OK, so it's over...
I've been hunkered down in my little foxhole for the past several weeks as the first Obamacare open enrollment period wound down. The propaganda flack was flying so thick and heavy between partisans on both sides of the debate that A Humble Seeker After Truth like yours truly was at significant risk of getting fragged.
But finally, we've had our first face-full of Health Exchange 1.0. And now that we've lived through it and The World As We Know It has not ended, it's time to look at some results, see what we might learn from them, and look ahead to Health Exchange 2.0, which (I hope) will build on those learnings and improve the process.
Robert Pear wrote in The New York Times wrote that, with the end of open enrollment, Obamacare looks less like a monolithic national program and more like a patchwork of experiments in the policy laboratories which are the states. Some have succeeded. Some have not, and for a great many people, the future remains quite uncertain.
Let's take a look at the box scores thus far:
Winners
Millions and Millions Of Americans: The numbers are still squishy, but we've come a long way, very quickly, from insurers' initial belief that nobody would ever shop for health insurance on-line. By White House accounts, about eight million Americans withstood the rolling disaster of the Healthcare.gov roll-out, and persisted through a wonky process on the still-glitchy public exchange platform, to enroll in health coverage through the federal exchange.
An additional three million Americans benefited from Medicaid expansion in states which adopted the Obama Administration's Medicaid expansion program.
And a bonus: research by The Rand Corporation suggested that almost as many Americans (somewhere between six and eight million) signed up for private health coverage directly with insurers or through their employers..
So...Do the numbers suggest a pent-up demand for health coverage? Maybe. About a third of the folks signing up for coverage via Healthcare.gov were apparently uninsured previously. But the majority had coverage elsewhere before they went shopping.
Certainly, enrollment suggested the effectiveness of subsidies as an incentive to enroll. Medicaid expansion enabled millions of poor people to obtain coverage. And about three-quarters of Healthcare.gov enrollees received at least some level of federal subsidy. We don't yet know the total cost of those subsidies, but there's no doubt that many folks came to the state and federal marketplaces in search of a better deal. The number of "off-exchange" individuals with non-group coverage dropped from 9.4 million to 7.8 million people, the majority of whom found coverage elsewhere.
But the number of individuals who enrolled in private, employer-sponsored plans off the exchanges is a pleasant surprise. In general, these folks did not receive subsidies. And during the open enrollment period, more than three times as many people went from zero coverage to employer-sponsored coverage than those who may have lost their coverage, either because their employers discontinued their plans or because the plans didn't meet Obamacare standards for plan design.
There is certainly reason to take these numbers with a grain of salt. It's estimated that as many as a third of Healthcare.gov enrollees had not yet paid their premiums by enrollment deadline. The Rand research was based on a wide-ranging survey of a representative sample of Americans. And many skeptics believe that many of the folks who withstood The Trials Of The Wonky Website did so because their health conditions were so serious that the prospect of subsidized coverage would enable them to exploit the health care system at taxpayer expense.
But that final thought discounts the notion that, prior to enactment of the insurance reforms enacted in PPACA, insurers' medical underwriting standards were so restrictive that a little hypertension or a little high cholesterol could result either in "rate-ups" which made the cost of obtaining coverage prohibitive, or even in denial of coverage.
Inescapable conclusion: The rate of uninsured Americans has reportedly dropped from 20.5 percent of the population to 15.8 percent. So, at least for now, close to twenty million Americans have demonstrated that significant demand exists out there, and both public and private health plans have seen a significant increase in enrollment. For those folks and those families, this is a big win. And it happened in six months; that is an amazing achievement.
Wellpoint/Anthem: This company is one of a very small number of insurers which decided that the exchange business represented a significant business opportunity, and enthusiastically participated in Healthcare.gov and state exchanges in every state in which the company has a presence. They were rewarded with over a million new customers. It's very unusual for an insurer to take that sort of risk as a leader; in most cases, as in this one, the race is usually to be second, once the leader has taken the initial hits. I suspect that Anthem's early success in building enrollment via the exchanges will encourage other insurers which have been hanging back to increase their commitment to this potentially powerful marketing channel.
Losers
Hawaii, Maryland, Massachusetts, Minnesota, and Oregon: Actually, in addition to this five-way tie, throw in American taxpayers as losers, as well. These five states, having pocketed over a billion dollars in development grants, built state exchange platforms which didn't work. In Hawaii, recipient of $205 million to build their state exchange, managed to sign up a whopping 7600 people. Now, math is not my strong suit, but I think that boils down to about $27,000 per enrollment. The remainder of the states continued to be so dysfunctional that the vast majority of their enrollments were on paper...the old fashioned way.
Maryland has already agreed to scrap its own exchange platform and adopt the technology platform developed by The State Of Connecticut. And last week the Oregon legislature, having determined that fixing their monstrosity would cost at least an additional $30-40 million, opted to shut down their exchange and join Healthcare.gov.
This is just the first round of shake-out from the chaos of development which ran parallel to the government's rush to create the regulations outlining how exchanges should operate. States like California, Colorado, Connecticut, Kentucky and California, which have had far greater success with their exchange platforms, could become licensors of their technology.
CGI: Hey!...Anybody thinking of building or re-modeling their exchange platforms and processes, DO NOT HIRE THIS COMPANY!...At least in America, CGI has a reputation for being far more highly-skilled at navigating the government procurement process than at actually doing the work, either on time or on-budget. That attribute became all too clear as the exchange open enrollment date loomed, and everybody watching (except, apparently, then HHS Secretary Kathleen Sibelius and the entire White House staff) could see that Healthcare.gov was not going to be ready for prime time.
Under normal circumstances, the combination of CGI's "expertise" and the lax and highly-politicized oversight of their government "clients" passes unnoticed by the public...But in those cases, there's rarely a deadline, and the technology they develop doesn't touch the lives of millions of people directly. But in this case, CGI Federal could not, no matter how they spun, avoid the fall-out from their botched attempt to build the Healthcare.gov website and supporting processes. Between what it cost taxpayers to let CGI Federal do...whatever it was they were doing...and the cost of bringing Accenture in to fix it, and the cost of building out the "back end" applications required to manage the exchange (still nowhere near ready), the project will easily exceed another billion dollars. So I guess, as in the previous category, the taxpayers are also losers...and Accenture is a winner by default.
(Oh, and in case you think the CGI choke-a-thon was restricted to wild and wacky D.C., consider that CGI also built the non-performing platform in Massachusetts).
Red State Residents; Just as whether one sees Obamacare as a success or a disaster largely depends on one's party affiliation and where you get your news, exchange enrollment by state currently seems to be highly dependent on the political leadership in each state. In general, exchange enrollment has been highest in states with Democrat leaders, and lower in states with Republican leaders. Much of the disparity comes from those states' refusal to co-operate with the federal government's Medicaid expansion. But political leadership (or lack of it) also contributes to how vigorously the public exchange is promoted.
Next time around, I'll talk a little about some of the big remaining exchange questions, about the upcoming 2014 open enrollment (which is hard upon us), and what's in all this for small businesses (Hint: not much).
Showing posts with label PPACA. Show all posts
Showing posts with label PPACA. Show all posts
Tuesday, April 29, 2014
Thursday, February 13, 2014
The Coming Small Business S**tstorm...That NOBODY'S Ready For...Least Of All, Small Businesses
As PPACA was being concocted, one of my greatest concerns was that I saw very little in the legislation itself which would provide much of a benefit for a segment of the market most in need of constructive reform: the small group market, especially companies with fewer than 25 employees, and especially groups with 10 or fewer workers. This has traditionally been a market segment which is both overpriced and under-served.
