Health Care Co-operatives: The Senate Finance Committee's reform plan allocates $6 billion ($300 million per state) to establish statewide non-profit health insurance purchasing co-operatives by 2013. To qualify for federal start-up funds, the co-operatives must meet fairly stringent criteria. The organizations applying for the funds cannot be in the insurance business, or be related to insurance companies (this will be a disappointment to mutual insurance companies). They also must not be organizations currently offering insurance, though it's not clear whether that would include Chambers of Commerce or trade or professional associations currently offering health insurance coverage to members. Co-ops must be in the primary business of providing access to health care services to their members, and any excess revenue generated by the co-ops would have to be returned to its members, or invested in other health care-related activity. The would also be self-insured, and would be expected to stand on their own within one year of being established.
The co-op idea is meant to be a more politically palatable alternative to a "public option" health plan. It's certainly a less disruptive concept than a public health plan, and so much more palatable to the insurance industry. But as one who's had a good deal of experience in the health insurance co-operative business, I'm not sure that's the best idea.
Even with a compelling value proposition (substantial savings for participating companies and individuals), it takes considerable time to build sufficient critical mass within a co-op to enable it to be competitive with private insurers already in the marketplace. And co-ops will have to expend a lot of resources on marketing, sales and underwriting, just like their commercial brethren. Nonetheless, a well-run co-op could produce some economies of administrative scale, and if run solely for the benefit of their members, could be a player in the marketplace over time.
Both co-ops and exchanges will also be encouraged to enter into interstate "compacts" for the purposes of purchasing services more efficiently. This is a back-door entryway into a national market for health care coverage, a necessary innovation to enable true competition to develop in the health insurance market, where large insurers have the ability to use their economies of scale nationwide.
Elements of this part of the bill are bound to change significantly. I'd certainly expect to see some sort of "trigger" introduced to the bill providing that, after a substantial time had occurred to permit insurance reforms to work and co-ops and exchanges to be established, a public health plan could still be introduced if all these reforms had NOT resulted in better access and more controllable costs for group and individual consumers.
Legislators will be counting on the threat of the introduction of a public plan to be sufficient motivation to persuade insurers to play fair.
Don't panic just yet; should such a "trigger" be pulled, it wouldn't be till 2018 at the earliest.
Mandates: Beginning in 2013, every American would be required to have health insurance coverage, whether through an employer or through an exchange. Tax credits would be available to individuals who might need help in obtaining coverage, up to 300% of the federal poverty line.
Companies with 200 or more employees would be required to enroll all their qualified employees in a health plan. Companies with more than 50 employees would have to enroll their employees or pay a fairly modest penalty for those employees who must purchase coverage on the individual market. Companies with fewer than 50 employees would be exempt from any mandate.
Seems to me that, no matter what you call it, the bill imposes mandates on employers and individuals to provide or purchase health coverage under most circumstances. As I've written before, if the voluntary market can be demonstrated to be working as well as it can, and everyone who wishes to purchase coverage can do so at a reasonable cost, it might make sense to enact a mandate to cover thee outliers who have refused to purchase coverage, even when it's available.
We're by no means there yet. And I fear that, in the face of a looming mandate, insurers will merely bide their time and do fairly little, because the clock will be ticking toward a date when everyone will be required to buy their product, no matter what the price.
Thursday, September 24, 2009
Wednesday, September 23, 2009
Health Insurance Reform: God (Or The Devil) Is In The Details
The Senate Finance Committee's health insurance reform plan does propose some significant changes to the small group and individual health insurance markets. I say "changes" and not improvements because there still aren't a lot of details, and those details there are don't suggest a lot of hope that small business owners and self-employed people will experience much short- or long-term cost savings...in fact, the betting would be on higher costs and even more limited control over them.
The major elements of the insurance proposal fall into four categories: rate and underwriting regulations; the creation of insurance exchanges; the development of statewide, non-profit health insurance co-operatives; and the individual mandate.
Insurance Rating Reforms: beginning on January 1, 2013, insurance companies would no longer be able to deny coverage to any individual applicant for health reasons. And insurers would have limits on the variations they might impose on rates: in general, the highest price for any given health plan could not exceed 7.5 times the cost of the lowest-cost plan. And rates can be set using only the applicant's age and family size, plus variations for smoking and geography.
The same conditions would apply to small groups (with 1-50 employees) by 2019.
Who might win here?...Obviously, people who haven't been able to purchase coverage because they wouldn't pass through a health screen, and probably self-employed people, who would qualify for group coverage under the plan. The rating rules would theoretically benefit younger insureds, and more or less smack it to older folks.
The thing is, though, that we won't know till at least 2019 how any of these regulations might help or hurt the market, since there seems to be no oversight.
Insurance Exchanges:States will be required to set up insurance "exchanges," which will use standardized application forms, technology-assisted marketing and communications and customer support, to marketplaces for purchasing health plans. The timing would supposedly follow the insurance reform timetable, with exchange-based plans available to individuals by January 1, 2013, for small groups by 2018, and for larger groups five years after that.
It's a lot easier to pass a law that says, "Thou shalt set up insurance exchanges" than it is actually to build one. No one really has any idea how such a marketplace will be set up and operate. It's also not clear how plans available through an exchange might be different form those offered by insurers themselves, whether all insurers operating in a state will be required to participate, if that participation will be proportionate to their market share...or anything else.
And again, small businesspeople who are feeling the health insurance squeeze now shouldn't be rushing to the bank with all the money they're going to save on health insurance premiums. It'll be three to five years before the structures will even exist, and another three to five to determine whether this approach is working.
