Author Archive | John Barrett

ObamaCare’s Future Foretold

By Robert Samuelson

WASHINGTON — If you want a preview of President Obama’s health care “reform,” take a look at Massachusetts. In 2006, it enacted a “reform” that became a model for Obama. What’s happened since isn’t encouraging. The state did the easy part: expanding state-subsidized insurance coverage. It evaded the hard part: controlling costs and ensuring that spending improves people’s health. Unfortunately, Obama has done the same.

Like Obama, Massachusetts requires most individuals to have health insurance (the “individual mandate”). To aid middle-class families too well-off to qualify for Medicaid — government insurance for the poor — the state subsidizes insurance for people up to three times the federal poverty line (about $66,000 in 2008 for a family of four). Together, the mandate and subsidies have raised insurance coverage from 87.5 percent of the non-elderly population in 2006 to 95.2 percent in the fall of 2009, report Sharon Long and Karen Stockley of the Urban Institute.

People have more access to treatment, though changes are small. In 2006, 87 percent of the non-elderly had a “usual source of care,” presumably a doctor or clinic, note Long and Stockley in the journal Health Affairs. By 2009, that was 89.9 percent. In 2006, 70.9 percent received “preventive care”; in 2009, that was 77.7 percent. Out-of-pocket costs were less burdensome.

But much didn’t change. Emergency rooms remain as crowded as ever; about a third of the non-elderly go at least once a year, and half their visits involve “non-emergency conditions.” As for improvements in health, most probably lie in the future. “Many of the uninsured were young and healthy,” writes Long. Their “expected gains in health status” would be mostly long-term. Finally — and most important — health costs continue to soar.

Aside from squeezing take-home pay (employers provide almost 70 percent of insurance), higher costs have automatically shifted government priorities toward health care and away from everything else — schools, police, roads, prisons, lower taxes. In 1990, health spending represented about 16 percent of the state budget, says the Massachusetts Taxpayers Foundation. By 2000, health’s share was 22 percent. In 2010, it’s 35 percent. About 90 percent of the health spending is Medicaid.

State leaders have proven powerless to control these costs. Facing a tough re-election campaign, Gov. Deval Patrick effectively ordered his insurance commissioner to reject premium increases for small employers (50 workers or less) and individuals — an unprecedented step. Commissioner Joseph Murphy then disallowed premium increases ranging from 7 percent to 34 percent. The insurers appealed; hearing examiners ruled Murphy’s action illegal. Murphy has now settled with one insurer allowing premium increases, he says, of 7 percent to 11 percent. More settlements are expected.

Attacking unpopular insurance companies is easy — and ultimately ineffectual. The trouble is that they’re mostly middlemen. They collect premiums and pay providers: doctors, hospitals, clinics. Limiting premiums without controlling the costs of providers will ultimately cause insurer bankruptcies, which would then threaten providers because they won’t be fully reimbursed. The state might regulate hospitals’ and doctors’ fees directly; but in the past, providers have often offset lower rates by performing more tests and procedures.

A year ago, a state commission urged another approach: Scrap the present “fee-for-service” system. The commission argued that fee-for-service — which ties reimbursement to individual services — rewards quantity over quality and discourages coordinated care among doctors and hospitals. The commission recommended a “global payments” system to force hospitals, doctors and clinics to create networks (“accountable care organizations”). These would receive flat per-patient payments to promote effective — not just expensive — care. Payments would be “risk adjusted”; sicker patients would justify higher payments.

But the commission offered no blueprint, and efforts to craft consensus among providers, consumer groups and insurers have failed. State Senate President Therese Murray, an advocate of payment change, has given up for this year. “Nobody is in agreement on anything,” she told The Boston Globe.

All this anticipates Obamacare. Even if its modest measures to restrain costs succeed — which seems unlikely — the effect on overall spending would be slight. The system’s fundamental incentives won’t change. The lesson from Massachusetts is that genuine cost control is avoided because it’s so politically difficult. It means curbing the incomes of doctors, hospitals and other providers. They object. To encourage “accountable care organizations” would limit consumer choice of doctors and hospitals. That’s unpopular. Spending restrictions, whether imposed by regulation or “global payments,” raise the specter of essential care denied. Also unpopular.

Obama dodged the tough issues in favor of grandstanding. Imitating Patrick, he’s already denouncing insurers’ rates, as if that would solve the spending problem. What’s occurring in Massachusetts is the plausible future: Unchecked health spending determines government priorities and inflates budget deficits and taxes, with small health gains. And they call this “reform”?