And with pressure on insurers to reduce administrative costs, it seemed that small businesses, which are relatively expensive to sell to and service, would readily be abandoned by insurers and brokers in search of bigger fish. My fear was that small businesses would take it in the proverbial teeth, saddled with additional costs due to the broad-based insurance reforms, but with few benefits to offset the aggravation. And it seemed to me that insurers would readily abandon the small group marketplace, making their "big bets" that small business owners would be quick to dump their plans and push their employees onto the public exchanges, with the subsidies they would provide.
It struck me then that the "reformers" had very little knowledge of the issues besetting small business owners in the "micro-group" niche, about half of whom are struggling to provide some sort of health coverage for their workers and their families. The prevailing wisdom in political circles is that small businesses are either greedy, denying their employees access to health coverage, or ignorant, and needing to be "encouraged" by government to "do the right thing."
So I asked very early on...who is speaking for small business?
With the announcement yesterday that the Obama Administration had decided to push the employer mandate for companies in the 50-99 market out past the 2014 elections, it's clear that small business owners must not have very good lobbyists; since they're sort of out in the cold...The Little Cheese That Stands Alone.
Because, while companies with fewer than 25 employees will not be required to purchase and pay for coverage for their employees, those that wish to are going to face an administrative nightmare in about six short months...and nobody...insurers, brokers, and especially small business owners...is prepared to deal with the shitstorm which will engulf the small business market beginning in October.
And it's not clear to me that either our political "leaders," nor those in the industry, are terribly concerned.
What's gonna happen?...
Thousands upon thousands of small businesses have had their plans "grandfathered" by their insurers, even though the plans didn't adhere to PPACA requirements.
Thousands upon thousands more have accepted two-year rate renewals, with an eye toward postponing "rate shock" till 2015.
Starting in the fourth quarter of 2014, all these groups will need to be re-sold.
If these small businesses wish to continue to provide health coverage to their workers, the plans they offer will have to comply with ACA regulations. That means new plan designs, which will be expensive.
They'll probably be looking at their workforces in light of the requirement that "full-time employment" be re-defined at 30 hours per week. (This may not be as catastrophic as some critics have suggested. In the past, when managing a very large small business health plan, our groups audits found that the most commonly-broken rule was enrolling less-than-full-time employees on the company's health plan. We tried to accommodate this by modifying our carrier contracts to provide some flexibility in defining "full-time employment" down to 30 hours per week. As long as companies provided coverage to all their qualified employees working 30 hours per more per week, they were okay with us. Same with 35 or 40 hours per week. All we asked was that the companies be consistent in their treatment of workers).
And thousands upon thousands of small businesses, whose rates had been set based on health underwriting, will have to be re-rated using community-rating criteria. In general this will make coverage more expensive for younger, healthier workers and slightly less expensive for older workers, and those with health conditions.
Unless the White House gets smart very quickly, this is going to mean a huge amount of chaos in the small group market.
Want to be whether Healthcare.gov will be ready? Because it's not right now. Even with the "front end" vastly improved over launch, the "back end" functions...billing, enrollment, defined contribution or other premium-sharing functionality...are very likely just a glimmer (maybe a glaze) in some programmers' eyes.
Insurers certainly aren't ready. Having snapped out of their Obamacare-denial reverie in early 2013, their first effort involved getting (sort of) ready for the onrush of individuals hitting the exchange market. The widely-decried outrage over Healthcare.gov's launch provided a lot of cover for private insurers whose "exchange" technology was not ready for prime time, either. Most of them are still processing applications on paper and/or over the phone.
Where are the "private exchanges?" In general, most of the "big name" exchange operators...Mercer, Towers Watson, Aon Hewitt...are chasing low-hanging fruit...Their "exchanges" are largely amped-up third party administration platforms with a new label. And they're chasing large, self-insured groups with a lot of retirees first. They won't be in the 50-99-employee group space for at least another year, if ever, and they've never really had an interest in the fewer-than-25-employee small group market.
The biggest exchange e-brokers, like eHealth and GoHealth, started their lives as brokers in the individual market. That's where their expertise is, and where they've made their money. They might be thinking about the small group market, but they're very busy sticking to their knitting. Hard to see them ready to jump in six months from now.
The limited number of players with small group functionality are mostly broker utilities, developed to assist brokers in managing their own books of business. Will they have the ability, or the willpower, to leap over the hordes of middlemen and go directly to the small business owner/operator in an exchange-type direct-to-consumer environment?
Again, wanna bet?...
It'd be a real shame if PPACA, which, at least rhetorically, was supposed to make health coverage easier to access and more affordable for small businesses and their workers, instead undermined and destroyed the small group health insurance market.
But unless I'm very wrong, the coming shitstorm is gathering which could do just that.
So, if I'm wrong, for Gawd's sake, enlighten me...
And with pressure on insurers to reduce administrative costs, it seemed that small businesses, which are relatively expensive to sell to and service, would readily be abandoned by insurers and brokers in search of bigger fish. My fear was that small businesses would take it in the proverbial teeth, saddled with additional costs due to the broad-based insurance reforms, but with few benefits to offset the aggravation. And it seemed to me that insurers would readily abandon the small group marketplace, making their "big bets" that small business owners would be quick to dump their plans and push their employees onto the public exchanges, with the subsidies they would provide.
It struck me then that the "reformers" had very little knowledge of the issues besetting small business owners in the "micro-group" niche, about half of whom are struggling to provide some sort of health coverage for their workers and their families. The prevailing wisdom in political circles is that small businesses are either greedy, denying their employees access to health coverage, or ignorant, and needing to be "encouraged" by government to "do the right thing."
So I asked very early on...who is speaking for small business?
With the announcement yesterday that the Obama Administration had decided to push the employer mandate for companies in the 50-99 market out past the 2014 elections, it's clear that small business owners must not have very good lobbyists; since they're sort of out in the cold...The Little Cheese That Stands Alone.
Because, while companies with fewer than 25 employees will not be required to purchase and pay for coverage for their employees, those that wish to are going to face an administrative nightmare in about six short months...and nobody...insurers, brokers, and especially small business owners...is prepared to deal with the shitstorm which will engulf the small business market beginning in October.
And it's not clear to me that either our political "leaders," nor those in the industry, are terribly concerned.
What's gonna happen?...
Thousands upon thousands of small businesses have had their plans "grandfathered" by their insurers, even though the plans didn't adhere to PPACA requirements.
Thousands upon thousands more have accepted two-year rate renewals, with an eye toward postponing "rate shock" till 2015.
Starting in the fourth quarter of 2014, all these groups will need to be re-sold.
If these small businesses wish to continue to provide health coverage to their workers, the plans they offer will have to comply with ACA regulations. That means new plan designs, which will be expensive.
They'll probably be looking at their workforces in light of the requirement that "full-time employment" be re-defined at 30 hours per week. (This may not be as catastrophic as some critics have suggested. In the past, when managing a very large small business health plan, our groups audits found that the most commonly-broken rule was enrolling less-than-full-time employees on the company's health plan. We tried to accommodate this by modifying our carrier contracts to provide some flexibility in defining "full-time employment" down to 30 hours per week. As long as companies provided coverage to all their qualified employees working 30 hours per more per week, they were okay with us. Same with 35 or 40 hours per week. All we asked was that the companies be consistent in their treatment of workers).
And thousands upon thousands of small businesses, whose rates had been set based on health underwriting, will have to be re-rated using community-rating criteria. In general this will make coverage more expensive for younger, healthier workers and slightly less expensive for older workers, and those with health conditions.
Unless the White House gets smart very quickly, this is going to mean a huge amount of chaos in the small group market.
Want to be whether Healthcare.gov will be ready? Because it's not right now. Even with the "front end" vastly improved over launch, the "back end" functions...billing, enrollment, defined contribution or other premium-sharing functionality...are very likely just a glimmer (maybe a glaze) in some programmers' eyes.