Tomorrow: Co-ops and Mandates
The major elements of the insurance proposal fall into four categories: rate and underwriting regulations; the creation of insurance exchanges; the development of statewide, non-profit health insurance co-operatives; and the individual mandate.
Insurance Rating Reforms: beginning on January 1, 2013, insurance companies would no longer be able to deny coverage to any individual applicant for health reasons. And insurers would have limits on the variations they might impose on rates: in general, the highest price for any given health plan could not exceed 7.5 times the cost of the lowest-cost plan. And rates can be set using only the applicant's age and family size, plus variations for smoking and geography.
The same conditions would apply to small groups (with 1-50 employees) by 2019.
Who might win here?...Obviously, people who haven't been able to purchase coverage because they wouldn't pass through a health screen, and probably self-employed people, who would qualify for group coverage under the plan. The rating rules would theoretically benefit younger insureds, and more or less smack it to older folks.
The thing is, though, that we won't know till at least 2019 how any of these regulations might help or hurt the market, since there seems to be no oversight.
Insurance Exchanges:States will be required to set up insurance "exchanges," which will use standardized application forms, technology-assisted marketing and communications and customer support, to marketplaces for purchasing health plans. The timing would supposedly follow the insurance reform timetable, with exchange-based plans available to individuals by January 1, 2013, for small groups by 2018, and for larger groups five years after that.
It's a lot easier to pass a law that says, "Thou shalt set up insurance exchanges" than it is actually to build one. No one really has any idea how such a marketplace will be set up and operate. It's also not clear how plans available through an exchange might be different form those offered by insurers themselves, whether all insurers operating in a state will be required to participate, if that participation will be proportionate to their market share...or anything else.
And again, small businesspeople who are feeling the health insurance squeeze now shouldn't be rushing to the bank with all the money they're going to save on health insurance premiums. It'll be three to five years before the structures will even exist, and another three to five to determine whether this approach is working.
Tomorrow: Co-ops and Mandates
Tuesday, September 22, 2009
Taxes And Taxes Which Aren't Taxes: Plenty Not To Like In Baucus Health Bill
It's actually a pretty good sign that the health reform plan released last week by Senate Finance Committee Chair Max Baucus immediately drew fire from both left and right, from both Republicans and Democrats. It's the sign of a compromise that all parties feel unsatisfied with the result.
What the release of the plan really triggers is the beginning of serious horse-trading, as the Finance Committee's bill is debated against a bill reported out earlier in the summer by the Senate Health, Education, Labor, and Pensions Committee, which is considerably more liberal than the Finance Committee's version. And once the Senate has agreed upon a bill, then the action will move to the House, which must reconcile four different health reform bills. Then House and senate members will form a Conference Committee to reconcile House and senate bills into the final piece of legislation.
The point here is that we're a long, long, way from knowing what the final version of health reform legislation will look like. So if you're part of the insurance industry, it's way premature to be celebrating that the Finance version doesn't contain a "public option." And if you're a manufacturer of pharmaceuticals or medical equipment, it's too soon to panic over the imposition of billions of dollars in fees meant to cover the cost of insuring the uninsured via a means which would not add to the federal deficit.
But for small businesspeople and other taxpayers, it ISN'T too soon to be concerned that whatever comes out of the legislative sausage-maker will make health insurance more expensive for you, unless cooler heads prevail along the way...which isn't likely.
Republicans have virtually invited themselves out of the debate, which means that they've abandoned their role as negotiators on behalf of limited government and lower taxes in favor of mere obstreperousness. And Baucus has already made clear his willingness to increase tax subsidies to assist middle-income Americans to buy coverage, and to raise the ceiling on his spurious proposal to tax "gold-plated" health plans.
There's plenty in Baucus' bill to give taxpayers pause. Here are a few:
...A 35% excise tax on insurers which offer generous benefit plans. Setting aside for a moment the notion of on what basis such a tax might be calculated (actual premium cost vs. some sort of "actuarial value" calculation), insurers are likely (indeed, they'll lobby furiously for the right) to pass the cost of the excise tax on to the consumers who purchase these generous benefits plans. And while they've been characterized as punishing the white-collar tycoons who run big banks and insurance companies, these benefits plans are really enjoyed mostly by union workers. The idea won't fly unless it's seriously watered down, but since it's one of the biggest keys to generating revenue to pay for other stuff, watering it down will require either cutting benefits for some or raising revenue some other way;
Taxes which aren't taxes: In similar fashion, the Baucus plan proposes imposition of $13 billion in fees on insurance companies, drugmakers, and equipment manufacturers to cover part of the cost of insuring the uninsured. These fees have also been cooked up to generate revenue in a way that doesn't look like a tax. But the costs would be passed straight back to consumers as well.
I don't know about you, but when my costs go up, it doesn't matter much whether the extra costs goes to the government or my insurance company, it feels like a tax to me.
Tomorrow, I'll try to take uo the upside and downside of the Baucus bill's insurance reforms.
What the release of the plan really triggers is the beginning of serious horse-trading, as the Finance Committee's bill is debated against a bill reported out earlier in the summer by the Senate Health, Education, Labor, and Pensions Committee, which is considerably more liberal than the Finance Committee's version. And once the Senate has agreed upon a bill, then the action will move to the House, which must reconcile four different health reform bills. Then House and senate members will form a Conference Committee to reconcile House and senate bills into the final piece of legislation.
The point here is that we're a long, long, way from knowing what the final version of health reform legislation will look like. So if you're part of the insurance industry, it's way premature to be celebrating that the Finance version doesn't contain a "public option." And if you're a manufacturer of pharmaceuticals or medical equipment, it's too soon to panic over the imposition of billions of dollars in fees meant to cover the cost of insuring the uninsured via a means which would not add to the federal deficit.
