Author Archive | John Barrett

Insurers’ rate quote practice is unfair to consumers

Shoppers are routinely asked to disclose their current provider’s rate, which all but guarantees that no one will provide coverage for much less.

Let’s say your barber is increasing the cost of haircuts. Is it fair for other barbers to require that you disclose how much you were being asked to pay before they say how much they’ll charge?

That hypothetical example illustrates the situation many California businesses find themselves in when they go shopping for health insurance. By routinely having to reveal the size of a rate increase to other insurers, they all but guarantee that no one will provide coverage for much less.

“It’s price fixing,” said John Antonelli, president of ARSLegal in Whittier. “If my company tried this, we’d be thrown in jail.”

His business, which handles document copying for law firms, has 135 employees. Antonelli said ARS had been paying about $600,000 annually to Blue Shield of California to provide health coverage to workers and their families.

But serious illnesses involving a handful of workers and their family members prompted Blue Shield to raise the company’s annual premium last year 60% to almost $960,000, he said.

So Antonelli had his insurance broker put out a request for quotes from other firms. He knew from experience that he’d have to disclose information about the general health of his workforce. What he hadn’t expected was a requirement among insurers that he also disclose how much Blue Shield wanted to raise his company’s rates.

The California Department of Insurance says this isn’t a legal requirement. But brokers and insurance-industry officials say it’s a standard practice to ask how much a company’s current insurer wants to charge for annual premiums.

“If you don’t tell them, you don’t get a quote,” said John Barrett, a Pasadena health insurance broker. “It’s that simple.”

From the insurer’s point of view, that’s understandable. Insurers will do everything possible to minimize their exposure to risk. The more they know about a company’s insurance history, the easier it is to tailor a policy that keeps losses at a minimum.

“That’s not price fixing,” Barrett insisted. “It’s full disclosure.”

But it also speaks to a distinct lack of competition in the marketplace. Knowing what a rival wants to charge can be a strong incentive for other insurers to keep their own prices high, said Laurence Taylor, a broker with Pegasus Capital & Insurance Services in downtown Los Angeles.

“It’s an unfortunate situation,” he said. “It makes things tough for employers.”

Antonelli’s position is that as long as he’s upfront about his employees’ insurance claims, why should he have to stack the deck in an insurer’s favor by declaring how much a competitor wanted to charge?

“I’m happy to tell you about the health of my employees,” he said. “But you give me a bid on your own, not based on what Blue Shield wanted to charge.”

In his case, the lowest bid received from another insurer for comparable coverage still represented a hefty 25% rate hike, which Antonelli reluctantly accepted.

California law limits how much insurers can charge businesses with fewer than 50 workers, so it’s relatively easy to obtain reasonable quotes from multiple providers.

Things are different for larger businesses. Because insurers have more latitude when it comes to prices, they’ll often seek whatever they think the market will bear.

For a medium-size company like Antonelli’s, with relatively little bargaining muscle compared with an enterprise with thousands of workers, that can be a real challenge. Such companies typically have to settle for whatever they can get from insurers.

One other thing that’s striking here: The punitive nature of filing claims. In Antonelli’s case, his company willingly paid about $600,000 a year for health insurance. But as soon as a few serious cases materialized — one worker had heart trouble, the spouse of another got cancer — Blue Shield jacked up the company’s rates.

That’s quite a product. Don’t use it, and it’ll cost you $600,000. Use it, and your cost will soar to almost $1 million. A Blue Shield spokesman declined to comment.

Patrick Johnston, president of the California Assn. of Health Plans, an industry group, said knowing how much another insurer is charging can be a crucial data point when determining a company’s medical risk.

“If the rate is high, it would suggest to other insurers that the claims experience is high and likely to remain high,” Johnston said. “Therefore, the insurer quoting the bid would be cautious about estimating on the low side.”

And that’s how you get a vicious cycle whereby insurance rates inevitably skew higher. All it takes is one large rate increase for all other insurers to fall in line, regardless of what their own due diligence might tell them.

A bill in Sacramento, AB 52, would have given state regulators the authority to block unreasonable rate increases. But it fell apart last week when backers acknowledged they didn’t have the votes to get it passed.

At the very least, lawmakers should take a closer look at insurers requiring a competitor’s renewal rate before offering a quote for health coverage. This is an unfair and unreasonable practice that tips the scales too far on insurers’ behalf.