Insurers certainly aren't ready. Having snapped out of their Obamacare-denial reverie in early 2013, their first effort involved getting (sort of) ready for the onrush of individuals hitting the exchange market. The widely-decried outrage over Healthcare.gov's launch provided a lot of cover for private insurers whose "exchange" technology was not ready for prime time, either. Most of them are still processing applications on paper and/or over the phone.
Where are the "private exchanges?" In general, most of the "big name" exchange operators...Mercer, Towers Watson, Aon Hewitt...are chasing low-hanging fruit...Their "exchanges" are largely amped-up third party administration platforms with a new label. And they're chasing large, self-insured groups with a lot of retirees first. They won't be in the 50-99-employee group space for at least another year, if ever, and they've never really had an interest in the fewer-than-25-employee small group market.
The biggest exchange e-brokers, like eHealth and GoHealth, started their lives as brokers in the individual market. That's where their expertise is, and where they've made their money. They might be thinking about the small group market, but they're very busy sticking to their knitting. Hard to see them ready to jump in six months from now.
The limited number of players with small group functionality are mostly broker utilities, developed to assist brokers in managing their own books of business. Will they have the ability, or the willpower, to leap over the hordes of middlemen and go directly to the small business owner/operator in an exchange-type direct-to-consumer environment?
Again, wanna bet?...
It'd be a real shame if PPACA, which, at least rhetorically, was supposed to make health coverage easier to access and more affordable for small businesses and their workers, instead undermined and destroyed the small group health insurance market.
But unless I'm very wrong, the coming shitstorm is gathering which could do just that.
So, if I'm wrong, for Gawd's sake, enlighten me...
Tuesday, October 29, 2013
When Is A Mandate NOT A Mandate?...When It Was Designed Never To Be Enforced...
I wrote to President Obama a couple weeks ago, advising him to consider trading a budget resolution and a debt-ceiling increase for a one-year delay in the individual mandate. I suggested there were both solid political reasons and substantive reasons for doing so.
He never got back to me. I mean, I understand; he's been a little busy...
Then last week, without acknowledging that the roll-out of new federal health exchange has been a multi-dimensional disaster, The White House released the news that there will be a six-week delay in the enforcement of the individual mandate. People will have until March 31, 2014, to apply for qualified health coverage before facing a potential penalty.
What penalty?...
I have to say, it has been three years since I read (parts of...well, the personally-relevant parts of) the legislation itself. So I was rather surprised to catch a rant by Lawrence O'Donnell, former Senate staffer, TV consultant (he helped make The West Wing seem like it could really happen), and now host of The Last Word on MSNBC, in which he shattered all the silliness surrounding the "delay Obamacare" shenanigans of the Tea Party and the feckless, follow-any-shiny-object fixation of the media on the roll-out, by pointing out that there really isn't a mandate in the law, except on paper...because the mandate was designed never to be enforced.
First, O'Donnell showed a portion of a White House press conference, in which an intrepid correspondent asked Press Secretary Jay Carney if the recent roll-out snafu would be severe enough to warrant a one-year delay in PPACA's individual mandate, which requires that all individuals either sign up for a health plan or pay a penalty.
Carney gave an answer that would make a Jesuit proud . In short words and simple sentences, Carney said essentially this: "The law is very clear. Individuals will not be subject to a penalty if they live in a state which has refused to participate in Medicaid expansion, as many states with republican governors have done, or if they live in an area which does not provide them with access to affordable health coverage."
The reporter asked for clarification: Might this be taken to mean that someone who can't buy health coverage because the marketplace website doesn't work be considered to live in a place which doesn't have access to affordable health coverage?
Carney repeated his answer.
In other words, yes: if the exchange website isn't working, nobody will be penalized.
But here is the real gem. The law takes great pains to enumerate the fines that might be levied over time upon individuals or employer groups who do not take the steps required by law. Much has been written and reported on that subject.
But the agency tasked with collecting those fines is the Internal Revenue Service. And here's the guidance the law gives to the IRS, from page 131 of PPACA:
"Section 5000 A Title 26- IRS Code Chapter 48- Maintenance of minimum essential coverage:
(A) Waiver of criminal penalties-
In the case of any failure by a taxpayer to timely pay any penalty imposed by this section, such taxpayer shall not be subject to any criminal prosecution or penalty with respect to such failure.
B) Limitation on liens and levies-
The Secretary shall not-
( i) file notice of lien with respect to any property of a taxpayer by reason of any failure to pay the penalty imposed by this section , or (ii) levy on any such property with respect to such failure."
Okay, so, I'm not a lawyer, but I know how to read, and it sure seems to me that, written into the law, there is a "get out of jail free" card for anybody who might, for whatever reason, fail to comply with PPACA's mandate. And given that "taxpayer" is a term which can apply equally to an individual or a corporation (which, as I understand it, is now a person, too), it seems to me that the law pretty explicitly says that no one will ever be required to pay a fine for non-compliance with the PPACA mandate...ever.
So, when is a mandate not a mandate? When the law it's written into clearly and explicitly forbids the enforcement agency from ever collecting any fine, ot taking any other adverse action, against anyone who doesn't comply with the mandate. Ever.
I'm not sure how aware of this provision Our Friends In Government might want people to be of this little magic trick. I'm sure supporters of the law would rather not know that people can freely avoid signing up for a health plan, since there's no penalty for not doing so: that might affect enrollment.
And chances are opponents of the law won't want people to know about it. either. That would mean that some Republican lawmaker would have to take to the ramparts and insist that the law be changed to require the IRS to levy and collect those fines, liens and judgments...which, of course, would be tantamount to a Republican insisting that the government raise taxes.
But for now, I know. And if you've read this, you know. And we have friends. Let's educate them, shall we?...
He never got back to me. I mean, I understand; he's been a little busy...
Then last week, without acknowledging that the roll-out of new federal health exchange has been a multi-dimensional disaster, The White House released the news that there will be a six-week delay in the enforcement of the individual mandate. People will have until March 31, 2014, to apply for qualified health coverage before facing a potential penalty.
What penalty?...
I have to say, it has been three years since I read (parts of...well, the personally-relevant parts of) the legislation itself. So I was rather surprised to catch a rant by Lawrence O'Donnell, former Senate staffer, TV consultant (he helped make The West Wing seem like it could really happen), and now host of The Last Word on MSNBC, in which he shattered all the silliness surrounding the "delay Obamacare" shenanigans of the Tea Party and the feckless, follow-any-shiny-object fixation of the media on the roll-out, by pointing out that there really isn't a mandate in the law, except on paper...because the mandate was designed never to be enforced.
First, O'Donnell showed a portion of a White House press conference, in which an intrepid correspondent asked Press Secretary Jay Carney if the recent roll-out snafu would be severe enough to warrant a one-year delay in PPACA's individual mandate, which requires that all individuals either sign up for a health plan or pay a penalty.
Carney gave an answer that would make a Jesuit proud . In short words and simple sentences, Carney said essentially this: "The law is very clear. Individuals will not be subject to a penalty if they live in a state which has refused to participate in Medicaid expansion, as many states with republican governors have done, or if they live in an area which does not provide them with access to affordable health coverage."
The reporter asked for clarification: Might this be taken to mean that someone who can't buy health coverage because the marketplace website doesn't work be considered to live in a place which doesn't have access to affordable health coverage?
Carney repeated his answer.
In other words, yes: if the exchange website isn't working, nobody will be penalized.
But here is the real gem. The law takes great pains to enumerate the fines that might be levied over time upon individuals or employer groups who do not take the steps required by law. Much has been written and reported on that subject.