But for small businesspeople and other taxpayers, it ISN'T too soon to be concerned that whatever comes out of the legislative sausage-maker will make health insurance more expensive for you, unless cooler heads prevail along the way...which isn't likely.
Republicans have virtually invited themselves out of the debate, which means that they've abandoned their role as negotiators on behalf of limited government and lower taxes in favor of mere obstreperousness. And Baucus has already made clear his willingness to increase tax subsidies to assist middle-income Americans to buy coverage, and to raise the ceiling on his spurious proposal to tax "gold-plated" health plans.
There's plenty in Baucus' bill to give taxpayers pause. Here are a few:
...A 35% excise tax on insurers which offer generous benefit plans. Setting aside for a moment the notion of on what basis such a tax might be calculated (actual premium cost vs. some sort of "actuarial value" calculation), insurers are likely (indeed, they'll lobby furiously for the right) to pass the cost of the excise tax on to the consumers who purchase these generous benefits plans. And while they've been characterized as punishing the white-collar tycoons who run big banks and insurance companies, these benefits plans are really enjoyed mostly by union workers. The idea won't fly unless it's seriously watered down, but since it's one of the biggest keys to generating revenue to pay for other stuff, watering it down will require either cutting benefits for some or raising revenue some other way;
Taxes which aren't taxes: In similar fashion, the Baucus plan proposes imposition of $13 billion in fees on insurance companies, drugmakers, and equipment manufacturers to cover part of the cost of insuring the uninsured. These fees have also been cooked up to generate revenue in a way that doesn't look like a tax. But the costs would be passed straight back to consumers as well.
I don't know about you, but when my costs go up, it doesn't matter much whether the extra costs goes to the government or my insurance company, it feels like a tax to me.
Tomorrow, I'll try to take uo the upside and downside of the Baucus bill's insurance reforms.
Tuesday, September 15, 2009
"Do Insurance Companies Deserve All The Crap They're Getting?"
A blogger's dream...I finally received an actual question from an actual reader (thanks for both, by the way), and it happens to be an important question, at that.
First, "deserve" has almost nothing to do with it. As the past several months of debate have made clear, health care reform is a complex exercise, because of the many powerful entities...hospitals, physicians, pharmaceutical manufacturers, medical equipment makers,...who, together with insurers, are both contributors to the current mess we're in, and beneficiaries of the status quo.
But no matter how complex, the standard public relations strategy for shaping discussion of an issue is the old game of "villains and victims." Every story needs a good guy and a bad guy. So in this debate as well as any other, you're either one or the other.
We know the pharmaceuticals industry and the hospital industry have already pledged their support for the President's efforts in exchange for a pledge that the resulting reforms will mitigate their downside (whether all these pledges hold up through the legislative process remains to be seen).
We also know that most people's views of the health care system are seen through the lens of their health plans. If a claim is denied, if a treatment isn't authorized, if the newest prescription drug isn't on the "approved" list, people tend to blame their insurance companies. If patients are surprised by big co-pays or out-of-network penalties, they tend to blame their health plans, And rightly or wrongly, those other big players tend to see insurers as curbs to their ability to generate as much revenue as they believe they deserve.
So no one likes insurance companies, which makes them a convenient choice to play the villains in this debate.
The many talking heads who have bemoaned the fact that the current debate seems to be focused primarily on health insurance reform, rather than on reform to the overall delivery system, are all right...but they all miss the point. The President has made very little headway selling systemic reform as necessary because of the complexity of the message. Simplifying the message to focus on a villain is helping to sell the public on the need for reform; everybody has a horror story about how they or someone they know have been "screwed by an insurance company." And in the politics of this debate, it's less important to actually fix the entire health care system than it is to be able to take credit for having done something good. And beating up on insurance companies is an activity which many people find satisfying.
Is this to say that insurance companies have been unfairly singled out for abuse?...That they're innocent victims? Hardly. Health insurers have made out pretty well over the past 15 to 20 years, largely on the basis of a big push they made both in Congress and in state legislatures across the country which established many of the pricing, underwriting and administrative rules under which they currently operate.
It was the health insurance lobby which defined "small group health insurance" as coverage for companies with between 2 and 50 workers...thus creating a lucrative and exclusive market for individual health insurance coverage.
It was the insurance lobby which made sure that those individual health plans would not be subject to the same government regulations as group coverage...thus enabling the pricing, underwriting, and recission issues that we hear about so often.
It was the insurance industry which has created high-deductible health plans, and sold families on $10,000 family deductibles as a smart financial decision...even when those families might earn $40,000 a year or less, and the deductible would ruin them.
It's health insurers who created short-term health coverage, and limited benefit plans, and sold them to often ill-informed customers who had no idea how useless those "products" are when a serious illness or injury occurs.
But as unacceptable as many of those practices seem, it's important to recognize that they are all perfectly legal. And within the industry, there are reasons for them.
The health insurance industry is not monolithic. There are nearly 2,000 licensed life and health companies out there. Much of the outrageous behavior we see in the marketplace has resulted from efforts by small, "niche" insurers to use the legislative and regulatory process to undermine the market power of the few gigantic mega-plans which dominate local and regional health care markets. In over 70 percent of local communities, three or fewer insurers hold 75% combined market share or more.
The small guys find it hard to compete under those conditions. So they've gamed the system a little to create opportunities for themselves.
An excellent example of these curbs on more open competition is regulation which impedes large insurers from forming association-type "pools," which can reduce administration costs and bring down prices for participating companies. Smaller insurers won rules which prohibit insurers from discounting administrative costs or taking any other steps which might enable them to make use of the laws of large numbers to offer lower rates to some small groups than for others.
