Archive | Insurance Company News – California

If ObamaCare survives, legal battle has just begun

Even if the Affordable Care Act survives its first Supreme Court test— a ruling is due Thursday — the lawsuits won’t end. Citizens have already filed challenges to what critics call the law’s “death panel” and its impact on privacy rights, religious liberty and physician-owned hospitals. Still another potential lawsuit poses as great a threat to the law as the case now before the high court.

Under the guise of implementing the law, the Internal Revenue Service has announced it will impose a tax of up to $3,000 per worker on employers whom Congress has not authorized a tax. To make things more interesting: If the IRS doesn’t impose that unauthorized tax, the whole law could collapse. The Act’s “employer mandate” taxes employers up to $3,000 per employee if they fail to offer required health benefits. But that tax kicks in only if their employees receive tax credits or subsidies to purchase a health plan through a state-run insurance “exchange.”

This 2,000-page law is complex. But in one respect the statute is clear: Credits are available only in states that create an exchange themselves. The federal government might create exchanges in states that decline, but it cannot offer credits through its own exchanges. And where there can be no credits, there is nothing to trigger that $3,000 tax.

  • States are so reluctant to create exchanges that Secretary of Health and Human Services Kathleen Sebelius estimates she might have to operate them for 15 to 30 states. Even if she manages that feat, the law will still collapse without the employer mandate and tax credits.

Unauthorized Tax

To prevent that from happening, on May 18 the IRS finalized a rule making credits available through federal exchanges, contrary to the express language of the statute.

Because those credits trigger penalties against employers, the IRS is literally taxing employers and spending billions without congressional authorization. Estimates by the Urban Institute indicate that had this rule been in effect in 2011, it would have cost at least $14.3 billion for HHS to run exchanges for 30 states. About 75% of that is new federal spending; the remainder is forgone tax revenue.

The IRS doesn’t have a leg to stand on here. It has not cited any express statutory authority for its decision, because there is none. The language limiting tax credits to state-established exchanges is clear and consistent with the rest of the statute. The law’s chief sponsor, Senate Finance Committee chairman Max Baucus (D-Mont.), is on record explaining creation of an exchange is among the conditions states must satisfy before credits become available. Indeed, all previous drafts of the law also withheld credits from states to push them to cooperate.

Employers can sue

Under the Congressional Review Act, Congress has 60 days from the date of issue to block the rule. Reps. Scott DesJarlais, R-Tenn., and Phil Roe, R-Tenn., have introduced a resolution. It may receive a cold reception from President Obama, but “taxation without representation” is a difficult position to defend. If that approach fails, states that have refused to establish a health insurance exchange, and large employers the IRS will hit with this unauthorized tax, could challenge the rule in court.

The authors of the Affordable Care Act wrongly assumed states would be eager to implement it. If saving the law from that miscalculation requires letting the IRS tax Americans without authorization, then it is s not worth saving.

*Modified from an article by Jonathan Adler, and Michael Cannon

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Red states eye health exchanges

By J. LESTER FEDER | 6/14/12

Some conservative experts see reason to hope the states that have been fighting the health care reform law could become hotbeds of health policymaking if the Affordable Care Act fails. They say the work many red states have been quietly doing to comply with the law in case they lose in the Supreme Court could be repurposed to create state-based reforms on a more conservative model. Some states, for instance, may look at their own version of Utah’s small-business insurance exchange.

These alternative approaches are unlikely to address a key goal of President Barack Obama’s health care reform law — expanding coverage to millions of uninsured people — in part because without the federal law, they wouldn’t have the federal cash for subsidies. But lawmakers in conservative states still see an opportunity to address some problems and lay down a marker for eventual broader reforms requiring federal action.

“States will have invested significant time and resources … in the way of their own state brain trust,” said Leavitt Partners’ Cheryl Smith, who has been advising several Republican-led states on health insurance exchanges. “I think what we’ll see is this unleashing of creative juices within states to solve problems.” The health care law has created a focus that even its opponents say may create openings for conservative states to “reclaim” the concept of exchanges as a vehicle for moving away from the employer-based insurance system, said Ed Haislmaier of The Heritage Foundation.“Of particular concern to me [is] that folks on the right not throw out the baby with the bath water,” Haislmaier said Wednesday.