Insurers should have access to relevant claims data in pricing their contracts. All parties should be making informed decisions when it comes to health coverage.

But lawmakers should prohibit the requesting of a rival’s rates. It serves to make insurers lazy in their price estimates and to encourage costlier policies.

Healthcare is expensive enough. We don’t need to perpetuate a system that makes things worse.



Employers Are Not Planning Big Changes to Health Plans

Employers are planning only moderate changes to their healthcare plans in 2012, according to a survey by Towers Watson. Ron Fontanetta of Towers Watson said, “With so much still unknown regarding both the short- and long-term impact of healthcare reform, most employers will not make wholesale changes to employer-sponsored health plans in 2012. However, a small group of employers is driving more fundamental change in 2012 by using account-based platform designs, aggressively positioning incentives and rethinking subsidization levels.”

Eighty-eight percent plan to take steps to control their costs and avoid the impact of healthcare reform’s excise tax. The average annual cost of medical and pharmacy coverage is $11,204 per employee. Forty-five percent will rethink their healthcare strategy over the long-term and many are uncertain how they will respond to the looming impact of state-based insurance Exchanges in 2014. Employer healthcare costs are expected to rise 5.9% 2012 compared to 7.6% in 2011. Many times is much better to find a compounding pharmacy instead of walking into the store.

Seventy-one percent of employers plan to continue offering healthcare coverage through 2014. Most of the remaining 29% are not sure whether they will continue offering health benefits or offer a salary increase to offset lost benefits. Fifty-four percent of employers that offer healthcare benefits to retirees plan to discontinue them.

Fifty-three percent of employers say they are confident that healthcare reform will be implemented in the anticipated timeline, but 70% are skeptical that health insurance exchanges will provide a viable alternative to employer-sponsored coverage in 2014 or 2015.

Fifty-six percent of employers believe that they will trigger the excise tax by 2018. Yet more than three-quarters believe that healthcare benefits will continue to be a key component of their benefit offerings beyond 2014.
Employers are planning or considering the following actions between now and 2014:
• 58% plan to increase the use of preferred networks.
• 49% plan to use value-based benefit designs.
• 17% plan to add account-based health plans (such as HSAs or HRAs) in 2013 or 2014, which would result in nearly 74% of employers offering them.

For 2014 and 2015, 57% of employers are considering reducing employee healthcare contributions for lower-paid workers and 47% are considering making a substantial reduction in the value of the healthcare benefits they offer.

Sixty-six percent of employers will increase employees’ share-of-premium contributions for single-only coverage for 2012. Seventy-three percent of employers will increase the employees’ share-of-premium contributions for dependent coverage.Cost shifting is expected to continue well beyond 2012. By 2013 or 2014, 23% of employers are considering significantly reducing their subsidization of coverage for spouses and dependents. Nineteen percent are considering using spousal waivers and surcharges when other coverage is available.
The survey also reveals the following:

• 70% expect to lose grandfathered status by 2012.
• 57% are considering rewarding or penalizing their employees based on biometric outcomes compared to 8% today.
• 32% don’t offer healthcare coverage to part-time employees.


Report: States better than feds in getting sick people enrolled in high-risk pools

By Julian Pecquet – 08/26/11 03:18 PM ET

States are doing a much better job than the federal government at getting sick people enrolled in the healthcare reform law’s high-risk pools, according to a new report.

As of April 30, the Government Accountability Office found, the 27 states that operate their own pools had enrolled 15,781 people with pre-existing conditions. The federally-operated pool for the 23 other states and the District of Columbia, by contrast, only had 5,673 enrollees.


The report, requested by Senate Health, Education, Labor and Pensions (HELP) Committee ranking member Mike Enzi (R-Wyo.), found three main reasons for the low enrollment figures: the requirement that enrollees be uninsured for six months prior to applying; premiums that can be unaffordable to many; and a lack of awareness about the program.

The report found that enrollment figures ranged from 0 in Vermont and 1 in Massachusetts (both operated by the Department of Health and Human Services) to 3,191 in the state-run Pennsylvania pool.

Democrats’ healthcare reform law set aside $5 billion to help people with pre-existing conditions obtain affordable coverage before insurance exchanges go online in 2014. The program has come under criticism for failing to meet expectations, with fewer than 22,000 people enrolled as of April 30, far short of the 200,000 to 350,000 that had been predicted.