Six Months to Go Until The Largest Tax Hikes in History

From Ryan Ellis

In just six months, the largest tax hikes in the history of America will take effect.  They will hit families and small businesses in three great waves on January 1, 2011:

First Wave: Expiration of 2001 and 2003 Tax Relief

In 2001 and 2003, the GOP Congress enacted several tax cuts for investors, small business owners, and families.  These will all expire on January 1, 2011:

Personal income tax rates will rise. The top income tax rate will rise from 35 to 39.6 percent (this is also the rate at which two-thirds of small business profits are taxed).  The lowest rate will rise from 10 to 15 percent.  All the rates in between will also rise.  Itemized deductions and personal exemptions will again phase out, which has the same mathematical effect as higher marginal tax rates.  The full list of marginal rate hikes is below:

– The 10% bracket rises to an expanded 15%
– The 25% bracket rises to 28%
– The 28% bracket rises to 31%
– The 33% bracket rises to 36%
– The 35% bracket rises to 39.6%

Higher taxes on marriage and family. The “marriage penalty” (narrower tax brackets for married couples) will return from the first dollar of income.  The child tax credit will be cut in half from $1000 to $500 per child.  The standard deduction will no longer be doubled for married couples relative to the single level.  The dependent care and adoption tax credits will be cut.

The return of the Death Tax. This year, there is no death tax.  For those dying on or after January 1 2011, there is a 55 percent top death tax rate on estates over $1 million.  A person leaving behind two homes and a retirement account could easily pass along a death tax bill to their loved ones.

Higher tax rates on savers and investors. The capital gains tax will rise from 15 percent this year to 20 percent in 2011.  The dividends tax will rise from 15 percent this year to 39.6 percent in 2011.  These rates will rise another 3.8 percent in 2013.

Second Wave: Obamacare

There are over twenty new or higher taxes in Obamacare.  Several will first go into effect on January 1, 2011.  They include:

The “Medicine Cabinet Tax” Thanks to Obamacare, Americans will no longer be able to use health savings account (HSA), flexible spending account (FSA), or health reimbursement (HRA) pre-tax dollars to purchase non-prescription, over-the-counter medicines (except insulin).

The “Special Needs Kids Tax” This provision of Obamacare imposes a cap on flexible spending accounts (FSAs) of $2500 (Currently, there is no federal government limit).  There is one group of FSA owners for whom this new cap will be particularly cruel and onerous: parents of special needs children.  There are thousands of families with special needs children in the United States, and many of them use FSAs to pay for special needs education.  Tuition rates at one leading school that teaches special needs children in Washington, D.C. (National Child Research Center) can easily exceed $14,000 per year.  Under tax rules, FSA dollars can be used to pay for this type of special needs education.

The HSA Withdrawal Tax Hike. This provision of Obamacare increases the additional tax on non-medical early withdrawals from an HSA from 10 to 20 percent, disadvantaging them relative to IRAs and other tax-advantaged accounts, which remain at 10 percent.

Third Wave: The Alternative Minimum Tax and Employer Tax Hikes

When Americans prepare to file their tax returns in January of 2011, they’ll be in for a nasty surprise—the AMT won’t be held harmless, and many tax relief provisions will have expired.  The major items include:

The AMT will ensnare over 28 million families, up from 4 million last year. According to the left-leaning Tax Policy Center, Congress’ failure to index the AMT will lead to an explosion of AMT taxpaying families—rising from 4 million last year to 28.5 million.  These families will have to calculate their tax burdens twice, and pay taxes at the higher level.  The AMT was created in 1969 to ensnare a handful of taxpayers.

Small business expensing will be slashed and 50% expensing will disappear. Small businesses can normally expense (rather than slowly-deduct, or “depreciate”) equipment purchases up to $250,000.  This will be cut all the way down to $25,000.  Larger businesses can expense half of their purchases of equipment.  In January of 2011, all of it will have to be “depreciated.”

Taxes will be raised on all types of businesses. There are literally scores of tax hikes on business that will take place.  The biggest is the loss of the “research and experimentation tax credit,” but there are many, many others.  Combining high marginal tax rates with the loss of this tax relief will cost jobs.

Tax Benefits for Education and Teaching Reduced. The deduction for tuition and fees will not be available.  Tax credits for education will be limited.  Teachers will no longer be able to deduct classroom expenses.  Coverdell Education Savings Accounts will be cut.  Employer-provided educational assistance is curtailed.  The student loan interest deduction will be disallowed for hundreds of thousands of families.

Charitable Contributions from IRAs no longer allowed. Under current law, a retired person with an IRA can contribute up to $100,000 per year directly to a charity from their IRA.  This contribution also counts toward an annual “required minimum distribution.”  This ability will no longer be there.


Costs Soaring After Bay State Health Change


Anyone wanting a preview of Obama-Care need just focus on Massachusetts, the state that provided the blueprint for Obama’s plan. It makes a great case for making haste in repealing ObamaCare.

In Massachusetts, health care prices are out of control, emergency rooms are overcrowded, the government is at war with itself and private insurers are running in the red, refusing to enter critical markets on the government’s unrealistic terms.

The party line now is that the Bay State’s reform was not about cost control but rather expanding access to care. The program’s backers claim that the price spiral they find themselves in was expected, anticipated, even if they didn’t actually have a plan for it.

That’s a revisionist’s tale. In early 2006, the plan’s backers — led by then Republican Gov. Mitt Romney — adamantly asserted that his plan would in fact control costs, provide universal coverage and improve the quality of care. (If this sounds familiar, it’s because Obama’s team borrowed the marketing scripts.)