But the agency tasked with collecting those fines is the Internal Revenue Service. And here's the guidance the law gives to the IRS, from page 131 of PPACA:
"Section 5000 A Title 26- IRS Code Chapter 48- Maintenance of minimum essential coverage:
(A) Waiver of criminal penalties-
In the case of any failure by a taxpayer to timely pay any penalty imposed by this section, such taxpayer shall not be subject to any criminal prosecution or penalty with respect to such failure.
B) Limitation on liens and levies-
The Secretary shall not-
( i) file notice of lien with respect to any property of a taxpayer by reason of any failure to pay the penalty imposed by this section , or (ii) levy on any such property with respect to such failure."
Okay, so, I'm not a lawyer, but I know how to read, and it sure seems to me that, written into the law, there is a "get out of jail free" card for anybody who might, for whatever reason, fail to comply with PPACA's mandate. And given that "taxpayer" is a term which can apply equally to an individual or a corporation (which, as I understand it, is now a person, too), it seems to me that the law pretty explicitly says that no one will ever be required to pay a fine for non-compliance with the PPACA mandate...ever.
So, when is a mandate not a mandate? When the law it's written into clearly and explicitly forbids the enforcement agency from ever collecting any fine, ot taking any other adverse action, against anyone who doesn't comply with the mandate. Ever.
I'm not sure how aware of this provision Our Friends In Government might want people to be of this little magic trick. I'm sure supporters of the law would rather not know that people can freely avoid signing up for a health plan, since there's no penalty for not doing so: that might affect enrollment.
And chances are opponents of the law won't want people to know about it. either. That would mean that some Republican lawmaker would have to take to the ramparts and insist that the law be changed to require the IRS to levy and collect those fines, liens and judgments...which, of course, would be tantamount to a Republican insisting that the government raise taxes.
But for now, I know. And if you've read this, you know. And we have friends. Let's educate them, shall we?...
Thursday, June 13, 2013
Why "Rate Shock" Is A Bullshit Term...
I've been perversely amused at the writing and speculation which has appeared in both popular and industry publications about the potential changes in health premium rates which will occur come January 1, 2014, when the bulk of PPACA-mandated market changes are scheduled to take place. Most of what appears is, of course, propaganda generated by partisans.
The rates for California's exchange will be lower than expected, the California experts say. Nonsense! Apples and oranges and cantaloupes, industry partisans say. There will be "rate shock" for younger insureds.
Prepare for 80% increases in premiums in Ohio, political hack (and technical dim-bulb...and proud of it) Mary Taylor, Ohio's Lieutenant Governor and Insurance Commissioner, warns Ohioans. Beware Obamacare-induced "rate shock." Nonsense! says the Kaiser Foundation, in this article in The Cleveland Plain Dealer (which, unfortunately for the public, gave up on "plain dealing" long ago)...http://www.cleveland.com/open/index.ssf/2013/06/obamacare_to_make_rates_soar_s.html#incart_river.
Clearly, the industry and its apologists have decided to use the term "rate shock" to inflame and confuse the public. Their p.r. people are certain that if they just go around shouting "Rate shock! Rate shock! RATE SHOCK! RATE SHOCK!!! often enough and loudly enough, it'll scare people and make headlines. And also, they hope, divert the public's attention that the "rate shock" they'd like to blame on PPACA is actually the un-doing of practices in which the health industry generally has been engaged in for decades which have not only been unsuccessful in keeping premium rates and health costs under control, but also kept millions of people out of the health insurance system...to the benefit of insurers' bottom lines.
It also shows the importance of, and the slipperiness of, language in the debate over health insurance reform.
Insurers scream "rate shock" to re-inforce the perception of PPACA as a boogeyman. If insurers were engaged in the same practice, some bland-looking p.r. people would be describing the phenomenon as "re-calibration of our rating formulas."
Because that's what the phenomenon really is: a process to re-align premium rates in response not just to new federal regulations, but also to re-inforce the policy objective of turning health insurance coverage from an exclusive thing available to some, to an inclusive process available to everybody.
Let's look at a few of the phenomena that this "re-calibration" seeks to un-do:
-The erosion of health insurance as a "community" good and responsibility: When group health plans were initially established, their rating processes were based on "community rating," the idea that everybody in the pool would pay the same amount for the same coverage. In the 1970's, the rise of self-insurance took a big chunk of the working population...those who worked for big companies...out of the community pool. And as commercial insurers began to encroach upon then-mostly-not-for-profit Blue Cross & Blue Shield plans to compete for group business, they introduced the concept of medical underwriting; that is, using the health of group members to set rates and rules for participation in their plans.
When it became clear that this tactic was robbing community pools of groups which were younger and healthier, and leaving behind groups which didn't qualify (setting up a cycle of "adverse selection" against those community insurers), BCBS plans were forced to utilize health underwriting to defend themselves. This led to:
-The exclusion of groups and individuals which represented potential health risks: The health underwriting "arms race," when carried to its extreme, meant that some groups, even those with relatively good risk profiles, could be excluded from coverage. In a continuing effort to keep prices under some control, and keep group coverage profitable, insurers further undermined the notion of "community rating" by applying their risk-avoidance strategies more and more stringently to smaller and smaller groups, thus creating an increasingly large pool of "uninsureds:" people, and groups, whose health status in insurers' eyes rendered them too risky to cover.
And with the "community" being diluted further and further by perceived health risk, there were fewer large purchasing entities which had the market presence and technical know-how to call "bullshit" on these practices and push back on insurers. This led to accelerated risk segmentation, especially among small groups and individuals. And all this led to:
-HIPAA and the "ghettoization" of small groups and individuals: After the failure of the Clinton Administration's own health care reform strategy, the Democrat President and a Republican Congress moved to "fix" problems in the small group and individual insurance markets by enacting the Health Insurance Portability and Accountability Act (HIPAA), which established a complex web of "rating corridors" and other rules for small group health coverage. It also famously forbade insurers from excluding any small groups which applied for coverage based on the group's health condition. Insurers were required to provide coverage to any group which applied.
An "unintended consequence" of those "guaranteed issue" rules (largely crafted by the insurance industry's lobby
itself) was that, while the "guaranteed issue" rules wouldn't let insurers refuse coverage to any group for health reasons, the rules didn't stop health underwriting. So health underwriting became not a gateway for coverage but a factor in pricing. So the differences in costs for similarly-sized groups could differ by as much as 80%, based on the health of the groups' applicants. So, indirectly, health underwriting led to group exclusion based on price. So the owner of a 10-employee business wanting to cover his/her employees could face a cost ranging from $100,000-180,000 for doing so, based solely on the ages and health conditions of the group's members...something over which the business owner has little control, and which it's illegal for him/her to do anything about, since discriminating in employment based on an employee's health is against the law...
Worse, HIPAA specifically excluded individuals (including self-employed professionals) from participating in group coverage. This led to a non-group insurance industry which made a lot of money by selling coverage primarily to young, healthy individuals who would be less likely to use it than their older, less healthy counterparts. Insurers were free to apply any sort uf medical underwriting screens to individual insureds, which meant that they could engage in a conscious strategy to develop rates and rules which would favor young, healthy insureds and exclude individuals with a wide range of health conditions of even modest severity, such as high blood pressure or cholesterol. In addition, there were no limits set on rates for these individuals, so the difference in rates between those charged to young, healthy people and older, less-healthy folks , if they qualified for coverage at all were virtually unchecked...again, using price to screen out undesirable risks. This created the "crisis" in individyal coverage which was a major impetus for PPACA, and to still greater numbers of those for whom coverage was not available. As insurers rushed to make a lot of money in this segment, there was a "race to the bottom" in the ratings wars, which led to:
-Tithing on the altar of the health insurance industrial complex: One of the "geniuses" behind HIPAA was a guy named Patrick Rooney, who was Chairman and CEO of Golden Rule Insurance Company, and a big contributor to the Republican Party. He was also one of the nation's foremost advocates for "Consumer-Directed Health Plans (now more popularly...and accurately...known as "High-Deductible Health Plans (HDHP's)." The purpose of these plans (which are insanely profitable) is to reduce premiums by shifting an increasing amount of financial risk to the insured. A HDHP with a $10,000 family deductible is relatively inexpensive to buy, but a an Ohio family with a median $42,000 annual income could be exposed to a deductible which is the equivalent of nearly 25 percent of its annual income...a "double tithe" to the health insurance system.