The program’s early failure in Vermont is especially noteworthy because federal officials last year rejected two proposals by the Green Mountain State to run its own pool. Vermont had proposed expanding its existing health insurance programs or working with Blue Cross and Blue Shield to establish a new program, according to the Burlington Free Press, but HHS rejected the proposals in part because they would not have been effective soon enough to comply with the law.

In its response to the report, HHS said it has improved its enrollment efforts since the program first started in June 2010. The department points to increased outreach efforts, lower premiums and expanded eligibility, as well as its decision to pay agents and brokers for getting people enrolled starting this fall


Survey: Employers shift rising health costs to their workers

By Sam Baker – 08/18/11 11:31 AM ET

As healthcare costs continue to rise, businesses are increasingly passing on the added burden to their employees.

Higher cost-sharing for employees is the primary way in which employers are trying to control their own healthcare spending, according to a new survey from the National Business Group on Health. The organization, which mostly represents large companies, said more than half of the employers it surveyed plan to make employees cover a greater share of their healthcare costs.

Businesses are shifting away from co-pays, wherein employees pay a fixed dollar amount for healthcare services and the plan picks up the rest. Instead, they’re charging workers a percentage of the total costs. That can help make consumers more aware of the total cost of the healthcare they use.

“We are clearly seeing a march toward a more aggressive consumerist system,” said Helen Darling, president of the National Business Group on Health.

Darling said Thursday that shifting from co-pays to coinsurance is “a more subtle way to increase what the consumer pays.” She predicted that eventually, only governments and unions will keep offering fixed co-pays.

Employers are expecting their healthcare costs to rise by slightly more than 7 percent next year, according to the survey — roughly the same increase that businesses budgeted for this year.

Businesses are also looking ahead to figure out how they’ll need to adjust their policies because of healthcare reform. Especially generous plans will be taxed heavily beginning in 2018, and some of the law’s popular benefits will likely increase the cost of insurance.

Allowing children to stay on their parents’ plans through age 26 has added about 1 percentage point to employers’ costs, Darling said. But she said businesses have largely absorbed that increase themselves, rather than passing it on to employees.


Researchers: Obamacare cost estimates hide up to $50 billion per year

Published: 10:04 PM 08/08/2011

Federal payments required by President Barack Obama’s health care law are being understated by as much as $50 billion per year because official budget forecasts ignore the cost of insuring many employees’ spouses and children, according to a new analysis. The result could cost the U.S. Treasury hundreds of billions of dollars during the first ten years of the new health care law’s implementation.

“The Congressional Budget Office has never done a cost-estimate of this [because] they were expressly told to do their modeling on single [person] coverage,” said Richard Burkhauser in a telephone interview Monday. Burkhauser is an economist who teaches in Cornell University’s department of policy analysis and management. On Monday the National Bureau of Economic Research published a working paper on the subject that Burkhauser co-authored with colleagues from Cornell and Indiana University.

Employees and employers can use the rules to their own advantage, he said.  “A very large number of workers” will be able to apply for federal subsidies, “dramatically increasing the cost” of the law, he said.

In May a congressional committee set the accounting rules that determine who will qualify for federal health care subsidies under the 2010 Patient Protection and Affordable Care Act. When the committee handed down the rules to the Congressional Budget Office, its formula excluded the health care costs of millions of workers’ spouses and children. The result was a final estimate for 2010 that hides those costs.

“This is a very important paper,” Heritage Foundation health care expert Paul Winfree told TheDC. These hidden costs, he said, “will almost certainly add to the deficit, contrary to what the Congressional Budget Office and others have estimated.”

That’s especially important, Winfree added, because Congress’s 12-member “super committee” is about to draft another round of cuts to 10-year spending plans.

Burkhauser says his paper will be expanded later this year because “we have gotten so much heat for this work, that in our final version we are more clearly explaining how we came to find out about the change in the Committee’s [the Joint Committee on Taxation’s] interpretation of the law.”

The president’s health care law provides government subsidies for, among others, private-sector employees who earn between 1.33 times and 4 times the poverty level, and who also spend more than 9.5 percent of their family income on health care.

On May 4, 2010, the Joint Committee on Taxation directed the Congressional Budget Office to ignore family members when determining whether employees actually pay more than 9.5 percent of their household income on insurance.