Disinterested outsiders predicted that both prices and total costs would most likely increase under the government-dominated system, since massive new demand, reimbursed at the lowest prices, would be forced on a fixed supply. They were shouted down by insiders vested in getting the reform passed.

Guess who was right?

Two data points are harbingers of collapse. First, an academic study “The Effect of Massachusetts’ Health Reform on Employer-Sponsored Insurance Premiums” by professors John F. Cogan, R. Glenn Hubbard and Daniel Kessler, confirmed the prediction.

Massachusetts’ reform not only did not decrease prices and spending, as promised, but prices are increasing at rates greater than national trend lines and greater than rates in the Bay State prior to reform.

Three years prior to reform, insurance premiums for employers were increasing 3.7% more slowly in Massachusetts than in the rest of the country.  Today, the opposite is true.  Prices in Massachusetts are increasing 5.7% more than in other states. In Boston, prices for employer-provided family plans are increasing 8.2% faster than in other large metropolitan areas.

“Because the plan’s main components are the same as those of the new health reform law,” the study’s authors note, “the effects of the plan provide a window onto the country’s future.”

Post-reform, prices are up, more people have insurance, and more people are headed to the emergency room.  If this sounds odd, it should. Among former Gov. Romney’s favorite arguments for reform was that it would shift dollars from inefficient emergency room care to the more efficient venue of the primary care doctor.

The Obama administration passed its reform on the backs of health insurers — couching the reform as health insurance reform rather than the actual remaking of health care delivery.

In this election year, Gov. Deval Patrick’s administration has torn this page from Obama’s playbook. He demanded the right to approve insurance prices in February and then had his bureaucrats deny necessary increases in April. Prior to reform, rates had to be actuarially sound. Post-reform, it’s more important that they be politically sound.

Those in his own bureaucracy charged with making sure that insurers can pay their bills called this a “train wreck” and put three insurers under solvency watch. The Patrick administration stood resolute in its election-year pandering. “It’s unacceptable for consumers to be treated this way and it will not be tolerated,” thundered Massachusetts Insurance Commissioner Patrick Murphy, in April.

Last week, the administration’s own hearing officers sided with the first insurance company whose case made it through the process. The increased rates, it determined, were fair and necessary.

The Patrick administration’s political folks, like Romney’s before, will not be swayed by inconvenient facts. Insurance commissioner Murphy “strongly disagrees” with his own hearing officers’ ruling.

Is it any wonder then that the state’s bureaucracy responsible for managing its health care cannot entice any of the state’s major insurance carriers to offer plans to small businesses?  Carriers representing 90% of the state’s insurance market share are refusing to offer plans to small business through the state’s Connector.

“Given the rate cap that the administration has imposed on the health plans, none of them is in a position to enter into any new endeavors with the state at this time,” explains Eric Linzer, a spokesperson for the industry association.  State officials have responded by sending letters to insurance carriers threatening legal action.


Health overhaul may mean longer ER waits, crowding

By CARLA K. JOHNSON, AP Medical Writer

CHICAGO – Emergency rooms, the only choice for patients who can’t find care elsewhere, may grow even more crowded with longer wait times under the nation’s new health law.

That might come as a surprise to those who thought getting 32 million more people covered by health insurance would ease ER crowding. It would seem these patients would be able to get routine health care by visiting a doctor’s office, as most of the insured do.

But it’s not that simple. Consider:

_There’s already a shortage of front-line family physicians in some places and experts think that will get worse.

_People without insurance aren’t the ones filling up the nation’s emergency rooms. Far from it. The uninsured are no more likely to use ERs than people with private insurance, perhaps because they’re wary of huge bills.

_The biggest users of emergency rooms by far are Medicaid recipients. And the new health insurance law will increase their ranks by about 16 million. Medicaid is the state and federal program for low-income families and the disabled. And many family doctors limit the number of Medicaid patients they take because of low government reimbursements.

_ERs are already crowded and hospitals are just now finding solutions.

Rand Corp. researcher Dr. Arthur L. Kellermann predicts this from the new law: “More people will have coverage and will be less afraid to go to the emergency department if they’re sick or hurt and have nowhere else to go…. We just don’t have other places in the system for these folks to go.”

Kellermann and other experts point to Massachusetts, the model for federal health overhaul where a 2006 law requires insurance for almost everyone. Reports from the state find ER visits continuing to rise since the law passed — contrary to hopes of its backers who reasoned that expanding coverage would give many people access to doctors offices.

Massachusetts reported a 7 percent increase in ER visits between 2005 and 2007. A more recent estimate drawn from Boston area hospitals showed an ER visit increase of 4 percent from 2006 to 2008 — not dramatic, but still a bit ahead of national trends.

“Just because we’ve insured people doesn’t mean they now have access,” said Dr. Elijah Berg, a Boston area ER doctor. “They’re coming to the emergency department because they don’t have access to alternatives.”

Crowding and long waits have plagued U.S. emergency departments for years. A 2009 report by the Government Accountability Office, Congress’ investigative arm, found ER patients who should have been seen immediately waited nearly a half-hour.

“We’re starting out with crowded conditions and anticipating things will only get worse,” said American College of Emergency Physicians president Dr. Angela Gardner.