The combination of the promotion of heavily-underwritten individual health coverage and curbs on efficiencies in the small group market have been major factors in the devolution of the risk pool, requiring insurers to rate each small group and individual application as if it were a universe of one, two, or three people. This strategy of risk-based selection has been a bonanza for small specialty insurers, and has undermined incentives for large insurers to find ways to reduce their costs and create a more competitive local market.
Interestingly, it's these same insurers who have objected to the formation of large non-profit purchasing co-ops, on the outrageous assertion that the formation of a bunch of co-ops would "fragment the risk pool." Actually, their fears are just the opposite: that the formation of co-operatives would mobilize groups of purchasers into economic units which might be able to negotiate aggressively on behalf of their participating members. Insurers hate negotiating in the small group and individual markets; they vastly prefer their "take it or leave it" approach.
Keep in mind that it's easy to talk just as broadly about outrageous behavior on the part of hospitals, doctors, drug and equipment makers...even individual Americans whose risky behavior drives up costs throughout the system...as it is about perfectly legal "abuses" by the insurance industry. We're all contributors to our health care crisis.
But changing some of the more egregious practices within the insurance industry, enabling the formation of large risk pools through co-operative purchasing, opening the group market up to self-employed individuals...these steps really could help a lot of people, stabilize rates, and expand coverage in the private voluntary market.
First, "deserve" has almost nothing to do with it. As the past several months of debate have made clear, health care reform is a complex exercise, because of the many powerful entities...hospitals, physicians, pharmaceutical manufacturers, medical equipment makers,...who, together with insurers, are both contributors to the current mess we're in, and beneficiaries of the status quo.
But no matter how complex, the standard public relations strategy for shaping discussion of an issue is the old game of "villains and victims." Every story needs a good guy and a bad guy. So in this debate as well as any other, you're either one or the other.
We know the pharmaceuticals industry and the hospital industry have already pledged their support for the President's efforts in exchange for a pledge that the resulting reforms will mitigate their downside (whether all these pledges hold up through the legislative process remains to be seen).
We also know that most people's views of the health care system are seen through the lens of their health plans. If a claim is denied, if a treatment isn't authorized, if the newest prescription drug isn't on the "approved" list, people tend to blame their insurance companies. If patients are surprised by big co-pays or out-of-network penalties, they tend to blame their health plans, And rightly or wrongly, those other big players tend to see insurers as curbs to their ability to generate as much revenue as they believe they deserve.
So no one likes insurance companies, which makes them a convenient choice to play the villains in this debate.
The many talking heads who have bemoaned the fact that the current debate seems to be focused primarily on health insurance reform, rather than on reform to the overall delivery system, are all right...but they all miss the point. The President has made very little headway selling systemic reform as necessary because of the complexity of the message. Simplifying the message to focus on a villain is helping to sell the public on the need for reform; everybody has a horror story about how they or someone they know have been "screwed by an insurance company." And in the politics of this debate, it's less important to actually fix the entire health care system than it is to be able to take credit for having done something good. And beating up on insurance companies is an activity which many people find satisfying.
Is this to say that insurance companies have been unfairly singled out for abuse?...That they're innocent victims? Hardly. Health insurers have made out pretty well over the past 15 to 20 years, largely on the basis of a big push they made both in Congress and in state legislatures across the country which established many of the pricing, underwriting and administrative rules under which they currently operate.
It was the health insurance lobby which defined "small group health insurance" as coverage for companies with between 2 and 50 workers...thus creating a lucrative and exclusive market for individual health insurance coverage.
It was the insurance lobby which made sure that those individual health plans would not be subject to the same government regulations as group coverage...thus enabling the pricing, underwriting, and recission issues that we hear about so often.
It was the insurance industry which has created high-deductible health plans, and sold families on $10,000 family deductibles as a smart financial decision...even when those families might earn $40,000 a year or less, and the deductible would ruin them.
It's health insurers who created short-term health coverage, and limited benefit plans, and sold them to often ill-informed customers who had no idea how useless those "products" are when a serious illness or injury occurs.
But as unacceptable as many of those practices seem, it's important to recognize that they are all perfectly legal. And within the industry, there are reasons for them.
The health insurance industry is not monolithic. There are nearly 2,000 licensed life and health companies out there. Much of the outrageous behavior we see in the marketplace has resulted from efforts by small, "niche" insurers to use the legislative and regulatory process to undermine the market power of the few gigantic mega-plans which dominate local and regional health care markets. In over 70 percent of local communities, three or fewer insurers hold 75% combined market share or more.
The small guys find it hard to compete under those conditions. So they've gamed the system a little to create opportunities for themselves.
An excellent example of these curbs on more open competition is regulation which impedes large insurers from forming association-type "pools," which can reduce administration costs and bring down prices for participating companies. Smaller insurers won rules which prohibit insurers from discounting administrative costs or taking any other steps which might enable them to make use of the laws of large numbers to offer lower rates to some small groups than for others.
The combination of the promotion of heavily-underwritten individual health coverage and curbs on efficiencies in the small group market have been major factors in the devolution of the risk pool, requiring insurers to rate each small group and individual application as if it were a universe of one, two, or three people. This strategy of risk-based selection has been a bonanza for small specialty insurers, and has undermined incentives for large insurers to find ways to reduce their costs and create a more competitive local market.
Interestingly, it's these same insurers who have objected to the formation of large non-profit purchasing co-ops, on the outrageous assertion that the formation of a bunch of co-ops would "fragment the risk pool." Actually, their fears are just the opposite: that the formation of co-operatives would mobilize groups of purchasers into economic units which might be able to negotiate aggressively on behalf of their participating members. Insurers hate negotiating in the small group and individual markets; they vastly prefer their "take it or leave it" approach.