Lieutenant Governor/Insurance Commissioner Taylor in Ohio approved an HDHP design which incorporated a $25,000 family deductible. And it was against such plans that she compared the new rating structures to be established for use after 1/1/2014. Of course premiums for PPACA mandated health plans will be more expensive than a $25,000-deductible HDHP...They'll actually cover something...
So let's sum up, shall we? The rates for new PPACA-based health plans must accommodate:
-a return to something more closely resembling community rating (my 25-year-old son will pay more for his health coverage, and I'll pay a little less, but over time he'll benefit from this "subsidy" at his own son's "expense");
-a guarantee that any individual or group will be able to purchase coverage at a cost comparable to any other individual's or group's cost;
-a restoration of sanity to the cost of individual health coverage, and;
-a re-design of HDHP's to include no more than a $4,000 annual family deductible.
And that's to overlook the premium subsidy program designed to make coverage more affordable for young people, and lower-paid individuals and families.
One can certainly expect a short-term spike in total "community" costs, as those who've been excluded from health insurance coverage because of often-minor health conditions seek treatment they've been forced to put off. But over time, utilization will even out.
But it would be helpful to the continuing health insurance reform debate to recognize that nearly forty years of insurance industry practices have contributed to the mess which exists in our health insurance system, that virtually every "cost containment" strategy employed by the industry has been employed not to control premiums (which, even if it were true, would have to be acknowledged as utter failures), but to enable insurers to retain profits through increasingly egregious risk-avoidance practices, and that any "shock" to the health insurance system relates directly to the correction of insurers' behavior.
This makes it...disingenuous...on the part of insurers, and their political enablers...suddenly to act as if they were victims...or as if their carefully-rehearsed outrage has anything to do with their concern for consumers.
I've said many times that I'm no fan of Obamacare. The insurance reforms necessary to move the market back to inclusiveness and some sense of community could have been enacted without a lot of the other nonsense contained in the law. And an unfortunately critical component of its eventual success is dependent on the effective operation of these mythical creatures called exchanges/marketplaces, which still exist mostly in the imagination of their architects and the code of a bunch of very-highly-paid consultants.
But if the President were really the socialist many of his detractors would like to characterize him as, he'd have said to the insurance industry, "All this effort is necessary to correct forty years' worth of highjinks which you've foisted on the marketplace to boost your profitability. You've made lots of money doing it. Now. you're going to fix those problems, and you're going to eat the cost."
Then, insurers' wailing and gnashing of teeth would, at least, have been genuine...
The rates for California's exchange will be lower than expected, the California experts say. Nonsense! Apples and oranges and cantaloupes, industry partisans say. There will be "rate shock" for younger insureds.
Prepare for 80% increases in premiums in Ohio, political hack (and technical dim-bulb...and proud of it) Mary Taylor, Ohio's Lieutenant Governor and Insurance Commissioner, warns Ohioans. Beware Obamacare-induced "rate shock." Nonsense! says the Kaiser Foundation, in this article in The Cleveland Plain Dealer (which, unfortunately for the public, gave up on "plain dealing" long ago)...http://www.cleveland.com/open/index.ssf/2013/06/obamacare_to_make_rates_soar_s.html#incart_river.
Clearly, the industry and its apologists have decided to use the term "rate shock" to inflame and confuse the public. Their p.r. people are certain that if they just go around shouting "Rate shock! Rate shock! RATE SHOCK! RATE SHOCK!!! often enough and loudly enough, it'll scare people and make headlines. And also, they hope, divert the public's attention that the "rate shock" they'd like to blame on PPACA is actually the un-doing of practices in which the health industry generally has been engaged in for decades which have not only been unsuccessful in keeping premium rates and health costs under control, but also kept millions of people out of the health insurance system...to the benefit of insurers' bottom lines.
It also shows the importance of, and the slipperiness of, language in the debate over health insurance reform.
Insurers scream "rate shock" to re-inforce the perception of PPACA as a boogeyman. If insurers were engaged in the same practice, some bland-looking p.r. people would be describing the phenomenon as "re-calibration of our rating formulas."
Because that's what the phenomenon really is: a process to re-align premium rates in response not just to new federal regulations, but also to re-inforce the policy objective of turning health insurance coverage from an exclusive thing available to some, to an inclusive process available to everybody.
Let's look at a few of the phenomena that this "re-calibration" seeks to un-do:
-The erosion of health insurance as a "community" good and responsibility: When group health plans were initially established, their rating processes were based on "community rating," the idea that everybody in the pool would pay the same amount for the same coverage. In the 1970's, the rise of self-insurance took a big chunk of the working population...those who worked for big companies...out of the community pool. And as commercial insurers began to encroach upon then-mostly-not-for-profit Blue Cross & Blue Shield plans to compete for group business, they introduced the concept of medical underwriting; that is, using the health of group members to set rates and rules for participation in their plans.
When it became clear that this tactic was robbing community pools of groups which were younger and healthier, and leaving behind groups which didn't qualify (setting up a cycle of "adverse selection" against those community insurers), BCBS plans were forced to utilize health underwriting to defend themselves. This led to:
-The exclusion of groups and individuals which represented potential health risks: The health underwriting "arms race," when carried to its extreme, meant that some groups, even those with relatively good risk profiles, could be excluded from coverage. In a continuing effort to keep prices under some control, and keep group coverage profitable, insurers further undermined the notion of "community rating" by applying their risk-avoidance strategies more and more stringently to smaller and smaller groups, thus creating an increasingly large pool of "uninsureds:" people, and groups, whose health status in insurers' eyes rendered them too risky to cover.
And with the "community" being diluted further and further by perceived health risk, there were fewer large purchasing entities which had the market presence and technical know-how to call "bullshit" on these practices and push back on insurers. This led to accelerated risk segmentation, especially among small groups and individuals. And all this led to:
-HIPAA and the "ghettoization" of small groups and individuals: After the failure of the Clinton Administration's own health care reform strategy, the Democrat President and a Republican Congress moved to "fix" problems in the small group and individual insurance markets by enacting the Health Insurance Portability and Accountability Act (HIPAA), which established a complex web of "rating corridors" and other rules for small group health coverage. It also famously forbade insurers from excluding any small groups which applied for coverage based on the group's health condition. Insurers were required to provide coverage to any group which applied.
An "unintended consequence" of those "guaranteed issue" rules (largely crafted by the insurance industry's lobby
itself) was that, while the "guaranteed issue" rules wouldn't let insurers refuse coverage to any group for health reasons, the rules didn't stop health underwriting. So health underwriting became not a gateway for coverage but a factor in pricing. So the differences in costs for similarly-sized groups could differ by as much as 80%, based on the health of the groups' applicants. So, indirectly, health underwriting led to group exclusion based on price. So the owner of a 10-employee business wanting to cover his/her employees could face a cost ranging from $100,000-180,000 for doing so, based solely on the ages and health conditions of the group's members...something over which the business owner has little control, and which it's illegal for him/her to do anything about, since discriminating in employment based on an employee's health is against the law...