Federal stimulus money and the new health law address the primary care shortage with training for 16,000 more providers, said Health and Human Services Department spokeswoman Jessica Santillo.

But many experts say solving ER crowding is more complicated.

What’s causing crowding? Imagine an emergency department with a front door and a back door.

There’s crowding at both ends.

At the front door, ERs are strained by an aging population and more people with chronic illnesses like diabetes. Many ERs closed during the 1990s, leaving fewer to handle the load. The American Hospital Association’s annual survey shows a 10 percent decline in emergency departments from 1991 to 2008. Meanwhile, emergency visits rose dramatically.

At the back door, ER patients ready to be admitted — in hospital lingo, ready to “go upstairs” — must compete for beds with patients scheduled for elective surgeries, which bring in more money. “If you’ve got 10 ER patients and 10 elective surgeries,” Kellermann asked rhetorically, “which are you going to give the beds to?”

That’s why easing crowding will take more than just access to primary care. It also will take hospitals that run more efficiently, moving patients through the system and getting ER patients upstairs more quickly, Kellermann said.

Ideas that work include bedside admitting, where a staffer takes a patient’s insurance information as treatment starts.

That and other strategies are being tried at St. Francis Hospital and Health Centers in Indianapolis. There, the performance of nurse managers is measured by how long admitted patients wait in the emergency department for a bed upstairs.

And to stave off inappropriate ER visits, the hospitals have opened after-hours clinics staffed by primary care doctors to handle patients who can’t leave work to see a doctor, said Indianapolis hospital executive Keith Jewell. ER wait times have fallen.

A Chicago hospital, too, is readying for the onslaught of ER patients. On the city’s South Side, Advocate Trinity Hospital handles 40,000 emergency visits a year and is expecting more because of the new law.

Greeter Stephanie Bailey makes sure patients don’t get frustrated while they’re waiting. She can take their vital signs and inform staff if the patient is about to leave without treatment.

Inside the emergency department, a giant sheet of paper hangs on a wall. It’s hand-lettered in orange and purple, and tracks daily progress on hospital goals: How many patients left before they were treated? How many minutes did patients stay in the ER?

On a recent day, the note said “0.0 percent” of the patients left without treatment. Someone had added a smiley face. But there was no smiley face next to the average ER length of stay for the same day — nearly four hours. The hospital’s goal is three.


Health law risks turning away sick –

By Julian Pecquet

The Obama administration has not ruled out turning sick people away from an insurance program created by the new healthcare law to provide coverage for the uninsured.

Critics of the $5 billion high-risk pool program insist it will run out of money before Jan. 1, 2014. That’s when the program sunsets and health plans can no longer discriminate against people with pre-existing conditions.

Administration officials insist they can make changes to the program to ensure it lasts until 2014, and that it may not have to turn away sick people. Officials said the administration could also consider reducing benefits under the program, or redistributing funds between state pools. But they acknowledged turning some people away was also a possibility.

“There’s a certain amount of money authorized in the statute, and we will do our best to make sure that that amount of money insures as many people as possible and does as much good as possible,” said Jay Angoff, director of the Office of Consumer Information and Insurance Oversight at the Department of Health and Human Services (HHS). “I think it’s premature to say [what happens] when it’s gone.”

The administration has not discussed asking Congress for more money down the line if the $5 billion runs out before Jan. 1, 2014. Uninsured sick people could start applying for participation in the high-risk insurance pools on Thursday.

Healthcare experts of all stripes warned during the healthcare debate that $5 billion would likely not last until 2014. Millions of Americans cannot find affordable healthcare because of their pre-existing conditions, and that amount would only cover a couple hundred thousand people, according to a recent study by the chief Medicare actuary.

Republicans continued to hammer that point on Thursday, asking HHS officials to brief them about the program.

We are “deeply concerned that these pools may not provide quality coverage or will limit enrollment,” Reps. Joe Barton (R-Texas), John Shimkus (R-Ill.) and Michael Burgess (R-Texas), the ranking members on the Energy and Commerce panel and its health and oversight subcommittees, wrote in a letter to HHS Secretary Kathleen Sebelius.

The letter requests a briefing on high-risk pools by July 15, particularly on three topics: protections and services in place “to make sure that access is efficient and unimpeded; whether HHS believes the program is financially sustainable through 2013; and details about how each state’s pool will be administered and what options they’ll have available.”

Leading health reform advocate Ron Pollack, founding executive director of Families USA, said the pools were a “very imperfect tool that could be implemented quickly” but were the best option available for the interim period before 2014.

“The pools are going to be helpful for a significant number of people,” he told The Hill, “but nobody thought they’re the ultimate answer for helping people with pre-existing conditions.”

Still, he didn’t rule out that Families USA could press lawmakers to allocate more money in a few years if it looks like the program needs it.

Each state has a certain budget allocation for its pool, and the first step to stay under budget would be to shift money around between states that don’t see a lot of applicants and those that do, said Richard Popper, deputy director of the Office of Consumer Information and Insurance Oversight at HHS.

