Archive | Insurance Company News – California

California could pose problem for Obama’s healthcare reform

By Noam N. Levey, Los Angeles Times

September 15, 2011

California, a model for healthcare reform, is seeking to impose some of the toughest limits on government-subsidized coverage. If approved, the limits could herald deep Medicaid cuts nationwide.


Reporting from Washington — For more than a year, as conservative states have battled President Obama’s sweeping healthcare law, California was supposed to be a model that showed the law’s promise.

But the state is emerging as one of the biggest headaches for the White House in its bid to help states bring millions of Americans into the healthcare system starting in 2014.

Though still outpacing much of the nation, cash-strapped California is cutting its healthcare safety net more aggressively than almost any other state, despite billions of dollars in special aid from Washington.

And state leaders are pressing the Obama administration for permission to place some of the toughest limits in the nation on government-subsidized healthcare, including a cap on how often people with Medicaid — the healthcare program for the poorest Americans — can go to the doctor.

A decision on some of California’s requests is expected this month. If approved, the limits could open the door to deep cutbacks nationwide.

“There are states that are bellwethers. California is one of them,” said Jane Perkins, legal director of the National Health Law Program. If the federal government approves California’s requests, other states are almost certain to seek similar treatment, setting off a “race to the bottom,” she said.

The stakes are unusually high for the Obama administration. “Health reform is badly in need of success stories, and early success in California could add decisive momentum,” said Drew Altman, president of the nonprofit Kaiser Family Foundation, a leading health policy center. “But if California bogs down, or if there is an implementation failure, it would be a huge negative for the whole implementation effort nationally.”

Less than a year ago, California officials were setting out to lead the country toward healthcare reform.

In October, then-Gov. Arnold Schwarzenegger broke with national Republicans to support the healthcare overhaul and made California the first state to create an insurance exchange after the national law was enacted. Beginning in 2014, these exchanges will serve as Internet-based marketplaces in which people who do not get health benefits at work can buy coverage.

A month later, the Obama administration approved a $10-billion plan to help California get a jump start on expanding coverage to its poorest residents, another key part of the new law.

The state continues to move ahead. A well-respected expert is taking the helm of California’s insurance exchange, and the state is expanding the number of low-income Californians eligible for health coverage.

“Health reform is the light at the end of the tunnel,” said Anthony Wright, executive director of Health Access California, a leading advocacy group.

By contrast, GOP leaders in Texas, Florida, Kansas and other conservative states have recently put the brakes on expanding health coverage.

But as a result of a deep budget crisis, California’s 2012 spending plan slashes $2 billion from Medi-Cal, as Medicaid is called in the state, over the next two years. That could affect more than 8.5 million people.

California already spends less per beneficiary than any state. It is now seeking waivers from the federal government to impose copays of $5 for office visits and prescriptions, $50 for emergency room visits and $100 for hospital stays. Few other states come close to charging Medicaid recipients that much.

Cost sharing in Medicaid is tightly restricted under federal law because it can discourage people from seeking needed care. A family of three at the federal poverty line makes just $356 a week.

The state plans to limit Medicaid beneficiaries to seven doctor visits a year, with exceptions for essential care. No state has imposed such stringent limits.

California, which already pays Medi-Cal providers less than all but two states, also is pushing to cut payments to doctors, hospitals and others who serve Medi-Cal patients by 10%. That would drop reimbursement for a standard physician visit to less than $12.

“This isn’t the way we’d want to run a Medicaid program,” said Toby Douglas, California’s Medi-Cal director. “If it wasn’t for the state fiscal crisis, we … would not be going forward with these proposals. We would be focusing solely on healthcare reform.”

Medical providers and patient advocates are growing increasingly concerned, however, that the cuts will undermine the goals of the new law.

Many doctors have already closed their doors to Medicaid patients. Other providers are following suit. In June, Sharp Coronado Hospital in San Diego County stopped taking new patients at its facility providing long-term life support.

“I’m afraid no one is going to take these people,” said Chief Executive Marcia Hall.

In Washington, officials at the Department of Health and Human Services, who have been in intense discussions with California officials for months, desperately want to avert a healthcare crisis in the state.

In a case before the U.S. Supreme Court this fall, the administration is backing California’s bid to throw out a lawsuit by state medical providers challenging its Medi-Cal cuts.

At the same time, many administration officials are worried that granting California permission to further slash Medicaid could prompt other states to follow suit.

“We want to honor the flexibility that the states need and want,” said Dr. Donald Berwick, who heads the federal Medicaid and Medicare programs. “But beneficiaries are also having a tough time, and we want make sure their interests and access are being protected.”


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.



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



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.



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.


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.


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?


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.


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).



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.


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.