Worse, HIPAA specifically excluded individuals (including self-employed professionals) from participating in group coverage. This led to a non-group insurance industry which made a lot of money by selling coverage primarily to young, healthy individuals who would be less likely to use it than their older, less healthy counterparts. Insurers were free to apply any sort uf medical underwriting screens to individual insureds, which meant that they could engage in a conscious strategy to develop rates and rules which would favor young, healthy insureds and exclude individuals with a wide range of health conditions of even modest severity, such as high blood pressure or cholesterol. In addition, there were no limits set on rates for these individuals, so the difference in rates between those charged to young, healthy people and older, less-healthy folks , if they qualified for coverage at all were virtually unchecked...again, using price to screen out undesirable risks. This created the "crisis" in individyal coverage which was a major impetus for PPACA, and to still greater numbers of those for whom coverage was not available. As insurers rushed to make a lot of money in this segment, there was a "race to the bottom" in the ratings wars, which led to:
-Tithing on the altar of the health insurance industrial complex: One of the "geniuses" behind HIPAA was a guy named Patrick Rooney, who was Chairman and CEO of Golden Rule Insurance Company, and a big contributor to the Republican Party. He was also one of the nation's foremost advocates for "Consumer-Directed Health Plans (now more popularly...and accurately...known as "High-Deductible Health Plans (HDHP's)." The purpose of these plans (which are insanely profitable) is to reduce premiums by shifting an increasing amount of financial risk to the insured. A HDHP with a $10,000 family deductible is relatively inexpensive to buy, but a an Ohio family with a median $42,000 annual income could be exposed to a deductible which is the equivalent of nearly 25 percent of its annual income...a "double tithe" to the health insurance system.
Lieutenant Governor/Insurance Commissioner Taylor in Ohio approved an HDHP design which incorporated a $25,000 family deductible. And it was against such plans that she compared the new rating structures to be established for use after 1/1/2014. Of course premiums for PPACA mandated health plans will be more expensive than a $25,000-deductible HDHP...They'll actually cover something...
So let's sum up, shall we? The rates for new PPACA-based health plans must accommodate:
-a return to something more closely resembling community rating (my 25-year-old son will pay more for his health coverage, and I'll pay a little less, but over time he'll benefit from this "subsidy" at his own son's "expense");
-a guarantee that any individual or group will be able to purchase coverage at a cost comparable to any other individual's or group's cost;
-a restoration of sanity to the cost of individual health coverage, and;
-a re-design of HDHP's to include no more than a $4,000 annual family deductible.
And that's to overlook the premium subsidy program designed to make coverage more affordable for young people, and lower-paid individuals and families.
One can certainly expect a short-term spike in total "community" costs, as those who've been excluded from health insurance coverage because of often-minor health conditions seek treatment they've been forced to put off. But over time, utilization will even out.
But it would be helpful to the continuing health insurance reform debate to recognize that nearly forty years of insurance industry practices have contributed to the mess which exists in our health insurance system, that virtually every "cost containment" strategy employed by the industry has been employed not to control premiums (which, even if it were true, would have to be acknowledged as utter failures), but to enable insurers to retain profits through increasingly egregious risk-avoidance practices, and that any "shock" to the health insurance system relates directly to the correction of insurers' behavior.
This makes it...disingenuous...on the part of insurers, and their political enablers...suddenly to act as if they were victims...or as if their carefully-rehearsed outrage has anything to do with their concern for consumers.
I've said many times that I'm no fan of Obamacare. The insurance reforms necessary to move the market back to inclusiveness and some sense of community could have been enacted without a lot of the other nonsense contained in the law. And an unfortunately critical component of its eventual success is dependent on the effective operation of these mythical creatures called exchanges/marketplaces, which still exist mostly in the imagination of their architects and the code of a bunch of very-highly-paid consultants.
But if the President were really the socialist many of his detractors would like to characterize him as, he'd have said to the insurance industry, "All this effort is necessary to correct forty years' worth of highjinks which you've foisted on the marketplace to boost your profitability. You've made lots of money doing it. Now. you're going to fix those problems, and you're going to eat the cost."
Then, insurers' wailing and gnashing of teeth would, at least, have been genuine...
Thursday, September 20, 2012
First He Was For It, Then He Was Against It, Now He's...Sorta Stuck...
Poor Mitt Romney has had enough trouble these last couple weeks without my help, so I thought I'd hold off for awhile before looking more closely at his latest tap dance around the question of health care reform before sounding off about his disingenuousness. But it's a slow day today, so here goes.
As everyone paying even a LITTLE attention knows, one of the elephants in the room of the Romney campaign has been the little dichotomy between his denunciation of "Obamacare" and the fact that one of his key achievements as Governor of Massachusetts was the development of a health insurance reform plan...which served as the conceptual (if not the political) foundation of many of the insurance reforms found in PPACA. Even though the question of "How can you oppose something you took credit for creating in Massachusetts?" has dogged him since the campaign began, he never had a particularly clear answer.
Then last week, he got himself a little MORE twisted up when he suggested that, eve though he still thinks Obamacare is horrible, and needs to be repealed, there are a few parts of the law he sorta likes. They happen to be the provisions which have already been implemented in the marketplace, most notably the elimination of lifetime maximums on health policies and the extension of family health coverage to dependent kids under age 26 (for which, by the bye, our 23-year-old son is quite grateful).
He was not quite so glib about another PPACA provision: the elimination of pre-existing conditions exclusions. Apparently Governor Romney fully supports the elimination of those exclusions for those who already have health coverage, but not for those whose pre-existing coverage have thus far kept them out of the insurance pool.
Huh?...
Now The Tonight Show's Jay Leno is no investigative journalist. But during Romney's recent appearance of the show, Leno asked the obvious question: "A lot of guys I know, comedians, mechanics, waiters, who don't have health insurance now can't get it because they have some sort of pre-existing health condition. Don't we want to get them coverage?"
Romney's answer was typically maladroit: "Well, of course we want to get as many people covered as possible, but if one day a person shows up with cancer or a heart condition wanting to buy health coverage because they're sick, we want to be able to say, 'We don't play that game here.'"
Game?...
I only have three thoughts to share regarding this latest gaffe by the Republican candidate:
1) In expressing his support for the provisions he did, Romney joins the ranks of those faux-magnanimous insurance companies which pledged, even before the Supreme Court upheld PPACA, that they would not roll back the elimination of lifetime limits and the under-26 dependent provision.
In the insurers' case, it was meant to sound like a concession to the marketplace. It wasn't. The fact is that insurers have already baked the cost of these provisions into their products, and have found that those provisions haven't affected their profitability at all, and MAY have generated more cash for them. I've never known an insurer willingly to give up cash it's already collecting to reduce benefits.
Besides, lifetime limits have always been sort of bogus, and somewhere near six million generally healthy young adults who hadn't previously had health coverage have it now because of that new law...and this is PRECISELY the group which insurers want to cover, because they tend not to use health services very much; they're the "young invincibles" which insurers have wanted in their pools. They have them now, and they ain't giving them up.
For Romney, the concern is political. These are provisions of the law that have proved to be popular. And for all his rhetoric, he knows better than to be seen attacking a benefit which is already helping working families;
2) The arbitrary exclusion of some individuals from health coverage because of pre-existing conditions is one of the key reasons for our perceived health crisis. The use of health conditions to set prices in the small group and individual markets has always been a gimmick designed to benefit insurers.
I've written several times before about my case, which is typical: when my insurer found out from my medical questionnaire that I had a little hypertension (controlled with a medication which costs $3/month), a little gout (controlled with a medication which costs $4/month), and a borderline cholesterol count (also controlled with a $3/month prescription), my premiums TRIPLED over the initial quoted rate, from $600 to $1800/month. There's no excuse for that, except greed.