“If we have that situation where we have strong demand in one state and not as strong demand in another state, the secretary of HHS after a year or two has the authority to reallocate the funding,” said Popper, who used to run Maryland’s high-risk pool.

“Along with that, we can work with the states to adjust their benefit structure, the deductibles, the co-pays, the overall plan structure to address some of those cost drivers, again to help the plan make it to 2014, when it will no longer be needed.”

In addition, Popper said, many people won’t be able to afford to participate in the program since premiums will range between about $140 and $900 a month, depending on applicants’ age and where they live. HHS estimates that at least 200,000 people will be in the program at any one time. To be eligible, applicants have to be citizens or nationals of the United States or be lawfully present; have a pre-existing medical condition; and have been uninsured for at least six months before applying for the high-risk pool plan.

“There are going to be meaningful premiums that are going to be required to stay in this plan — premiums in the hundreds of dollars every month,” Popper said. “There are a significant number of people out there with pre-existing conditions who are uninsured, but a significant number of those people … also have limited income. And some of them, while they may need this plan, the premiums may not be something they can afford.

“We have that to think about as well,” he added. “But for those who can afford it, this is going to be a great, great plan.”

If it looks like too many people are signing up — states will get monthly updates on how many people they can cover with the money they have left — there’s always the option of turning people down.

The bill “does give the secretary authority to limit enrollment in the plan … nationally or on a state-by-state basis,” Popper said. “So that is present, but at this point, we’re starting with no one in the plan as of today … so we don’t see that happening anytime soon


Q&A: New health coverage rules for employers.

By Noam N. Levey, Tribune Washington Bureau

The Obama administration announces regulations designed to discourage companies from scaling back workers’ benefits.

The Obama administration on Monday announced regulations to discourage companies from scaling back their health benefits, a goal Democrats described as a top priority of the new healthcare law.

The rules may have a profound effect on the health coverage that more than 160 million Americans get from their employers.

Here is a rundown of what the regulations could mean for those who get their benefits through work:

Q. How will the new rules work?

A. The rules affect plans that were in operation when the president signed the healthcare law on March 23. Companies have an incentive to retain this “grandfather status” because it exempts them from some of the healthcare law’s new mandates. To qualify for the exemptions, however, companies will be able to make only limited changes to their plans.

Q. Will my employer be able to charge more for health benefits?

A. Employers would be able to raise premiums and still retain grandfathered status. But the rules limit how much companies could raise co-pays, deductibles and other employee contributions. Employers also could not lower their contribution to their employees’ premiums by more than 5 percentage points.

Q. Could my benefits change?

A. Employers would be able to adjust benefits, but not cut them altogether. For example, if a plan currently covers prescription drugs, it would have to continue doing so, although the list of covered prescriptions could be adjusted.

Q. What if my employer doesn’t want to meet these requirements?

A. Any company can choose to forego grandfathered status and still offer health benefits. But the company’s health plan would then be considered a new plan and would be subject to an escalating series of new mandates. Starting next year, for example, new plans will be required to cover preventive services such as cancer screenings with no co-pays or other cost sharing.

The bigger requirements start in 2014. Businesses then will have to offer plans with a minimum standard of health coverage, which will be outlined by the federal government. Grandfathered plans would not have to meet this standard.

Both new and grandfathered plans are already subject to some mandates starting next year, including a prohibition on lifetime benefit limits and a requirement to cover dependent children under 27.

Q. Will employers just drop coverage altogether because of the new rules?

A. That’s difficult to say. Large employers have an incentive to continue offering health benefits because they could face penalties in 2014 if they do not. But some business leaders believe large employers may ultimately stop providing benefits and let their employees shop for coverage in regulated insurance exchanges.

Even more small businesses are expected to lose grandfather protections. Small businesses typically change their health plans more often than large employers. Some business groups say that will actually encourage companies to drop coverage.

Starting in 2014, small businesses will be able to shop for benefits for their employees in new insurance exchanges designed to improve coverage options.


PPACA: Agencies Release Core Regulations

The Obama administration has unveiled interim final regulations it will use to implement the rescission, preexisting condition exclusion, benefits maximum and patient protection provisions in the new federal health laws.

The Internal Revenue Service, an arm of the U.S. Treasury Department, and the Employee Benefits Security Administration, an arm of the U.S. Labor Department, worked to put out the 196-page batch of interim final rules and guidance together with the new Office of Consumer Information and Insurance Oversight, an arm of the U.S. Department of Health and Human Services.

The Affordable Care Act – the legislative package that includes the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act – created the OCIIO, and it also created the rescission provisions and other provisions that led to the development of the interim final rules.

The IRS also is proposing to adopt the same batch of rules as permanent regulations.

Final drafts of the interim final rules and the IRS notice of proposed rulemaking are now available on the Office of the Federal Register website.

The rules are due to appear in the Federal Register June 28. Agencies sometimes change documents between the time they appear on the Federal Register office website and the time they officially appear in the Federal Register.

Comments on the interim final rules will be due 60 days after the day of official publication in the Federal Register, and comments on the IRS proposed rules will be due 90 days after the publication date.