The instruction was included in a correction of a complex, 150-page March 21 document. The correction read: “ERRATA FOR JCX-18-10 … On page 15, Minimum essential coverage and employer offer of health insurance coverage, in the second sentence of the second paragraph, ‘the type of coverage applicable (e.g., individual or family coverage)’ should be replaced with ‘self-only coverage.’”

Because of this rule change, Burkhauser said, employees who otherwise meet the eligibility requirements to receive the federal subsidy can be denied it, if their own share of the family’s insurance costs total less than 9.5 percent of their families’ incomes.

If theory, he added, “this will mean that millions of families that are not provided with affordable insurance [by companies] will be ineligible to go to the federal exchanges,” he said.

But companies and their employees share great incentives to rearrange workers’ compensation to win more of these federal subsidies, he said.

For example, he explained, an employee can ask his employer to raise the price of company-provided insurance in exchange for an equal increase in salary. In many cases, that would boost the share of his income spent on health insurance to a percentage above the 9.5 percent threshold.

Such an arrangement, Burkhauser added, would make the employee, his spouse, and his children all eligible for federal health care subsidies while enriching both employer and employee — even after the Treasury Department collects fines from U.S. workers.

Burkhauser’s research found that because of the law’s incentives, an extra one-sixth of workers who get their health insurance from employers — or roughly an additional 12.7 percent of all workers — would gain by transfering themselves and their families into the federal exchanges.

Current projections suggest 75 percent of all employees will avoid the federal subsidies and stay in employer-backed health insurance plans. Burkhauser’s estimate, however, suggests that only about 65 percent of employees would have an adequate incentive to remain in privately funded health plans.

The May 4 federal health care rule ignored these incentives, he said, causing the CBO to underestimate the cost of Obama’s program by as much as $50 billion per year. If subsidy costs were to remain consistent, the ten-year total would be $500 billion; the government would likely recoup some of that in noncompliance penalties.

“Every day seems to bring a new Obamacare eruption that demonstrates the law’s authors had no idea what they were doing,” said Michael Cannon. Cannon directs the Cato Institute’s health policy studies program.

“This study shows yet another way that ObamaCare’s cost will be much, much higher than supporters led the American people to believe,” Cannon warned.

“Anyone who’s serious about the federal debt should make Obamacare’s trillion-plus dollars of new entitlement spending the first item to put on the chopping block.”



Associated Press –

July 28: Washington – The “golden years” may lose some luster for many baby boomers worried about the financial pressures that come with age. Many of the nation’s 77 million boomers are worried about being able to pay their medical bills as they get older, a new poll finds. The concern is so deep that it outpaces worries about facing a major illness or disease, dying, or losing the ability to do favorite activities.

Another major concern among the boomers: losing their financial independence.

The struggling economy, a longer life expectancy, ever-increasing health care costs and challenges facing Social Security are putting added pressure on the boomers, those born between 1946 and 1964.

According to the Associated poll, 43 percent of boomers polled said they were “very” or “extremely” worried about being able to pay for their medical costs, including long-term care. Almost the same number, 41 percent, said losing their financial independence was a big concern.

The oldest boomers are turning 65 this year, but it’s the younger ones like Krall who might be feeling more apprehension. “Boomers are not all created equal,” says Olivia Mitchell, professor at the Wharton School of the University of Pennsylvania and executive director of the Pension Research Council.

Many older boomers still have a defined benefit pension plan, probably some decent retiree medical insurance and Social Security, said Mitchell, a boomer herself who has studied pensions and retirement extensively.

“The youngest boomers the people who were born in the 60s face more uncertainty about their pensions, their Social Security, their housing and their medical care,” Mitchell said.

Her advice: “Push your retirement back two or three or five years if you can.

As long as you are still working then you’re not drawing down on your nest egg,” Mitchell said in an AP interview. “What most people don’t realize is how expensive it is to live in retirement.”

Many people in their late 60s, and some into their 70s, are still working.

According to the Bureau of Labor Statistics, 29.1 percent of people aged 65 to 69 worked at least part-time last year. And almost 7 percent of people aged 75 or older were employed in 2010.

One significant cost facing new retirees is health care. A study by Fidelity Investments estimated that a 65-year-old couple retiring this year with Medicare coverage would need $230,000, on average, to cover medical expenses in retirement. The estimate factors in the federal program’s premiums, co-payments and deductibles, as well as out-of-pocket prescription costs.

