Archive | Insurance Company News – California

CALIFORNIANS TO SEE STEEP HEALTH INSURANCE PREMIUM INCREASES, STATE POWERLESS TO STOP HIKES

Real Estate & Investment Business –

July 08: More than 1,500,000 Californians will face health insurance premium increases on July 1 averaging 3% to 17.4%, according to state filings. Some patients with Aetna small business plans will see premium increases as high as 92.5%.

California insurance regulators need the power to protect consumers and deny such steep rate increases when they are found to be excessive or unjustified, said Consumer Watchdog.

AB 52 (Feuer) would require a health insurance company to get approval from the elected insurance commissioner before a health insurance rate hike takes effect subjecting health insurance rates to the same strict rate regulation that auto, homeowners and other insurance companies already comply with in California. The bill will be heard in the California State Senate Health Committee Wednesday afternoon. The majority of states have the power to reject unreasonable premium hikes, but not California.

“This is an urgent life and death issue for those Californians who face premium hikes Friday as high as 92% because California is one of the few states without premium regulation,” said Consumer Watchdog president Jamie Court. “Californians will continue to be held hostage by profiteering health insurance companies if the legislature does not grant the elected insurance commissioner the power to stop arbitrary and unnecessary premium hikes.”

In recent years, health insurance policyholders in California have seen repeated massive rate hikes like those set to take effect Friday, even as medical inflation has been fairly low. Consumer Watchdog noted that these skyrocketing rates have coincided with ever-increasing profits for insurance companies. According to Aetna’s rate filing, the insurer’s 2011 company-wide rate of return is projected to be 24.8%.

A Consumer Watchdog report finds that rate regulation is necessary to hold down excessive rate increases. In Massachusetts for example, where health reform including an exchange and individual mandate was the model for national reform, insurance premiums continued to increase until prior approval rate regulation was enacted to moderate increases.

AB 52 would require insurance companies to get permission before implementing any hike and would allow state regulators to deny or modify rate changes determined to be excessive. Health insurers that are increasing rates on patients July 1 have lobbied heavily against the bill, which authorizes insurance regulators to review insurance company profits and overhead as well as company projections about future health care costs in order to determine whether or not to allow a rate increase to take effect. It also allows members of the public to challenge proposed rate hikes.

AB 52 would enact rules for health insurance that are similar to Proposition 103, which requires the Insurance Commissioner to regulate auto and other property/casualty insurance rates. Under those rules California motorists have saved more than $62 billion on their auto coverage over the past two decades, according to a 2008 report by the Consumer Federation of America.

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USE OF URGENT CARE GROWING IN SOUTHERN CALIFORNIA

California Healthline –

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

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

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

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

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

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

‘A Market in Great Need of Access to Care’

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

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

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

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

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

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

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

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

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

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

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

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Twentysomethings should weigh health insurance options

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

May 8, 2011

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

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

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

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

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

How do you wisely evaluate health insurance choices?

• Know your options

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

• Consider your health

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

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

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

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

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

• Health insurance plans are not all alike

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

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

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

• Add up the parts

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

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

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

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

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

business@latimes.com

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Couple’s health insurance choices are bad and worse

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

By David Lazarus – L.A. Times

April 19, 2011

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

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

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

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

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

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

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

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

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

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

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

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

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

Like the Selters, who suddenly find themselves being squeezed.

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

True. But capitalism shouldn’t be unfair.

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

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

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

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

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

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

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

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

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

That’s capitalism. I get it.

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

Or do I have that wrong?

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High-Deductible Plans Not More Risky for Medically Vulnerable

Tuesday, April 19, 2011

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

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

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

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

Key Findings

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

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

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

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

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

Implications

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

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

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A SHIFT TOWARD SMALLER HEALTH INSURANCE NETWORKS

Los Angeles Times –

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Warning: Dependent Care Mandate Can Cause Tax Headaches

Christian Schappel

The healthcare reform law’s dependent coverage rule doesn’t extend to health savings accounts (HSAs) – and it’s bound to cause some problems.

The new law changes the definition of a dependent child, resulting in a requirement that group health plans that offer dependent coverage to children allow young adults up to age 26 to remain on their parent’s insurance plan.

The problem: While the new definition of a dependent applies to most employer health coverage, it does not extend to HSAs. HSAs must still operate using the old definitions of a qualifying child or qualifying relative.