Many of the group plan and group insurance rules will apply for plan years beginning on or after Sept. 23, and others will apply for plan years beginning on or after Jan. 1, 2014.

Similarly, many of the rules that affect individual health insurance will apply for policy years beginning on or after Sept. 23, and some will apply for policy years beginning on or after Jan. 1, 2014.


The ACA provisions banning lifetime benefits caps will take effect Sept. 23, and provisions restricting use of annual caps will take effect that same date. A ban on annual benefits caps is set to take effect Jan. 1, 2014.

Grandfathered individual policies are exempted from this provision, officials note.

“The statute provides that, with respect to benefits that are not essential health benefits, a plan or issuer may impose annual or lifetime per-individual dollar limits on specific covered benefits,” officials say.

The regulations describing “essential health benefits” have not been issued, officials say.

“For plan years (in the individual market, policy years) beginning before the issuance of regulations defining ‘essential health benefits,’ for purposes of enforcement, the Departments will take into account good faith efforts to comply with a reasonable interpretation of the term ‘essential health benefits,’” officials say. “For this purpose, a plan or issuer must apply the definition of essential health benefits consistently. For example, a plan could not both apply a lifetime limit to a particular benefit – thus taking the position that it was not an essential health benefit – and at the same time treat that particular benefit as an essential health benefit for purposes of applying the restricted annual limit.”

Between Sept. 23 and Jan. 2004, group plans and individual health insurers can “establish a restricted annual limit on the dollar value of essential health benefits,” officials say.

To avoid the possibility of big premium increases, federal agencies will phase the annual limits in over 3 years.

Starting Sept. 23, the annual limits must be at least $750,000. The minimum annual limit will increase to $1.25 million Sept. 23, 2011, and to $2 million Sept. 23, 2012.

The new ACA annual maximum rules do not apply to health savings accounts or to health reimbursement arrangements, officials say.


The federal agencies are making special allowances for limited benefit “mini med plans.”

To keep members of those plans from suffering a severe impact, “these interim final regulations provide for the secretary of Health and Human Services to establish a program under which the requirements relating to restricted annual limits may be waived if compliance with these interim final regulations would result in a significant decrease in access to benefits or a significant increase in premiums,” officials say.

HHS officials will put out limited-benefit plan guidance “in the near future,” officials say.


The ACA preexisting conditions exclusions provisions will prohibit group plans and individual issuers from imposing preexisting condition exclusions after Jan. 1, 2014; those provisions take effect for enrollees under age 19 for plan years beginning on or after Sept. 23.

Until the ACA provisions take effect, the rules included in the Health Insurance Portability and Accountability Act (HIPAA) of 1996 continue to apply, officials say in a preamble to the proposed regulations.

“These interim final regulations do not change the HIPAA rule that an exclusion of benefits for a condition under a plan or policy is not a preexisting condition exclusion if the exclusion applies regardless of when the condition arose relative to the effective date of coverage,” officials say.


ACA bans on group health plan and individual health policy rescissions, except in cases involving fraud or intentional misrepresentation of a material fact, are set to take effect Sept. 23.

Under the current standard, carriers can rescind coverage in cases involving unintentional misrepresentations of material facts, officials say.

The new ACA rescission standard “applies to all rescissions, whether in the group or individual insurance market, and whether insured or self-insured coverage,” officials say. “These rules also apply regardless of any contestability period that may otherwise apply.”

Starting with policy years beginning on or after Jan. 1, 2014, ACA provisions will ban health carrier discrimination based on health status, and those changes “will reduce the likelihood of rescissions,” officials predict.

State anti-rescission laws apply if the state laws are tougher than the federal standard, officials say.


Some ACA provisions require health plans to give enrollees easier access to certain types of providers, such as gynecologists, and in-network-level emergency services, without imposing prior authorization requirements.

“The emergency services must be provided without regard to any other term or condition of the plan or health insurance coverage other than the exclusion or coordination of benefits, an affiliation or waiting period … or applicable cost-sharing requirements,” officials say.


President Obama said today in the White House that he has just spoken to the chief executive officers of some of the largest U.S. health carriers and some state insurance commissioners to talk about implementing the ACA provisions.

A year ago, everyone, including insurers recognized “that finally something needed to be done about America’s broken health care system,” Obama said, according to a written version of his remarks. “One thing was clear to everybody: We couldn’t keep traveling down the same road.”

The new ACA regulations and the rest of the health system change process is “not punitive,” Obama said. “It’s not meant to punish insurance companies. They provide a critical service. They employ large numbers of Americans.  And in fact, once this reform is fully implemented a few years from now, America’s private insurance companies have the opportunity to prosper from the opportunity to compete for tens of millions of new customers. We want them to take advantage of that competition.”

But consumers need protection from problems with the current system, such as discrimination against children with preexisting conditions and efforts to rescind policies issued to women with breast cancer, Obama said.

“I’m pleased to say that some insurance companies have already stopped these practices,” Obama said.