The projection does not factor in long-term care, such as the cost of living in a nursing home something most boomers in the Associated poll haven’t planned for yet. But a care center that we always recommend is the Skylark Senior Care center.

Some 83 percent of boomers polled said they do not have long-term care insurance, a private policy that helps pay for nursing homes or in-home care costs not covered by Medicare.

“The problem with it is that as you get older, the cost goes up,” said Plotkin. “At a certain point, it might not be worth it.”

Costs for long-term care insurance can range from $1,000 to $8,000 a year, depending on age, health conditions, policy term and other factors.

“It’s a tough sell,” says Paul Fronstin, director of health research and education at the nonprofit Employee Benefit Research Institute. “Even someone in their 60s might look at it and say it’s going to be 20 years before I need long-term care, so why buy it now.”

Boomers also didn’t fare so well in other later-life planning, such as legal wills and health care proxies.

Forty-percent of the boomers polled said they had a legal will to spell out how their possessions should be distributed after death.

Fewer boomers 34 percent had health care proxies and living wills. The living will allows people to document their wishes concerning medical treatment, and the proxy is a medical power of attorney that allows for the appointment of a trusted person to make medical decisions in case an individual is unable to do so.

The poll was conducted from June 3-12 by Knowledge Networks of Palo Alto, Calif., and involved online interviews with 1,416 adults, including 1,078 baby boomers born between 1946 and 1964. The margin of sampling error for results from the full sample is plus or minus 4.4 percentage points; for the boomers, it is plus or minus 3.3 percentage points.
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Associated Press –

Aug. 2: Washington – When it comes to Medicare and Medicaid, the debt deal raises more questions than it answers. The giant health care programs serving some 100 million elderly, low-income and disabled Americans were spared from the first round of cuts in the agreement between President Barack Obama and congressional leaders. But everything’s on the chopping block for a powerful new congressional committee that will be created under the deal to scour the budget for savings.

And if that hunt leads to a dead end, the agreement decrees an automatic 2 percent cut to Medicare providers such as hospitals. That’s on top of a 6 percent cut already enacted to finance Obama’s health care law, which is just being phased in.

The hospital industry, which agreed to cuts of $150 billion to help pay for Obama’s expansion of coverage to the uninsured, said Monday it’s just about had it.

The debt deal would allow the government to keep borrowing and stave off an unprecedented default on obligations to investors, Social Security recipients, federal employees and others. But it comes at the price of squeezing the budget in ways that average Americans may not yet realize.

The first $900 billion in savings from the complex deal are not likely to have much impact on health care. It’s the second round that counts, from $1.2 trillion to $1.5 trillion over 10 years.

“These guys haven’t really solved anything they have only set up a procedure to make cuts,” said Robert Laszewski, a health care industry consultant. “We haven’t seen the blood on the floor yet.”

The White House is emphasizing that Medicaid for the poor and benefits guaranteed to seniors under traditional Medicare would not be touched if automatic reductions become necessary as a backstop.

But the new congressional “supercommittee” created under the deal is under no such restrictions. It can shape its own menu of cuts to Medicare, Medicaid and Obama’s health care law, assuming the panel could get the votes to pass a package through Congress and buy-in from the White House.

For Medicaid, that means a new funding formula, proposed by the Obama administration and opposed by many governors, remains on the table. It would be used to dial down the amount of federal money states get for the health needs of their low-income people and long-term care patients in nursing homes.

For Medicare, it means the committee could push increases in copays and deductibles, as have two bipartisan commissions within the last nine months.
Medicare providers are nervous.

Doctors could be particularly exposed. Current law calls for an automatic cut of 30 percent in Medicare payments to doctors starting next year, the result of a previous budget control law gone awry. It’s unthinkable that lawmakers would allow that to go through. But where Congress in previous years just waived the cut and added the cost to the deficit, that’s not politically possible any more.

Drug companies are also hunkered down. Having agreed to help close the Medicare prescription coverage gap, as well as billions in new fees under the health care overhaul, they could now be on the hook for additional rebates to cover the drug costs of low-income seniors.

The budget supercommittee has a deadline for action around Thanksgiving. That has advocates mobilizing to stave off or contain the scope of cuts. One way to do that is to put tax increases back on the table.