Keep in mind that it's easy to talk just as broadly about outrageous behavior on the part of hospitals, doctors, drug and equipment makers...even individual Americans whose risky behavior drives up costs throughout the system...as it is about perfectly legal "abuses" by the insurance industry. We're all contributors to our health care crisis.
But changing some of the more egregious practices within the insurance industry, enabling the formation of large risk pools through co-operative purchasing, opening the group market up to self-employed individuals...these steps really could help a lot of people, stabilize rates, and expand coverage in the private voluntary market.
Friday, September 11, 2009
Reading Between The Lines Of The President's Address
Much ink and airtime have been invested since Wednesday night in critiquing the President's health care reform address. I have just a few thoughts:
1) The President gave an okay speech, but touched on relatively few new ideas. I thought his principal audience was House Democrats, particularly those on the left. He sought to assure them that he hadn't abandoned a few core issues...like a public health plan option...even as he virtually asked them not to abandon a health care bill which probably won't contain one.
It's pretty clear to me that a public option is probably not going to be included in a final bill. After the speech, both House Speaker Pelosi and Senate Majority Leader Reid backed off insistence on a public plan, except as a back-up measure in the event legislated insurance reforms don't work. And if one were to be enacted, it would be way down the line.
From the beginning, my prediction has been that the House might pass a bill containing a public option (though it would give the Blue Dogs fits), but the Senate won't, and the final bill would contain a provision to enact a public option only if the insurance industry were, after at least five years, unable to reduce costs and increase the incidence of insurance coverage enough to avoid "triggering" a public option. The President's address, and the Congressional leadership's response to it, makes that outcome more likely;
2) While it makes political sense, the idea of exempting 95% of the small companies in America from compliance with either a mandate to provide coverage to their employees or from tax penalties for not doing so doesn't just severely weaken the credibility of the overall health care reform strategy, it also signals some other significant potential problems down the road. Companies with fewer than ten employees have the hardest time purchasing group coverage to begin with, and when they can get it, pay nearly 20% more for it than large companies do. A "hands off" approach to the problems facing this segment of the marketplace could suggest that, while small businesses may be spared some of the expense entailed in the reform plan, they may not benefit much, either. And absent some very significant changes in the pricing and underwriting rules governing both the individual and small group markets, some of the President's suggested insurance reforms could make coverage more expensive for companies that are currently struggling to provide coverage to their workers (and to their owners' families as well) and put the cost of coverage further beyond the reach of those that don't.
3)Until there's a real bill, with real numbers, exercising too much concern about what might or might not be in it is a waste of time. The process is essentially starting over. I think it's going to be a matter of months, at least, before there's action on anything resembling a final bill. The first provisions of the bill, when it's enacted will not take effect till 2013, and will be phased in over probably a five-year period. So even under the best circumstances, a fully-realized program is nearly ten years away from fruition, and there are TONS of details between here and there.
1) The President gave an okay speech, but touched on relatively few new ideas. I thought his principal audience was House Democrats, particularly those on the left. He sought to assure them that he hadn't abandoned a few core issues...like a public health plan option...even as he virtually asked them not to abandon a health care bill which probably won't contain one.
It's pretty clear to me that a public option is probably not going to be included in a final bill. After the speech, both House Speaker Pelosi and Senate Majority Leader Reid backed off insistence on a public plan, except as a back-up measure in the event legislated insurance reforms don't work. And if one were to be enacted, it would be way down the line.
From the beginning, my prediction has been that the House might pass a bill containing a public option (though it would give the Blue Dogs fits), but the Senate won't, and the final bill would contain a provision to enact a public option only if the insurance industry were, after at least five years, unable to reduce costs and increase the incidence of insurance coverage enough to avoid "triggering" a public option. The President's address, and the Congressional leadership's response to it, makes that outcome more likely;
2) While it makes political sense, the idea of exempting 95% of the small companies in America from compliance with either a mandate to provide coverage to their employees or from tax penalties for not doing so doesn't just severely weaken the credibility of the overall health care reform strategy, it also signals some other significant potential problems down the road. Companies with fewer than ten employees have the hardest time purchasing group coverage to begin with, and when they can get it, pay nearly 20% more for it than large companies do. A "hands off" approach to the problems facing this segment of the marketplace could suggest that, while small businesses may be spared some of the expense entailed in the reform plan, they may not benefit much, either. And absent some very significant changes in the pricing and underwriting rules governing both the individual and small group markets, some of the President's suggested insurance reforms could make coverage more expensive for companies that are currently struggling to provide coverage to their workers (and to their owners' families as well) and put the cost of coverage further beyond the reach of those that don't.
3)Until there's a real bill, with real numbers, exercising too much concern about what might or might not be in it is a waste of time. The process is essentially starting over. I think it's going to be a matter of months, at least, before there's action on anything resembling a final bill. The first provisions of the bill, when it's enacted will not take effect till 2013, and will be phased in over probably a five-year period. So even under the best circumstances, a fully-realized program is nearly ten years away from fruition, and there are TONS of details between here and there.
Wednesday, September 9, 2009
Co-Ops, Triggers, Mandates...Where Will Health Reform Legislation End Up?