Pre-health reform definitions

Under the pre-reform definition, a qualifying child is someone who has not attained age 19 (or age 24 if a full-time student).

And a qualifying relative under the old definition is a child of the employee, other relative or member of the employee’s household, for whom the employee provides over half of the individual’s financial support.

Older children don’t qualify

These definitions now cause a problem when an employee tries to enroll a 25-year-old child in a group health plan that uses an HSA.

Because of the expansion of dependent care under the new reform law, the child is allowed into the plan. But the employee can’t submit the child’s uninsured expenses for reimbursement under the HSA because the child is too old to qualify under the rules of an HSA.

In addition, the child won’t be a qualifying relative if he/she doesn’t depend on the employee for the majority of his/her financial support.

So if the employee takes an HSA distribution to reimburse the child’s expenses, it’ll be taxed and could be subject to the 20% HSA penalty on early withdraws.

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FEW SUPPORT ‘INDIVIDUAL MANDATE’ IN HEALTH CARE REFORM LAW, POLL FINDS

HealthDay News – Mar. 7:

Half of U.S. adults still oppose the “individual mandate” clause in the new health care reform law that requires all Americans not already insured to purchase health insurance, while only 22 percent support it, a new Harris Interactive/HealthDay poll finds.

But certain arguments in favor of the mandate seem to sway opinion back toward support for it. For example, 71 percent of the more than 3,000 adults polled in mid-February agreed with the suggestion that “for health insurance to work, it is necessary to include people who are healthy in order to help pay for those who are sick.”

That seems to indicate that “while the individual mandate is still widely unpopular, indeed by far the most unpopular part of the Affordable Care Act [ACA], some arguments in favor of it are supported by most people,” said Humphrey Taylor, chairman of The Harris Poll, a service of Harris Interactive.

Prior Harris Interactive/HealthDay polls have consistently shown that the individual mandate is the only part of the Affordable Care Act that is unpopular with a majority of Americans.

Half of those interviewed for the new poll felt the individual mandate was unconstitutional, while 20 percent thought it was constitutional, and 30 percent weren’t sure. Among Republicans, 78 percent said the mandate was unconstitutional, compared with 31 percent of Democrats.

Most experts now believe that the constitutionality of the individual mandate will only be settled by the U.S. Supreme Court. However, only slightly more than a third (36 percent) of those polled believe that the nation’s highest court would be able to decide the issue in a non-political, non-partisan way.

Thirty-nine percent felt that any Supreme Court decision would be colored by the justices’ political leanings. “Most people do not feel that the Court is above politics,” Taylor said.

In recent lower court rulings on the Affordable Care Act, three judges appointed by Democratic administrations have so far supported the law, while two judges appointed by Republican administrations have ruled it unconstitutional.

Devon M. Herrick is a senior fellow at the National Center for Policy Analysis, a nonpartisan, nonprofit think tank focused on free-market approaches to public policy. He believes that the Supreme Court will largely look to the letter of the law when making any decision.

“I do not believe federal judges will rule for or against the Affordable Care Act based solely on their political affiliation,” he said. “However, differing political views can undoubtedly influence a judge’s interpretation of whether the ACA’s individual mandate violates the Constitution.”

The new poll found that the nation as a whole is still split on how it feels about the Affordable Care Act overall, with 39 percent of respondents opposed to the reform package, 34 percent in favor and 27 percent still undecided.

Most of this division cleaves along party lines, with 72 percent of Republicans wanting to repeal all or most of the legislation, compared to 15 percent of Democrats.

Smaller majorities agreed in the new poll with other arguments that would support the individual mandate. For instance, 56 percent agreed with the statement, “If everyone is required to have health insurance, including healthy people, it will make the average cost of insurance less expensive.”

And 51 percent agreed with the contention that “requiring insurance companies to provide health insurance to people with preexisting conditions will not work unless everyone is required to have insurance” a major argument often put forward as to why the individual mandate is necessary.

The AARP said it agrees with that reasoning. “Our members have been telling us for decades about the problems they’ve had getting or keeping access to health insurance because of their age or health history,” said Nancy LeaMond, executive vice president of AARP’s State and National Group. “The implementation of the ACA, which includes the individual mandate, is necessary to keep insurance companies from blocking coverage due to a person’s age or pre-existing conditions, or dropping coverage when someone gets sick.”