To be effective, health reform must reach out not just to the young and healthy, but must also provide access to coverage for those who've been excluded, AND provide some rate relief to those who are just getting screwed.
I'm not a big Obama fan. I think PPACA is a case of massive government overreach in many ways. But these insurance reforms represent good policy. Thus far, they've proven not to be costly; in fact, health costs for the last two years have risen only about a third as quickly as in the previous ten (as much a function of a recovering stock market, from which insurers get most of their profits when times are good, so they need to rely less on rates).
And insurers have had many years to see the light and enact some of these common-sense reforms voluntarily, and chose not to do so. Without the new law, it never would have happened.
3) As is the case with so many of his latest gaffes, this is an example of a presidential candidate who, whatever his core beliefs, has abandoned them for the sake of appeasing his rockhead conservative base. Most of the time, I'm guessing even HE doesn't believe what he's saying; he's just saying what his advisers brief him on. Whether on foreign policy, on health care, or on his "47%" gaffe, he's not speaking from his beliefs...he's talking back points he's heard from the people who surround him.
He's getting VERY bad advice. So when his answers sound cagey, or disingenuous, or just eye-poppingly inappropriate ("We don't play that game here"), he's only repeating what's been drilled into him by others. Sad...and scary...
As everyone paying even a LITTLE attention knows, one of the elephants in the room of the Romney campaign has been the little dichotomy between his denunciation of "Obamacare" and the fact that one of his key achievements as Governor of Massachusetts was the development of a health insurance reform plan...which served as the conceptual (if not the political) foundation of many of the insurance reforms found in PPACA. Even though the question of "How can you oppose something you took credit for creating in Massachusetts?" has dogged him since the campaign began, he never had a particularly clear answer.
Then last week, he got himself a little MORE twisted up when he suggested that, eve though he still thinks Obamacare is horrible, and needs to be repealed, there are a few parts of the law he sorta likes. They happen to be the provisions which have already been implemented in the marketplace, most notably the elimination of lifetime maximums on health policies and the extension of family health coverage to dependent kids under age 26 (for which, by the bye, our 23-year-old son is quite grateful).
He was not quite so glib about another PPACA provision: the elimination of pre-existing conditions exclusions. Apparently Governor Romney fully supports the elimination of those exclusions for those who already have health coverage, but not for those whose pre-existing coverage have thus far kept them out of the insurance pool.
Huh?...
Now The Tonight Show's Jay Leno is no investigative journalist. But during Romney's recent appearance of the show, Leno asked the obvious question: "A lot of guys I know, comedians, mechanics, waiters, who don't have health insurance now can't get it because they have some sort of pre-existing health condition. Don't we want to get them coverage?"
Romney's answer was typically maladroit: "Well, of course we want to get as many people covered as possible, but if one day a person shows up with cancer or a heart condition wanting to buy health coverage because they're sick, we want to be able to say, 'We don't play that game here.'"
Game?...
I only have three thoughts to share regarding this latest gaffe by the Republican candidate:
1) In expressing his support for the provisions he did, Romney joins the ranks of those faux-magnanimous insurance companies which pledged, even before the Supreme Court upheld PPACA, that they would not roll back the elimination of lifetime limits and the under-26 dependent provision.
In the insurers' case, it was meant to sound like a concession to the marketplace. It wasn't. The fact is that insurers have already baked the cost of these provisions into their products, and have found that those provisions haven't affected their profitability at all, and MAY have generated more cash for them. I've never known an insurer willingly to give up cash it's already collecting to reduce benefits.
Besides, lifetime limits have always been sort of bogus, and somewhere near six million generally healthy young adults who hadn't previously had health coverage have it now because of that new law...and this is PRECISELY the group which insurers want to cover, because they tend not to use health services very much; they're the "young invincibles" which insurers have wanted in their pools. They have them now, and they ain't giving them up.
For Romney, the concern is political. These are provisions of the law that have proved to be popular. And for all his rhetoric, he knows better than to be seen attacking a benefit which is already helping working families;
2) The arbitrary exclusion of some individuals from health coverage because of pre-existing conditions is one of the key reasons for our perceived health crisis. The use of health conditions to set prices in the small group and individual markets has always been a gimmick designed to benefit insurers.
I've written several times before about my case, which is typical: when my insurer found out from my medical questionnaire that I had a little hypertension (controlled with a medication which costs $3/month), a little gout (controlled with a medication which costs $4/month), and a borderline cholesterol count (also controlled with a $3/month prescription), my premiums TRIPLED over the initial quoted rate, from $600 to $1800/month. There's no excuse for that, except greed.
To be effective, health reform must reach out not just to the young and healthy, but must also provide access to coverage for those who've been excluded, AND provide some rate relief to those who are just getting screwed.
I'm not a big Obama fan. I think PPACA is a case of massive government overreach in many ways. But these insurance reforms represent good policy. Thus far, they've proven not to be costly; in fact, health costs for the last two years have risen only about a third as quickly as in the previous ten (as much a function of a recovering stock market, from which insurers get most of their profits when times are good, so they need to rely less on rates).
And insurers have had many years to see the light and enact some of these common-sense reforms voluntarily, and chose not to do so. Without the new law, it never would have happened.
3) As is the case with so many of his latest gaffes, this is an example of a presidential candidate who, whatever his core beliefs, has abandoned them for the sake of appeasing his rockhead conservative base. Most of the time, I'm guessing even HE doesn't believe what he's saying; he's just saying what his advisers brief him on. Whether on foreign policy, on health care, or on his "47%" gaffe, he's not speaking from his beliefs...he's talking back points he's heard from the people who surround him.
He's getting VERY bad advice. So when his answers sound cagey, or disingenuous, or just eye-poppingly inappropriate ("We don't play that game here"), he's only repeating what's been drilled into him by others. Sad...and scary...
Tuesday, August 28, 2012
What If The Health Care Cost Curve Doesn't (You Should Pardon The Expression) Get Bent?...And A Couple Other Questions
If I were a health care policymaker, I'd probably spend a whole lot more time than most of them do talking with real people who have real, "micro-world" questions which can illuminate the "macro-world" questions which the deep thinkers...well, think about.
Last week I spent a few hours over beers with a few friends who are pretty knowledgeable small business owners. Practical guys, with practical questions. The biggest one was this: Irrespective of the politics of Obamacare, what is the likelihood that some kind of regulatory or market force will actually bend the cost curve down?
Keep in mind that for most small business owners, annual premium increases of 15-25 percent per year have been the norm, not the exception. Even for fairly large small companies, premiums are doubling every five to six years.
I had to tell them the bad news: there's really nothing in the Affordable Care Act which has any concrete potential to reduce the rapidly-escalating price of health coverage, at least in the short to intermediate term.
That's because the Affordable Care Act essentially ignores the principal driver of health care cost increases: provider costs, especially on the hospital side.
Over eighty percent of health costs relate directly to payments to hospitals, physicians, drug and equipment companies, and other providers. And despite the potential promise of some of PPACA's experiments with delivery system reform, the likelihood is that those costs will continue to hyper-accelerate.
There is certainly a tempting target for cost containment: the estimated 210 billion dollars being spent on over-testing and over-treatment.
I wrote a little something about this phenomenon last year (http://polkiananalysis.blogspot.com/2011/10/economicsand-ethicsof-just-being-sure.html). And a recent column in The New York Times (http://well.blogs.nytimes.com/2012/08/27/overtreatment-is-taking-a-harmful-toll/?ref=health&wpisrc=nl_wonk ) expands on the theme.
Twenty to thirty percent of what we spend on health care can be retrospectively labelled as unnecessary. Let's pretend for a moment that, since one person's unnecessary treatment is another person's "do what it takes to help my Mom," only half that percentage is truly wasteful.
