

Obama administration officials say the bulk of the health law will be up and running on time.

“There’s an awful lot to implement and we want to do it efficiently,” Ellen Murray, the assistant secretary for financial resources at the Health and Human Services Department, said in an interview. “It’s a big job, and we want to do it right.”

• The government has warned that the exchanges, which are supposed to open in every state on Oct. 1, may not be easy for low-income people to navigate. In many states, people found to be eligible for Medicaid, the state-run program for the poor, will have to sign up through their state government instead of through the exchange.

Beyond Imagination

• “It’s a lot more complicated than anybody imagined,” Joseph Antos, a health economist at the nonprofit American Enterprise Institute who advises the CBO, said by phone.

That’s because the federal government has been forced to build part or all of the exchanges in 34 states where governors or legislatures declined to do it themselves. The government expects to spend $1.5 billion this year on the federal exchange, Murray said.

In those states, connections between computer systems that run the federal exchange and state Medicaid programs are incomplete, said Caroline Pearson, a vice president at Avalere Health, a consulting firm based in Washington that is tracking exchange development.

The extra step required to sign up might discourage enrollment by low-income people, she said in an interview.

“You sort of always want to minimize the number of interactions you have to have in order to get people into the system,” Pearson said. These are “additional hurdles that could present a problem,” she said.

People Covered

• The result is that the number of Americans projected to gain insurance from the law has already eroded, by at least 5 million people, to 27 million by 2017, the CBO said in February. In addition, as many as 8 million people will lose health-care plans now offered through their employers, almost three times more than the CBO initially projected.

The bulk of the Affordable Care Act relies on governors to build exchanges and expand Medicaid (USBOMDCA), the joint federal-state program for the poor. The law also required a myriad of regulations to be crafted and vetted by hospitals, insurers and other industry groups, all to be done within four years.

By comparison, President George W. Bush’s administration in 2003 was given three years by Congress to implement a new drug benefit in Medicare, a program whose scale is dwarfed by the health overhaul.

No Favors

“Congress did the administration absolutely no favors in setting the timetable,” said Neil Trautwein, vice president and employee benefits policy counsel at the National Retail Federation, a Washington-based lobbying group for retailers. “Because of a host of complications, the administration is behind in trying to catch up.”

For Obama that means delays. He’s pushing back a prohibition against companies giving their top executives better health plans than lower-ranking employees, and a requirement that they automatically enroll workers into the plans. Small businesses that had hoped to give their workers a choice of health plans in government-run marketplaces will instead have to choose one plan for their entire workforce.

A new program for states, called the Basic Health Program, won’t start until 2015, angering Obama’s allies. The Basic Health Plan was intended to be an option for states that want to cover more low-income people with a government health program, instead of private coverage sold through the exchanges. The provision was added to the law by Senator Maria Cantwell, a Washington Democrat, whose state operates a similar program and sought federal money to expand it.

Doing Triage

After the delay was announced in February, Cantwell threatened to oppose confirmation of an administrator for the U.S. Centers for Medicare and Medicaid Services, which is setting up exchanges. The senator questioned administration officials about the delay at three hearings, and won a letter on March 28 from Health and Human Services Secretary Kathleen Sebelius, promising to begin the program by 2015 and laying out a detailed timeline to set it up.

“It looks like what they’re doing is triage,” Holtz-Eakin said of the government. “If this isn’t going to work, forget it. If that’s not on time, forget it. Let’s get to the things that we can make work, and declare victory.”

*Modified from a Bloomberg.com article