Other arguments in favor of the individual mandate didn’t get majority support in the new poll. For example, more people (54 percent) disagreed than agreed (46 percent) with this statement: “If it is constitutional for the states to require people to buy car insurance or wear seat belts, it should be constitutional for the federal government to require people to buy health insurance if they do not already have it.”

There are parts of the Affordable Care Act that still garner widespread support among Americans. For example, a majority of both Republicans and Democrats like the provision that bars insurance companies from refusing to cover people with pre-existing conditions.

“The individual mandate is the most controversial portion of the Affordable Care Act. Less than one-quarter of those surveyed support it,” Herrick noted. “Yet, there is strong public support that people with pre-existing conditions should not face discrimination when purchasing coverage. The problem for policymakers is how to reconcile these two conflicting views.”

The Harris Interactive poll of 3,419 Americans over the age of 18 was conducted online within the United States between Feb. 16-18

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Experts: Individual mandate might fail

By DAVID NATHER | 3/1/11 4:25 AM EST

Forget all the shouting you’ve heard about the new mandate to buy health coverage. Forget the lawsuits, the cries of “Big Government” from Republicans and the Democrats’ claims that the new health care law would fall apart without it.

What if it just plain doesn’t work?

That’s a real possibility, according to health care economists and analysts across the political spectrum. They’re warning that the penalties in the law are actually so low — despite all the protests they’re causing — that a lot of people may decide it’s cheaper to pay the fines than to buy coverage.

If that happens, the “individual mandate” might not bring in enough healthy, uninsured people to cover the costs of sicker people and keep everyone’s insurance premiums stable. And those goals are the whole point of including the mandate in the law in the first place.

It’s not a topic that has gotten a lot of attention, except in quiet conversations in Washington health policy circles. And you won’t hear much about it as long as the focus is on the state lawsuits, the GOP attempts to repeal or defund the law and the Obama administration’s insistence that Americans have a responsibility to get health coverage.

But some of those who have looked at the law closely believe there’s a good chance that, when the mandate begins in 2014, it will still be more expensive to buy health insurance than to stay uninsured and pay the tax penalty. That means the law won’t work as designed to cut health care costs. Since everyone with pre-existing conditions can get coverage starting that year, insurers will need healthy people to pay premiums to help cover their costs. If the mandate doesn’t bring enough of them into the system, premiums could shoot sky-high for everyone else.

A failed mandate would mean that Republicans and other opponents of the law have spent a lot of time and money fighting a requirement that has no real power. It would also mean that President Barack Obama and congressional Democrats are spending a lot of political capital defending an unpopular mandate that won’t even do what it’s supposed to do.

“The mandate is a disaster politically,” said Robert Laszewski, a health care consultant who has written about its weaknesses. “It doesn’t work politically. It might not work constitutionally. And it sure doesn’t work in terms of preserving the integrity of the health insurance market.”

The problem becomes clear when you do the math.

Under the law, the penalty for not having coverage is phased in. When it starts in 2014, the penalty will be $95 or 1 percent of an individual’s income, whichever is greater. And when it’s fully in place, starting in 2016, it will cost either $695 or 2.5 percent of income.

What does that mean in real terms? A family making $55,125 a year — 250 percent of the federal poverty line — would face a $1,378 fine if it didn’t have health insurance (that’s 2.5 percent of its income). But it could pay up to $4,438 in premiums if it bought health insurance. And that’s after the tax credits the law would give it to make the insurance cheaper.

Critics on the right, including analysts at the conservative Heritage Foundation, have pointed out the problem. But so have analysts on the left, including Paul Starr, co-editor of the liberal American Prospect. Uwe Reinhardt, a respected health care economist at Princeton University, has written that the penalties are so low that young and healthy people might just decide to pay the fine.

“Where are the incentives? The incentives are going to be for millions of Americans to go bare,” said Robert Moffit, a senior fellow at The Heritage Foundation. “You can save thousands of dollars each year. Why would you be insured?”

Not everyone sees it that way. Administration officials point out that the Congressional Budget Office decided the mandate was strong enough that 94 percent of Americans will end up with health coverage, compared with 83 percent now.

That’s only a bit lower than Massachusetts, 98 percent of whose residents have health insurance — and with a weaker individual mandate than the federal law, according to Len Nichols, director of the Center for Health Policy Research and Ethics at George Mason University.

Massachusetts might not be a good model to predict how the rest of the country would react to the mandate, though, because it started with higher health coverage rates than red states such as Texas and its political climate might have been more receptive to an individual mandate, Nichols said.