Some have “questioned whether insurance companies might find a loophole in the new law and continue to discriminate against children with preexisting conditions,” Obama said. “And to their credit, when we called the insurance companies to provide coverage to our most vulnerable Americans, the industry agreed.  Those were the right things to do for their consumers, their customers — the American people. And I applaud industry for that.  And we’re going to hold industry to that standard, a standard in which industry can still thrive but Americans are getting a fair shake.”

Similarly, some insurers have tried to increase rates a great deal before new restrictions take effect, but at least one carrier withdrew a large rate increase when asked about it, Obama said.

“There are genuine cost-drivers that are not caused by insurance companies,” Obama said.

But “we’ve got to make sure that this new law is not being used as an excuse to simply drive up costs,” Obama said. “So what we do is make sure that the Affordable Care Act gives us new tools to promote competition, transparency and better deals for consumers. The CEOs here today need to know that they’re going to be required to publicly justify unreasonable premium increases on your websites, as well as the law’s new website — As we set up the exchanges, we’ll be watching closely, and we’ll fully support states if they exercise their review authority to keep excessively expensive plans out of their insurance exchanges.”


Pressure rising on healthcare long before overhaul takes effect. Millions will struggle to keep coverage until the law sets up a safety net in 2014

June 21, 2010|By Noam N. Levey, Tribune Washington Bureau

Reporting from Washington — Despite passage of the landmark healthcare overhaul this spring, the nation’s existing health system is continuing to fray, raising the prospect that the country could experience a crisis before the law establishes a new safety net in 2014.

Three months after President Obama signed the law, state governments struggling with budgets savaged by the recession are contemplating further cuts in healthcare aid for the poor, despite the promise of more federal dollars.

At the same time, several million laid-off Americans and their families who have used federal assistance to hold on to health insurance will lose coverage in coming months as the special assistance program expires. Those with jobs face their own challenges as employers continue to look for ways to pare health benefits and shift more costs to employees, if not drop health coverage altogether.

And people in all walks of life face rising healthcare prices and skyrocketing insurance premiums, which in many parts of the country are rising at double-digit rates this year.

“If the economy does not improve substantially, we may be taking some steps backward before we take steps forward,” said Ron Pollack, a leading supporter of the healthcare overhaul who heads the consumer group Families USA.

Obama’s senior healthcare advisor acknowledged that the road ahead may be rough. “Will plans continue to raise prices? Will some people continue to lose coverage? I think the answer is yes,” said Nancy-Ann DeParle, head of the White House Office of Health Reform. “It is something we are concerned about.”

DeParle called the next several years a “bridge period” until 2014, when Americans will get guaranteed access to health coverage along with billions of dollars of federal subsidies to help them pay their insurance bills.

The Obama administration thinks a series of initiatives in the new healthcare law will help hold the line during this period.

Since the law’s passage, administration officials have begun offering new tax breaks to small businesses to encourage them to offer their employees health benefits. The administration is developing regulations designed to increase oversight of insurance companies and prevent major rate increases.

The Department of Health and Human Services is working with states to set up high-risk pools for people who have been denied coverage.

“I think we have tools that will help make things better than they would have been” if the healthcare legislation had not passed, DeParle said.

Early research suggests that some of the short-term aid in the healthcare law, such as $5 billion for new high-risk pools, may be inadequate.

“This is not about healthcare reform,” said Helen Darling, president of the National Business Group on Health, an organization of large employers that provide coverage to about 50 million workers, retirees and dependents. “It’s just existing pressures on the system. … It’s business as usual.”

In a March survey, a sampling of 507 large employers reported that their healthcare costs would jump an average of 6.5% this year, slightly less than last year, but still more than three times as fast as prices are rising in the overall economy.

Many large employers are shifting more of those costs onto employees. Small businesses, which are already less likely to offer their employees health benefits, are under even more pressure as they wrestle with insurance premiums that are shooting up by more than 20% in some parts of the country.

More of these businesses appear to be either cutting benefits or shedding employees to offset rising healthcare costs, according to early responses to an economic survey by the National Small Business Assn. due out next month.

So far, federal and state officials have managed to hold together a healthcare safety net with the help of billions of dollars of stimulus spending authorized by Congress last year. Washington provided an estimated $2 billion in 2009 to help more than 2 million people and their dependents hold onto their health benefits after being laid off.

But now, under pressure to control spending, Congress appears certain to end the COBRA assistance, which provided unemployed workers with a 65% subsidy to help them pay their premiums. Normally, people who lose their jobs but want to keep their insurance through COBRA must pay the full cost of the premiums, making it unaffordable for most.

Democrats on Capitol Hill are moving to provide states with extra money to prop up their Medicaid programs for the poor, which have seen a huge surge in enrollment since the recession began. But for many states, even the extra aid is not expected to be enough.

California officials are planning to impose new limits on the number of prescriptions and doctor visits for people on its MediCal program. In North Carolina, state officials have already cut payments to doctors and other providers, and they are looking at ways to pare the number of people eligible for some services, such as home care. And in New Mexico, which also slashed provider payments recently, state leaders are discussing ways to cut long-term care services and some prescriptions.

“We don’t want to eliminate things at a time when we want to cover more people,” said Katie Falls, New Mexico’s human services secretary. “But getting from 2011 to 2014 is going to be very difficult. … And we’re coming up short.”