“All of our work lies ahead of us,” said Ron Pollack, executive director of Families USA, an advocacy group that battled for the health care overhaul. “We are not planning the next stage, because the process continues.”


Report: 1 in 8 employer insurance plans getting the axe since Obamacare

By C.J. Ciaramella 07/25/2011

One in eight small businesses have terminated their health insurance plans since the passage of President Obama’s health care reform, or expect to do so.

This figure comes from a National Federation of Independent Business report which surveyed small businesses one year after the passage of the Patient Protection and Affordable Care Act.

The report, released today, found prevailing negative attitudes about the law’s impact among small business owners.

Among the most striking of NFIB’s findings was the number of employer health insurance plans that have been or will be eliminated since PPACA’s passage — 14 percent, or one in eight. Eliminating employer health care plans “is the first major consequence of PPACA that small-business owners likely feel,” the report said.

“We are not aware of any data suggesting we’ve had turnover anywhere near this level in the past,” said William J. Dennis, a senior research fellow at the National Federation for Independent Business.

The NFIB study also found 20 percent of small employers expect to significantly change their benefit packages the next time they renew their health insurance plans. Almost all of them expected to see diminished benefits, increased employee costs, or both.

However, the American Public Health Association disputed the study’s results. APHA Executive Director Benjamin Georges said the study was mostly opinion and it was far too early to be criticizing the law, especially since most of it hasn’t even been rolled out yet.

“Most of the major parts haven’t gone into effect and shouldn’t be causing these market changes,” he said. “We’ve seen a lot of people blaming the law for things they ought not be blaming it for.”

Georges also said there was hidden costs and savings not factored into many studies of health care costs.

“We’re hoping that when people do these studies they’ll include the costs of absenteeism due to sickness and reductions in worker’s compensation,” Georges said. “There are a lot of little pieces that they need to put into their equation.”

The NFIB poll also surveyed small businesses about their attitudes toward the PPACA.

The vast majority of small employers with some knowledge of the PPACA didn’t think it will reduce the rate of health care costs or administrative burdens. They did think it will increase taxes and add to the federal deficit.

Although those surveyed agreed that PPACA will result in more people having health insurance coverage, they didn’t think it will increase the general health of the American public.

NFIB is an advocacy group for small and independent businesses. The poll was conducted by Mason-Dixon Polling and Research.

For the purpose of the survey, a small employer was defined as a business employing 50 or fewer employees.


Mass. Healthcare Reform Augurs Badly for Obamacare

A new study of the healthcare reform enacted by Massachusetts and its then Gov. Mitt Romney five years ago offers an ominous warning about the likely effects of Obamacare on the nation as a whole.

Researchers at the Beacon Hill Institute (BHI) at Suffolk University in Boston found that the Bay State healthcare reform plan has led to increased healthcare expenditures and private health insurance costs, as well as additional payments for Medicare and Medicaid, for a total of $8.5 billion in new outlays.

In 2006, Massachusetts enacted healthcare reform legislation that promised to extend healthcare coverage to all citizens while significantly lowering costs. The law imposes mandates on residents to obtain health insurance and on employers to provide it if they have 11 or more employees.

It also expands Medicaid coverage, establishes a health insurance subsidy program, and creates an insurance exchange that helps those who are ineligible for Medicaid buy competitively priced health plans.

The BHI report states: “Now that the law has been in effect for more than five years, we can begin to assess its impact on the state of Massachusetts.”

Among the findings:

• State healthcare expenditures have risen by $414 million over the five-year period.

• Private health insurance costs have risen by $4.31 billion.

• The federal government has spent an additional $2.41 billion on Medicaid in Massachusetts.

• Medicare expenditures increased by $1.42 billion.

The total cumulative cost over the period is just over $8.5 billion.

But the state has been able to shift the majority of the costs to the federal government, which continues to absorb a significant part of the cost of healthcare reform through enhanced Medicaid payments and the Medicare program — meaning Americans outside Massachusetts are helping to pay the bills for the healthcare plan.

In analyzing the study’s results, the researchers observe: “Cost‐containment is often a major goal of health reform plans. However, this particular healthcare reform legislation did not provide an effective means for containing costs.

“The promise of cost‐containment rested on a vague hope that the newly insured would seek preventive care, access their primary care physicians earlier in their illness and avoid costly emergency room visits. Yet the number of emergency room visits rose from 2.351 million in 2006 to 2.521 million in 2009, or by 7.2 percent over the period. The total cost of emergency visits has soared by 36 percent over the period, or by $943 million.”