Several weeks ago, I wrote about a few elements of health care reform legislation which, if enacted, might actually help small business owners and self-employed individuals get and maintain access to health care coverage at a more affordable cost. Those elements are:
-undoing federal and state regulations which impede the formation of large purchasing groups, or co-operatives, which would enable small businesses and the self-employed to combine their purchasing power for lower costs and a greater variety of choices in health coverage;
-expressly making it clear that self-employed individuals purchasing coverage through such co-ops will be able to obtain group coverage at group rates (since the "group" would be the co-operative, not the individual companies which are members);
-establishing a series of pilot projects or demonstration projects aimed at using information technology to make it easier and more cost-effective to shop for and purchase health coverage, and;
-establishing a five-year window for these initiatives to take effect, and for the insurance industry to demonstrate that they "get it," before considering the enactment of either a "public option" health plan, or a mandate of any kind.
My rationale for those initiatives were first, that mandating either employers or individuals to purchase health care coverage makes sense only if the marketplace is working as well as it can, and that coverage is generally available at reasonable prices to anybody who wants to buy it (today, that's not the case); and second, that the establishment of co-operative purchasing groups makes sense only if they are not subject to the same crippling, anti-consumer pricing and underwriting practices which have made health insurance more expensive and harder to obtain for small businesses and the self-employed.
As the President prepares to speak to the nation this evening, and as Congress re-convenes and begins efforts to "re-boot" health care reform legislation, I'm more confident than ever that these elements will be a part of the outcome of whatever health care reform legislation emerges from the Congressional sausage-maker. Here's why:
1) There's already broad consensus that the individual health insurance market needs to get fixed. It's a very safe bet that, at the very least, the legislation will prohibit insurers from rejecting applications from individuals with health conditions, and curb some of the industry's more egregious practices, such as recision (the practice of canceling coverage for individuals who develop health conditions after purchasing coverage), or dramatically increasing premium rates for individuals who are less than perfectly healthy;
2) Whether they're called exchanges, co-operatives, or something else, there's broad agreement that cost and access relief for the small group and individual markets will come from creating larger "risk pools," taking advantage of the actuarial laws of large numbers, as well as collective purchasing power, to enable participating companies to negotiate more effectively on pricing, and reducing the cost of administration, which can be six times higher for small businesses than for large ones;
3) The bill being reported out of the Senate Finance Committee will, at the very least, enable states to experiment with various mechanisms for pooling risks, whether via state-sponsored "public options" or co-operatives, and providing some Federal resources to encourage such experimentation.
That leaves the debate over the so-called public option. The House leadership has made it quite clear that House members probably can't pass without the inclusion of a public option. The Senate leadership says that a bill which contains a public option won't muster the votes necessary to pass, and the Senate Finance Committee does not contain a public option, settling for a "trigger" for a possible public option if, after three years, the insurance industry hasn't gotten its act together.
I expect that House members will get what they want: a bill which contains some sort of public option provision. But the Senate bill will not contain a public option, and MAY include a provision for some sort of medical malpractice reform as an olive branch to win some wavering Republiicans.
In conference committee, where the House and Senate bills will be reconciled, the parties will agree to hold off on a public option for three to (probably) five years, giving private market reforms a chance to work.
This would give the House the chance to say they supported a public option, and the President to say that a public option is a part of the bill. It would also give the market time to adjust to whatever regulations come out of the legislative process after the legislation passes (the regulatory process itself could take a couple years), and put the insurance industry on notice that, unless it plays a major role in reducing the number of uninsured people and reducing administrative costs, it could face competition with a robust public option.
And by the way, it would also give the geniuses in Washington the chance to decide exactly what a public option might look like, and how it might work. Because, as I've said several times in the past, currently there's almost NOTHING about the health care reform plan which has been specifically spelled out in legislation. So until that happens, both proponents and opponents are contending with shadows.
-undoing federal and state regulations which impede the formation of large purchasing groups, or co-operatives, which would enable small businesses and the self-employed to combine their purchasing power for lower costs and a greater variety of choices in health coverage;
-expressly making it clear that self-employed individuals purchasing coverage through such co-ops will be able to obtain group coverage at group rates (since the "group" would be the co-operative, not the individual companies which are members);
-establishing a series of pilot projects or demonstration projects aimed at using information technology to make it easier and more cost-effective to shop for and purchase health coverage, and;
-establishing a five-year window for these initiatives to take effect, and for the insurance industry to demonstrate that they "get it," before considering the enactment of either a "public option" health plan, or a mandate of any kind.
My rationale for those initiatives were first, that mandating either employers or individuals to purchase health care coverage makes sense only if the marketplace is working as well as it can, and that coverage is generally available at reasonable prices to anybody who wants to buy it (today, that's not the case); and second, that the establishment of co-operative purchasing groups makes sense only if they are not subject to the same crippling, anti-consumer pricing and underwriting practices which have made health insurance more expensive and harder to obtain for small businesses and the self-employed.
As the President prepares to speak to the nation this evening, and as Congress re-convenes and begins efforts to "re-boot" health care reform legislation, I'm more confident than ever that these elements will be a part of the outcome of whatever health care reform legislation emerges from the Congressional sausage-maker. Here's why:
1) There's already broad consensus that the individual health insurance market needs to get fixed. It's a very safe bet that, at the very least, the legislation will prohibit insurers from rejecting applications from individuals with health conditions, and curb some of the industry's more egregious practices, such as recision (the practice of canceling coverage for individuals who develop health conditions after purchasing coverage), or dramatically increasing premium rates for individuals who are less than perfectly healthy;
2) Whether they're called exchanges, co-operatives, or something else, there's broad agreement that cost and access relief for the small group and individual markets will come from creating larger "risk pools," taking advantage of the actuarial laws of large numbers, as well as collective purchasing power, to enable participating companies to negotiate more effectively on pricing, and reducing the cost of administration, which can be six times higher for small businesses than for large ones;
3) The bill being reported out of the Senate Finance Committee will, at the very least, enable states to experiment with various mechanisms for pooling risks, whether via state-sponsored "public options" or co-operatives, and providing some Federal resources to encourage such experimentation.