One state that is prepared to head in this direction is Mississippi. The state joined the lawsuit seeking to have the law struck down, but it took a $20 million planning grant, and that work won’t go to waste, said Mississippi Insurance Commissioner Mike Chaney. “Our game plan was to take all the federal money we could take [and] build the exchange,” Chaney said. “If PPACA is ruled unconstitutional in part or in whole, we’re still prepared to go forward with the exchange.”

But an exchange would look very different in a world without the health reform law’s consumer protections and requirements for health plans. Chaney said Mississippi would not set standard benefit packages, require insurers to sell to people with pre-existing conditions or subsidize people buying coverage. This would limit its value to those who currently are uninsured, of course, and could have limited participation like the lightly regulated exchange in Utah.

But its goal, Chaney said, wouldn’t be to help the people who currently have the greatest difficulty buying insurance. It primarily would aim to “make shopping easier for people who can afford [coverage] and don’t have health problems.” He said he hoped it also would create a market for some bare-bone plans affordable to those on the edge of being able to buy plans today. But progressive health care experts say that streamlined exchange model just wouldn’t do much. Bob Crittenden of the Herndon Alliance dismissed it as having “very little value.”

Haislmaier disagrees. The value, he said, is that these market-oriented exchanges would point toward a fundamental change in how health care works. That, in turn, would require the federal government to change policies such as the tax break for employer-sponsored insurance.

Exchanges are best used as a vehicle for allowing employees to shop around for insurance using fixed contributions from employers, Haislmaier argued, citing Utah as a model. This embodies a key tenet of conservative health reform ideas — making individuals more responsible for buying insurance and using competition to drive down costs.

State reforms will likely be most useful as “positioning” for future federal debates on health care reform, said the Kaiser Family Foundation’s Larry Levitt. That may prove true for any reforms more liberal pro-ACA states try as well.

If the Supreme Court takes away the insurance subsidies along with the mandate, it’s hard to see how any state could find the resources to significantly expand coverage. “I think it would be an opening for, frankly, both sides,” Levitt said. “Single-payer advocates will be pushing their agenda as well, but it would be an opening for conservative governors to stake out their point of view.”

Though few states are publicly discussing plans as concrete as Mississippi’s, Iowa Gov. Terry Branstad told The Des Moines Register this week that he’s been working with insurance and hospital industry leaders to come up with an alternative health reform plan in his state. “We’ve had kind of a working group that’s been looking at this for a long time,” Branstad said, adding, “We’re going to see this court decision come down, and then we’re going to have to determine where we go from there.”

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Many hospitals, doctors offer cash discount for medical bills

By Chad Terhune May 27, 2012  Los Angeles Times

The lowest price is usually available only if patients don’t use their health insurance. In one case, blood tests that cost an insured patient $415 would have been $95 in cash.

 

A Long Beach hospital charged Jo Ann Snyder $6,707 for a CT scan of her abdomen and pelvis after colon surgery. But because she had health insurance with Blue Shield of California, her share was much less: $2,336. Then Snyder tripped across one of the little-known secrets of healthcare: If she hadn’t used her insurance, her bill would have been even lower, just $1,054. “I couldn’t believe it,” said Snyder, a 57-year-old hair salon manager. “I was really upset that I got charged so much and Blue Shield allowed that. You expect them to work harder for you and negotiate a better deal.”

  • Unknown to most consumers, many hospitals and physicians offer steep discounts for cash-paying patients regardless of income. But there’s a catch: Typically you can get the lowest price only if you don’t use your health insurance. That disparity in pricing is coming under fire from people like Snyder, who say it’s unfair for patients who pay hefty insurance premiums and deductibles to be penalized with higher rates for treatment.

The difference in price can be stunning. Los Alamitos Medical Center, for instance, lists a CT scan of the abdomen on a state website for $4,423. Blue Shield says its negotiated rate at the hospital is about $2,400. When The Times called for a cash price, the hospital said it was $250. “It frustrates people because there’s no correlation between what things cost and what is charged,” said Paul Keckley, executive director of the Deloitte Center for Health Solutions, a research arm of the accounting firm. “It changes the game when healthcare’s secrets aren’t so secret.”