The large number of newly insured residents in the state has increased demands on the primary care system, forcing patients to visit emergency rooms at a rate significantly higher than expected.

The BHI report also states that “by increasing demand for healthcare services without an equal increase in their supply, the universal healthcare law guaranteed that the price of healthcare services and health insurance would increase.”

The researchers point out that the Patient Protection and Affordable Care Act signed by President Barack Obama in March 2010 is “essentially identical” to the Massachusetts law.

Obama claimed the law will lower healthcare costs. But the researchers conclude: “If the federal law is modeled after the Massachusetts law, it stands to reason that Massachusetts’ experience with healthcare reform provides an idea of what is in store for the country under the federal law.”


Healthcare law could leave families with high insurance costs

By Julian Pecquet – 07/21/11 12:43 PM ET

A major provision of the healthcare reform law designed to prevent businesses from dropping coverage for their workers could inadvertently leave families without access to subsidized health insurance.

The problem is a huge headache for the Obama administration and congressional Democrats, because it could leave families unable to buy affordable health insurance when the healthcare law requires that everyone be insured starting in 2014.

Some of the administration’s closest allies on healthcare reform warn this situation could dramatically undercut support for the law, which already is unpopular with many voters and contributed to Democrats losing the House in the 2010 midterm elections.

“It’s going to be a massive problem if it comes out that families have to buy really expensive employer-based coverage,” said Jocelyn Guyer, deputy executive director at Georgetown University’s Center for Children and Families.

“If they don’t fix this — and by ‘they’ I mean either the administration or Congress — we’re going to have middle-class families extremely unhappy with [healthcare] reform in 2014, because they’ll basically be facing financial penalties for not buying coverage when they don’t have access to any affordable options.”

At issue is a so-called “firewall” in the law that denies subsidies to workers whose employers offer quality, affordable coverage.

The firewall applies to plans with premiums that cost less than 9.5 percent of a worker’s income. If a worker has to dole out more than that amount to buy coverage, the employer coverage is considered unaffordable and the worker is eligible for subsidies to buy coverage on the new exchanges.

Initially, advocates thought the threshold also applied to family coverage. If premium costs paid to cover a worker’s family cost 20 percent of a worker’s income, for example, the worker and his or her family should be eligible for subsidies.

But in calculating the bill’s cost last year, Congress’s Joint Committee on Taxation (JCT) took the law to mean that employers and their families aren’t eligible for subsidies as long as the individual plan is affordable — regardless of the price of the family plan.

This means the costs to an employee for covering his or her family could be too high to afford for many working families.

“If you’ve got employer-based coverage that’s affordable for the employee only,” Guyer said, “the family is expected to take the employer coverage even if it“s totally unaffordable and no one in the family is eligible for the exchange subsidies.”

The glitch is causing heartburn for advocates who worry that it could leave thousands of children and spouses uninsured and subject to penalties for not having insurance.

“The JCT read of the language is disturbing and we hope the administration doesn’t read the language that way,” said Bruce Lesley, president of the children’s advocacy group First Focus. “It would put dependent coverage, children and spouses at grave risk.”

The Obama administration is expected to clarify shortly — through Treasury Department regulations — who’s eligible for subsidies.

An administration official told The Hill, “These matters will be considered in future regulations.”

Healthcare reform proponents say they’ve quietly been talking to the administration for months about the issue.

“We’ve talked to them — a lot — about this,” said Judith Solomon, vice president for health policy at the liberal Center on Budget and Policy Priorities. “We’ve made our views known.”

While advocates say changing the policy is a no-brainer, the costs could be a hurdle.

One new study, by the Employment Policies Institute, estimates that changing the policy could cost taxpayers $50 billion per year. But if the administration leaves the policy as is, “millions of families will be stuck in a no-man’s-land without affordable coverage through their employer or the exchange.”

“Whichever interpretation holds,” the study concludes, “the consequences are significant.”

Others dispute those figures. They argue that employers will offer affordable coverage for whole families and point out that many children who aren’t covered by employer family plans are eligible for Medicaid or the Children’s Health Insurance Program.

“It’s really not clear to me how much of an impact it would be [to change the policy],” Solomon said. The $50 billion-per-year figure “seems very high to me.”