New rules could make 66 percent of employer plans lose ‘grandfathered’ status

New rules from the Obama administration that regulate health care plans that existed before the reform bill was passed highlight the difficulty the administration faces in both reforming the system and allowing people to keep the plans they like.

Under new regulations issued Monday, anywhere from 39 percent to 66 percent of employer plans will lose their “grandfathered status” by 2013, according to estimates included with the rules.

For plans that do not fall under the grandfathered status, employers would have to find a plan that complies with the health care bill passed March 23. Whether or not costs for the new plans will be less than grandfathered plans has yet to be seen.

Small businesses would be harder hit than large employers, losing grandfathered status for as few as 49 percent and as many as 80 percent of plans. Employers may keep their plan if it does not raise its prices beyond “reasonable changes” and if it does not cut substantially cut benefits for a particular condition.

Health and Human Services Secretary Kathleen Sebelius reiterated a saying that President Obama said many times during the health care debate: “If you like the plan you have, you can keep it,” Sebelius said at a press conference Tuesday.

But experts say the new regulations reflect the limits to which that promise can be kept.

“Given the direction that President Obama wanted to go with health care, his promise that people could keep their existing plans was always a dicey one,” said Tevi Troy, former HHS deputy secretary under President Bush and visiting senior fellow at the Hudson Institute.

The administration said that it would “take into account reasonable changes” that insurers routinely make in response to changes in cost and availability but would not outline details about what “reasonable changes” might be.

The regulations stipulate that insurers may make changes to their plans, but only to increase benefits or adapt to consumer protections outlined in the health care bill.

“They give all Americans with health insurance some important protections this year and create a path to the consumer-friendly health insurance marketplace of the future,” Sebelius said.

The new rules mandate that new individuals may not be added to grandfathered health plans after a business merger or restructuring so that grandfather status is not traded as a commodity. Thus companies will likely have employees with two different types of health care coverage, if the companies stay with their current plan.

Troy anticipates that insurance companies will try to freeze their plans to retain their grandfathered status for as long as possible.

“Freezing is not sustainable,” Troy told the Daily Caller. “The majority of plans will lose their grandfathered status in relatively short order, which I suspect was the unstated intent of both the legislators and the regulators.”


White House moves to keep employers from dropping insurance

From the

The White House on Monday outlined broad new rules designed to prevent employers from dropping health insurance benefits for their workers or shifting huge new costs onto them.

The regulations empower the administration to revoke the so-called grandfather status of businesses that shift “significant” new burdens onto employees — a considerable penalty that would subject those plans to all the consumer protections in the Democrats’ new healthcare reform law.

Unveiling the rules Monday, Health and Human Services Secretary Kathleen Sebelius told reporters that the changes will make good on one of the administration’s central promises during the contentious debate over reform: “If you like your doctor and your plan, you keep it,” she said.

Democrats exempted existing health insurance plans from a number of provisions of the new law as a concession to the insurance industry and business community. For example, grandfathered plans — those up and running when the legislation became law in March — don’t have to offer an insurance product without a cost-sharing requirement. Businesses, particularly large companies, prefer that arrangement because they don’t have to make sweeping changes to their existing plans.

The new rules say that employers can make “routine and modest” adjustments to their premium, deductible and co-pay requirements, Sebelius said, but “significant” cost hikes or benefit cuts would cost them their exempted status. The goal is to ensure that grandfathered plans “don’t use this additional flexibility to take advantage of their customers,” she said.

“We don’t want a massive shift of cost to employees,” Sebelius said.

Officials expect the new rules to have the greatest impact on the roughly 133 million employees at large companies, whose insurance offerings tend to remain more stable than at smaller businesses. Labor Secretary Hilda Solis told reporters Monday that the new rules will help “minimize market disruptions.”

Republicans are not convinced. Senate Minority Leader Mitch McConnell (R-Ky.) said Monday that the rules would force more than half of the U.S. workforce out of their current health plan — which “flatly contradicts” the Democrats’ promises during the debate.

“Here’s one more promise the administration has broken on healthcare,” McConnell said.

Sen. Chuck Grassley (Iowa), senior Republican on the Finance Committee, echoed that message, calling the rules “more proof” that, under the new law, “you actually can’t keep what you like.”

“Change is coming for a lot of people,” Grassley said in a statement, “whether they want it or not.”

The new rules came on the same day analysts at PricewaterhouseCoopers issued a report projecting that employers’ healthcare costs will jump 9 percent in 2011. The authors predict that employers next year will shift more costs onto workers, hiking deductibles and replacing co-pays with co-insurance policies.

The White House was quick to push back against the report, pointing out that the employer surveys on which it was based were conducted before the Democrats’ reform bill was passed. Also, the analysts noted that the new reform law, much of which takes effect in 2014, had only a “minor” influence on next year’s cost trends.

Asked about the report Monday, Sebelius conceded that many people will wonder why all the benefits of the health reform law don’t begin immediately. Still, she added, the survey “argues the case that we could absolutely not afford to do nothing.”

“People are being absolutely priced out of the marketplace,” she said.