There are other reasons the federal mandate’s weaknesses might not decide its fate. For one thing, it’s not clear how many Americans will actually whip out their calculators, figure out what 2.5 percent of their income is and decide that health insurance is more expensive.

And some health care analysts argue that most people will make their decision based on a gut feeling — how much is health care worth to them at that moment — rather than weighing all factors in a completely rational way. “People could save money by not buying health insurance even with the individual mandate. That much is clear,” said David Kendall, a senior fellow at Third Way, a centrist Democratic think tank. But “if purchasing health insurance was an entirely rational exercise,” Kendall said, “we wouldn’t need to require people to buy it.”

Finally, some analysts say the generosity of the tax credits to help people buy insurance — rather than the mandate itself — will push people to go ahead and buy coverage.

“The subsidies are more important than the mandate by far,” said Gary Claxton, director of the Health Care Marketplace Project at the Henry J. Kaiser Family Foundation. “Given that most people want to have health insurance, and the subsides are pretty good, there’s already a pretty strong incentive to get coverage.” The mandate, he said, is just “another impetus that pushes you over the top.”

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CALIFORNIA TAXES PARENTS WHO ADD ADULT CHILDREN TO WORKPLACE HEALTH POLICIES

The Sacramento Bee –

Feb. 7: Thousands of California parents leaped at the chance to provide health coverage to their grown and uninsured children when a provision in the federal health care law took effect last fall.

Now some of those parents, such as Barry Demant of Folsom, are finding a hidden cost to the new benefit: a bigger tax bill. A loophole in California’s tax law requires the state to levy income taxes on the premiums employers pay to provide health insurance to the non-dependent children of their workers.

Last fall, Demant added his unemployed 25-year-old daughter to his company’s group health plan. That meant he no longer had to pay $180 a month to insure her through a separate individual health policy.

As part of the federal health care law, insurers are required to allow parents to enroll children up to age 26 on their health plans. “I wanted to give the health care law a chance, and I thought it would be a great opportunity, even if only selfishly, to reduce the amount I pay for her premiums,” Demant said.

He found out about the tax when his human resources department told him that a bump in income and taxes would soon appear in his paycheck. In the end, he said, some of the money he thought he was saving could evaporate in the form of increased state tax payments. Demant would not say exactly how much more he’ll be paying in taxes.

As Californians begin preparing personal income tax returns, some lawmakers are pushing to pass a law that would exempt those contributions from being subject to state personal income taxes, as was done on the federal level.

“The federal health care law dramatically changed things, and not all states have kept up with the pace of those changes. And we’re trying to make sure that we’re doing what’s right for our working families,” said Assemblyman Henry Perea, D-Fresno, who chairs the chamber’s Revenue and Taxation Committee.

Perea is a co-author of legislation, AB 36, that would conform the state tax code to federal rules that exempt the benefit from taxable income. A similar effort last year died when it was included in broader tax legislation that never made it to the governor’s desk. This time, proponents are hoping stand-alone legislation will get the necessary support.

By changing the tax code, budget-strapped California would lose a $92 million tax windfall, according to estimates by the Franchise Tax Board. “We shouldn’t consider it as a loss,” Perea said. “The benefit of making sure young adults have health insurance outweighs this new source of revenue.”

Millions affected

The new federal health care law was hailed as an answer to the millions of 20-somethings who go uninsured after falling off parents’ health plans.

Typically, dependents who aren’t bound for college have been pushed off their parents’ policies soon after graduating from high school. As many as 8.8 million young adults between the ages of 19 and 25 were uninsured in 2008, according to the Kaiser Family Foundation.

In California, about 1.3 million in that age group could benefit from the new rule, according to Young Invincibles, an advocacy group pushing to expand health coverage among the country’s young.

The new law went into effect Sept. 23 and required insurers and companies to offer the coverage. Because adult children typically don’t qualify as dependents under the tax code, employer contributions on their behalf are being counted as income by the state. The federal government exempted those contributions.

Dolores Duran-Flores, a lobbyist for the California School Employees Association, said she was surprised when she learned last month that the state would be taxing the health benefits.

Health care is an important issue for the 219,000 members of the union, mostly school support staff, already beset with layoffs and furloughs.

“It just makes sense to close this loophole,” she said. “There’s a glitch in the law, and we need to do something about it.”

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