That leaves the debate over the so-called public option. The House leadership has made it quite clear that House members probably can't pass without the inclusion of a public option. The Senate leadership says that a bill which contains a public option won't muster the votes necessary to pass, and the Senate Finance Committee does not contain a public option, settling for a "trigger" for a possible public option if, after three years, the insurance industry hasn't gotten its act together.
I expect that House members will get what they want: a bill which contains some sort of public option provision. But the Senate bill will not contain a public option, and MAY include a provision for some sort of medical malpractice reform as an olive branch to win some wavering Republiicans.
In conference committee, where the House and Senate bills will be reconciled, the parties will agree to hold off on a public option for three to (probably) five years, giving private market reforms a chance to work.
This would give the House the chance to say they supported a public option, and the President to say that a public option is a part of the bill. It would also give the market time to adjust to whatever regulations come out of the legislative process after the legislation passes (the regulatory process itself could take a couple years), and put the insurance industry on notice that, unless it plays a major role in reducing the number of uninsured people and reducing administrative costs, it could face competition with a robust public option.
And by the way, it would also give the geniuses in Washington the chance to decide exactly what a public option might look like, and how it might work. Because, as I've said several times in the past, currently there's almost NOTHING about the health care reform plan which has been specifically spelled out in legislation. So until that happens, both proponents and opponents are contending with shadows.
Thursday, September 3, 2009
A Bipartisan Small Group Reform Bill?...
Here's the good news: a bipartisan group of Senators managed to craft a small group health insurance reform bill which would enable groups of small businesses and self-employed individuals to form large purchasing pools, eliminate underwriting discrimination against the self-employed, reduce insurer administrative costs, and provide tax relief and other incentives for purchasing health coverage through large group purchasing plans.
The bad news: it was introduced in the waning days of the previous Congress. But it could be a roadmap for bipartisan small group reform as Congress re-convenes next week.
The bill was S2795, with the tortured acronym the SHOP Act (for "The Small Business Health Act Options Program Act"). It was introduced by a bipartisan group of senators as an improvement to S1955, which would have established the ground rules for development of large, association-based Small Business Health Plans, and laid the groundwork for a national market for health coverage. S1955 had the support of many national trade and business associations, but was undercut by objections from the insurance industry, and from local organizations like Chambers of Commerce, which derive a lot of revenue from proprietary health plans and feared the emergence of large national association competitors.
Even though it went nowhere, S2795 contained some very practical and helpful ideas for stabilizing the small group health insurance market. Among its provisions were:
...important underwriting, rating, and access provisions which would provide self-employed individuals with the same protections as small group employers, by making each state's small group underwriting and rating rules the same for the self-employed.
...reducing fears of excessive risk segmentation by forming all interested associations in a state into a single large, statewide association risk pool;
...diversifying the risk pools by encouraging the formation of association groups which would represent a broad base of industries;
...providing a broader range of health plan choices for participating small businesses by pooling risk, enabling participating associations to rely not just on one insurer for coverage of each association's members, but by making all health plans available through the statewide pool available to all the members of all participating associations;
...providing modest tax credits to small companies and self-employed individuals who purchase coverage through the statewide pools, and;
...making the plans available through each statewide association pool subject to each state's existing regulations, while establishing a process for developing a nationwide regulatory framework under which national associations might eventually operate.
Clearly the opponents of S1955, which would have created a national market for small group health coverage through national associations, had a concern that the rapid evolution of a national market dominated by national associations would undercut existing state insurance regulations such as mandated benefits, thus providing national groups with a competitive advantage which statewide or local groups would not have. While arguably the current regulatory environment of 50 separate sets of statewide insurance regulations actually benefits no one but insurers and existing association group plans, S2795 recognized that starting with the aggregation of groups at the statewide level, and migrating over time to a national set of standards, would reduce fights with insurers, state insurance commissioners, and other critical elements of the status quo.
The bill is clearly not perfect, and exactly how some provisions might be made to work is not clear. S1955 was a much more comprehensive (some would say radical) approach to consolidating the market power of small businesses on a nationwide basis. But S2795 was a sensible, thoughtful, and practical approach to beginning the process of small group reform incrementally, and within the existing regulatory structure.
And it had the support of both Democratic and Republican Senators, plus a token Independent. And in the current health insurance reform environment in Washington, how many reform proposals can say that?
The bad news: it was introduced in the waning days of the previous Congress. But it could be a roadmap for bipartisan small group reform as Congress re-convenes next week.
The bill was S2795, with the tortured acronym the SHOP Act (for "The Small Business Health Act Options Program Act"). It was introduced by a bipartisan group of senators as an improvement to S1955, which would have established the ground rules for development of large, association-based Small Business Health Plans, and laid the groundwork for a national market for health coverage. S1955 had the support of many national trade and business associations, but was undercut by objections from the insurance industry, and from local organizations like Chambers of Commerce, which derive a lot of revenue from proprietary health plans and feared the emergence of large national association competitors.
Even though it went nowhere, S2795 contained some very practical and helpful ideas for stabilizing the small group health insurance market. Among its provisions were:
...important underwriting, rating, and access provisions which would provide self-employed individuals with the same protections as small group employers, by making each state's small group underwriting and rating rules the same for the self-employed.