Snyder’s experience is hardly unique. In addition to Los Alamitos, The Times contacted seven other hospitals across Southern California, and nearly all had similar disparities between what a patient would pay through an insurer and the cash price offered for a common CT, or computed tomography, scan, which provides a more detailed image than an X-ray.

Health insurance still offers substantial value for consumers by providing preventive care at no cost and offering protection from major medical bills that could bankrupt most families. But cash prices — typically available for hundreds of common outpatient services and tests — have a real appeal to millions of consumers who are on the hook for a growing share of their medical costs as employers and insurers cut back on coverage and push more high-deductible plans.

  • Some doctors are trying to spread the word about cash prices and they’re urging patients to pressure hospitals and insurers to offer a better deal. David Belk, an internist in Alameda, launched a website about medical costs and speaks to community groups about the huge markups compared with the prevailing cash price. Belk recently told a group gathered at a seniors center about the vast price difference when he requested routine blood work for a patient last year. A local hospital charged her $782. Her insurer said that with its discount, she owed only $415. “She could have gotten it for $95 in cash. How does that make sense?” Belk said. “The last thing the insurance companies want you to know is how inexpensive this stuff really is.”

For those patients who have insurance, getting the lower price would typically mean withholding that information from the hospital or clinic. Experts warn that doing so, however, means any payments don’t apply to customers’ annual insurance limits for out-of-pocket spending. The decision on whether to pay cash or apply the fee toward the deductible will depend on a variety of factors, including the amount of the deductible and whether the person expects to incur more medical bills that year.

The cash discounts evolved over time after hospitals were criticized in recent years for charging the uninsured their highest rates and then hounding them at times with overzealous collection efforts. New government rules ensued limiting in many cases what hospitals could charge lower-income patients who were footing their own bills. Meantime, hospitals have been trying to boost revenue by encouraging more patients to pay upfront so they can avoid a lengthy and uncertain collections process.

The California Hospital Assn. says that discounted cash prices are intended for the uninsured, not those who have coverage. Jan Emerson-Shea, a vice president at the industry group, said most hospitals offer a separate discount to insured patients who are willing to pay their portion upfront. “If you have insurance, you are under that insurance plan’s negotiated rate with the hospital,” she said.

In the view of Robert Berenson, a senior fellow at the Urban Institute and vice chairman of the Medicare Payment Advisory Commission, big hospitals are exerting their market power to charge ever-increasing rates and major insurers go along with it because they can pass along the costs to employers and consumers. Insurance industry officials say that health plans negotiate the lowest prices they can, but that they also need to include prominent hospitals favored by customers in the network, and those institutions can command higher prices.

Hospital executives say they don’t like to charge insured patients more, but say that’s a result of the country’s broken healthcare system. At Long Beach Memorial Medical Center, where Snyder got her CT scan, the hospital’s chief financial officer said insured patients like her pay more to subsidize the uncompensated care given to the uninsured and low reimbursements for Medicaid patients. “We end up being forced to charge a premium to health plans to make the books balance,” said John Bishop, the hospital’s finance chief. “It’s a backdoor tax on employers and consumers.” Those higher prices charged by hospitals and other medical providers drove up healthcare spending at double the rate of inflation during the recession even as patients used less medical care, according to a new study by the Health Care Cost Institute.

Snyder, the salon manager, stumbled across the two-tier system accidentally. She has filed suit against her insurer, saying she hopes her case will lead to more disclosure of the price options, and ultimately lower treatment costs for patients. The Long Beach woman said she sought treatment in 2009 for a pain in her abdomen. First her doctor ordered a CT scan of her abdomen and pelvis at Liberty Pacific Medical Imaging, an independent facility near Long Beach Memorial. She got approval from Blue Shield, and she paid the negotiated rate of $660. Snyder underwent surgery on her colon, and her doctor ordered another CT scan in January 2010 because she felt lingering pain.