...reducing fears of excessive risk segmentation by forming all interested associations in a state into a single large, statewide association risk pool;
...diversifying the risk pools by encouraging the formation of association groups which would represent a broad base of industries;
...providing a broader range of health plan choices for participating small businesses by pooling risk, enabling participating associations to rely not just on one insurer for coverage of each association's members, but by making all health plans available through the statewide pool available to all the members of all participating associations;
...providing modest tax credits to small companies and self-employed individuals who purchase coverage through the statewide pools, and;
...making the plans available through each statewide association pool subject to each state's existing regulations, while establishing a process for developing a nationwide regulatory framework under which national associations might eventually operate.
Clearly the opponents of S1955, which would have created a national market for small group health coverage through national associations, had a concern that the rapid evolution of a national market dominated by national associations would undercut existing state insurance regulations such as mandated benefits, thus providing national groups with a competitive advantage which statewide or local groups would not have. While arguably the current regulatory environment of 50 separate sets of statewide insurance regulations actually benefits no one but insurers and existing association group plans, S2795 recognized that starting with the aggregation of groups at the statewide level, and migrating over time to a national set of standards, would reduce fights with insurers, state insurance commissioners, and other critical elements of the status quo.
The bill is clearly not perfect, and exactly how some provisions might be made to work is not clear. S1955 was a much more comprehensive (some would say radical) approach to consolidating the market power of small businesses on a nationwide basis. But S2795 was a sensible, thoughtful, and practical approach to beginning the process of small group reform incrementally, and within the existing regulatory structure.
And it had the support of both Democratic and Republican Senators, plus a token Independent. And in the current health insurance reform environment in Washington, how many reform proposals can say that?
Tuesday, September 1, 2009
"Shared Responsibility" Premium Hike Effective In Ohio Today
Here's how easy it is for the government and the insurance industry to spend your money to solve their problems.
Today, the State of Ohio institutes a 4% increase in the cost of individual (non-group) health plans to subsidize the cost of similar plans for people with pre-existing health conditions.
Ohio insurers are required by law to offer "open enrollment" health plans to indviduals with pre-existing health conditions which might disqualify them from conventional health insurance coverage. The plans are quite costly; individuals covered under the plans spend an average of $800-850 per month for coverage, well over twice what healthier people pay for similar coverage.
The plans are also hard to find. Insurers are required to offer them to the public only one month per year, and there's no standard for informing the public (usually you'll find a box in the classified section).
For both these reasons, not many Ohioans participate in the plan. Only about 1,300 out of Ohio's million or so uninsured residents have signed up for them.
The State budget passed in July sought to create a subsidy for open enrollment participants by assessing a 5% rate increase on all health plans sold in Ohio, including small group health plans. That would have created a huge windfall for insurers who sell non-group plans, in exchange for solving a problem for only a relatively few people.
The Ohio General Assembly eventually abandoned that approach, choosing instead to focus the premium surcharge on individual health plans. (It's not clear that a similar effort to hike small group premiums could have stood up to constitutional review, but individual health plans are at the Legislature's mercy).
So the Ohio Department of Insurance has been given an "oversight" role, to monitor rates and report back to the Governor. Ostensibly, if overall rates in the individual market rise more than 5 1/2%, the Department will scale back on the subsidy for open enrollment plans. Translation: if so many sick people sign up for subsidized coverage that it drives rates up, the Insurance Department will use pricing to slow down the rate at which they sign up.
This is a sign of things to come. When insurers tell legislatures, as they've told the White House, that they'll gladly stop rejecting applicants with pre-existing health conditions as long as everyone must buy health coverage, what they're generally NOT saying is that the cost of that largesse will be paid for by raising rates for everyone else...all in the name of "shared responsibility." But the REAL effect is to provide insurers with a subsidy enabling them to sell more individual health policies. And eventually, the price won't matter, because the law will require everybody to buy a health plan, no matter what it costs.
Today, the State of Ohio institutes a 4% increase in the cost of individual (non-group) health plans to subsidize the cost of similar plans for people with pre-existing health conditions.
Ohio insurers are required by law to offer "open enrollment" health plans to indviduals with pre-existing health conditions which might disqualify them from conventional health insurance coverage. The plans are quite costly; individuals covered under the plans spend an average of $800-850 per month for coverage, well over twice what healthier people pay for similar coverage.
The plans are also hard to find. Insurers are required to offer them to the public only one month per year, and there's no standard for informing the public (usually you'll find a box in the classified section).
For both these reasons, not many Ohioans participate in the plan. Only about 1,300 out of Ohio's million or so uninsured residents have signed up for them.
The State budget passed in July sought to create a subsidy for open enrollment participants by assessing a 5% rate increase on all health plans sold in Ohio, including small group health plans. That would have created a huge windfall for insurers who sell non-group plans, in exchange for solving a problem for only a relatively few people.
The Ohio General Assembly eventually abandoned that approach, choosing instead to focus the premium surcharge on individual health plans. (It's not clear that a similar effort to hike small group premiums could have stood up to constitutional review, but individual health plans are at the Legislature's mercy).
So the Ohio Department of Insurance has been given an "oversight" role, to monitor rates and report back to the Governor. Ostensibly, if overall rates in the individual market rise more than 5 1/2%, the Department will scale back on the subsidy for open enrollment plans. Translation: if so many sick people sign up for subsidized coverage that it drives rates up, the Insurance Department will use pricing to slow down the rate at which they sign up.
This is a sign of things to come. When insurers tell legislatures, as they've told the White House, that they'll gladly stop rejecting applicants with pre-existing health conditions as long as everyone must buy health coverage, what they're generally NOT saying is that the cost of that largesse will be paid for by raising rates for everyone else...all in the name of "shared responsibility." But the REAL effect is to provide insurers with a subsidy enabling them to sell more individual health policies. And eventually, the price won't matter, because the law will require everybody to buy a health plan, no matter what it costs.
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