This time, her surgeon referred her to the hospital’s imaging center. Snyder said she assumed her bill would be about the same because it was the identical test. Instead, Blue Shield’s rate with Long Beach Memorial was $3,497 and the insurer told Snyder she owed $2,336, records show. Incensed by having to pay nearly four times as much for the second scan, she started searching for an explanation. That’s when she discovered that the hospital’s cash price was less than half what she owed through her insurance.

In a complaint filed last month in Orange County Superior Court, Snyder accused Blue Shield of unfair business practices, breach of good faith and misrepresentation over her medical bills. The suit seeks class-action status on behalf of other Blue Shield customers. A spokesman for Blue Shield said the case has no merit and the nonprofit insurer negotiates the most favorable rates it can. In a court filing, Blue Shield said it “cannot promise or represent that there could not be providers who will charge someone less out-of-pocket cost for a service than she would pay if the Blue Shield contract rate applies.”

Snyder said she went back to work last year at a hair salon in Seal Beach, partly to help pay her insurance premiums of $700 a month. “It kills me that I’m paying that much in premiums,” she said, “and it’s better to pay cash out of my own pocket.”

Health-policy experts say the growing awareness of cash prices should accelerate the trend toward increased disclosure of all types of medical costs. But entrenched interests are likely to resist. “The insiders in the healthcare industry don’t want to lose control over this information,” Keckley said. “But price transparency is inevitable.”

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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 HealthCare.gov, 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

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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

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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

 

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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 Politico.com article

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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.

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ObamaCare Will Reignite Health Inflation

Investors Business Daily Editorial

 

Health Reform: The New York Times just discovered that the nation’s health care system was on the mend before ObamaCare took effect. Too bad it didn’t tell its readers how Obama’s “reforms” will destroy this progress.

The Sunday Times article — “In Hopeful Sign, Health Spending Is Flattening Out” — didn’t break any new ground. The numbers the reporter used have been around since January. But it was a tacit admission by the paper that the health care system was not in a state of crisis before ObamaCare.

Quite the opposite, in fact. As the story notes, annual increases in health spending had been trending downward for years, to the point where they climbed less than 4% in 2009 and 2010.

This isn’t the only good news. The Times story doesn’t mention it, but premium increases had also been moderating over the past several years. While some of the slowdown was due to the recession, the Times notes that it “was sharper than health economists expected,” and quotes a former Obama health adviser as saying that “I think there’s much more going on.”

So what is that “much more”? To its credit, the Times also makes clear that the slowdown was due in large part to the recent trend in the private sector toward more high-deductible insurance plans. By 2011, the share of workers enrolled in high-deductible plans had risen to 13% from just 3% five years earlier.

This is a reversal of the trend over the past several decades, which had seen out-of-pocket spending for health care steadily decrease, as government programs and generous health benefits increasingly shielded consumers from the direct cost of care. While almost half of health spending was paid out-of-pocket in 1960, the figure had dropped to just 11% by 2010.

Not surprisingly, as consumers paid less and less out of pocket, demand for health care became virtually unlimited, pushing up spending and inflation. But it wasn’t until recently that businesses — after trying everything else — started bringing consumers back into the cost picture with “consumer directed” health plans.

These higher-deductible plans cut health spending, as consumers suddenly realized that health care costs money. A 2011 Rand Corp. study found health spending for families with a deductible of $500 per person or more dropped an average 14%

But the real story here isn’t these recent gains in getting health spending under control. It’s how ObamaCare will poison the patient just as it was starting to recover.

ObamaCare’s coverage mandates, its limits on co-pays and deductibles, its attack on Medical Savings Account plans, its vast expansion of Medicaid and its massive subsidies all will shield consumers from even more of the direct cost of care.

Medicare’s chief actuary, Richard Foster, told Congress in March that “out-of-pocket spending would be reduced significantly” by ObamaCare — and by that he meant $237 billion in a decade.

And, not surprisingly, that is going to drive up health spending. Foster predicts, in fact, that after staying relatively low for years, national health spending will shoot up by more than 8% in 2014, when ObamaCare fully takes effect. Over the next decade, he said, ObamaCare will add more than $300 billion to the U.S. health tab.

Anyone who thinks ObamaCare will fix the nation’s health system has it backwards. The system was getting healthier before ObamaCare, and will continue to improve only if that misbegotten law is repealed.

 

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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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