Would it/ should it be worth our time to figure out how to cut $100 billion or so per year out of our health expenditures? A reasonable person would say so.
But doctors get paid for how much they do. And while hospitals' primary business is treating disease, they are also in the business of maximizing revenue.
Unless there's a revolutionary (and counter-intuitive, for those revenue-conscious providers) trend toward awarding clinical efficacy versus the volume and intensity of services rendered, the cost curve isn't gonna bend appreciably over the next ten years or so. And until we can get to these root costs, we can expect to see health premiums double or triple over the same period.
What about defined contribution? Won't that have an effect on health costs?
A switch to a defined contribution will certainly do a lot to reduce small employers' cost exposure. But only by shifting the cost burden to employees, and making hyper-inflation their problem.
The myth of defined contribution is that employers will pass along a portion of the savings they experience by capping their own expenditures with their employees in the form of higher wages, which employees might use to pay for their share of health premiums. By and large, this won't happen.
The best example of why not is the proliferation of high-deductible health plans. The myth of HDHP's is that employers would establish partially-employer-funded Health Savings Accounts to enable their workers to cover their deductibles. Only about ten percent of small employers did this; the rest just saved the money.
And while defined contribution models are fine for large, self-insured employers...whose costs are lower to start with, and whose relationships with employees is largely...statistical...small employers tend to have personal relationships with their workers. Most (not all) understand that their employees are only a medical disaster from financial ruin. They see just unloading their problem on their workers not just as worrisome, but as an idea that can jump up and bite them, especially if their employees under-insure or, worse, take the employer contribution and pocket it.
Most small employers will not be subject to the mandate, but most suspect that, in the face of trouble, their employees, or their employees' lawyers, or, worse yet, the IRS, will be calling the business owner first.
My small business owner friends saw defined contribution as a short-term band-aid that simply sets the table for trouble down the road.
Won't health exchanges do something to reduce health costs?
I've written before that, properly organized and operated, health exchanges could do a lot to empower purchasers by aggregating demand and increasing purchasing power through effective administration and negotiation.
Haven't seen too many "active purchaser" exchange models yet. The Massachusetts Connector has certainly improved access for folks in that state, but hasn't had an appreciable effect on price increases.
And as of today, the vast majority of states have yet to begin seriously organizing their health exchanges; in fact, about 26 states have basically refused, for political and budgetary reasons, to consider getting into the exchange business. Most of these "hell, no, we won't go" states have Republican governors and legislatures.
It does strike me, a non-politician, as odd that these state leaders, proclaiming so loudly against federal interference in their health care systems, would default on the development of their own exchanges and create the scenario for a massive federal takeover of their health systems through the formation of a gigantic federal health exchange.
Maybe they're all expecting a Romney victory in November to make this issue go away.
But what if they guess wrong?
That's a damned fine question.
If they guess wrong, and President Obama is re-elected, I expect we'll see the Administration issuing waivers to states to give them more time to build their own exchange plans. So the "drop-dead date" for the formation of health exchanges will slip from January, 2014 to 2015 or later.
None of this should leave small business owners hopeful for long-term price relief any time soon. And yet, despite the confusion, the health insurance environment for small businesses hasn't really changed all that much. After all, if you've been swallowing 15-25 percent per year increases for the last 15 years, can it really get worse?
Last week I spent a few hours over beers with a few friends who are pretty knowledgeable small business owners. Practical guys, with practical questions. The biggest one was this: Irrespective of the politics of Obamacare, what is the likelihood that some kind of regulatory or market force will actually bend the cost curve down?
Keep in mind that for most small business owners, annual premium increases of 15-25 percent per year have been the norm, not the exception. Even for fairly large small companies, premiums are doubling every five to six years.
I had to tell them the bad news: there's really nothing in the Affordable Care Act which has any concrete potential to reduce the rapidly-escalating price of health coverage, at least in the short to intermediate term.
That's because the Affordable Care Act essentially ignores the principal driver of health care cost increases: provider costs, especially on the hospital side.
Over eighty percent of health costs relate directly to payments to hospitals, physicians, drug and equipment companies, and other providers. And despite the potential promise of some of PPACA's experiments with delivery system reform, the likelihood is that those costs will continue to hyper-accelerate.
There is certainly a tempting target for cost containment: the estimated 210 billion dollars being spent on over-testing and over-treatment.
I wrote a little something about this phenomenon last year (http://polkiananalysis.blogspot.com/2011/10/economicsand-ethicsof-just-being-sure.html). And a recent column in The New York Times (http://well.blogs.nytimes.com/2012/08/27/overtreatment-is-taking-a-harmful-toll/?ref=health&wpisrc=nl_wonk ) expands on the theme.
Twenty to thirty percent of what we spend on health care can be retrospectively labelled as unnecessary. Let's pretend for a moment that, since one person's unnecessary treatment is another person's "do what it takes to help my Mom," only half that percentage is truly wasteful.
Would it/ should it be worth our time to figure out how to cut $100 billion or so per year out of our health expenditures? A reasonable person would say so.
But doctors get paid for how much they do. And while hospitals' primary business is treating disease, they are also in the business of maximizing revenue.
Unless there's a revolutionary (and counter-intuitive, for those revenue-conscious providers) trend toward awarding clinical efficacy versus the volume and intensity of services rendered, the cost curve isn't gonna bend appreciably over the next ten years or so. And until we can get to these root costs, we can expect to see health premiums double or triple over the same period.
What about defined contribution? Won't that have an effect on health costs?
A switch to a defined contribution will certainly do a lot to reduce small employers' cost exposure. But only by shifting the cost burden to employees, and making hyper-inflation their problem.
The myth of defined contribution is that employers will pass along a portion of the savings they experience by capping their own expenditures with their employees in the form of higher wages, which employees might use to pay for their share of health premiums. By and large, this won't happen.
The best example of why not is the proliferation of high-deductible health plans. The myth of HDHP's is that employers would establish partially-employer-funded Health Savings Accounts to enable their workers to cover their deductibles. Only about ten percent of small employers did this; the rest just saved the money.
And while defined contribution models are fine for large, self-insured employers...whose costs are lower to start with, and whose relationships with employees is largely...statistical...small employers tend to have personal relationships with their workers. Most (not all) understand that their employees are only a medical disaster from financial ruin. They see just unloading their problem on their workers not just as worrisome, but as an idea that can jump up and bite them, especially if their employees under-insure or, worse, take the employer contribution and pocket it.
Most small employers will not be subject to the mandate, but most suspect that, in the face of trouble, their employees, or their employees' lawyers, or, worse yet, the IRS, will be calling the business owner first.
My small business owner friends saw defined contribution as a short-term band-aid that simply sets the table for trouble down the road.
Won't health exchanges do something to reduce health costs?
I've written before that, properly organized and operated, health exchanges could do a lot to empower purchasers by aggregating demand and increasing purchasing power through effective administration and negotiation.
Haven't seen too many "active purchaser" exchange models yet. The Massachusetts Connector has certainly improved access for folks in that state, but hasn't had an appreciable effect on price increases.
And as of today, the vast majority of states have yet to begin seriously organizing their health exchanges; in fact, about 26 states have basically refused, for political and budgetary reasons, to consider getting into the exchange business. Most of these "hell, no, we won't go" states have Republican governors and legislatures.
It does strike me, a non-politician, as odd that these state leaders, proclaiming so loudly against federal interference in their health care systems, would default on the development of their own exchanges and create the scenario for a massive federal takeover of their health systems through the formation of a gigantic federal health exchange.
Maybe they're all expecting a Romney victory in November to make this issue go away.
But what if they guess wrong?
That's a damned fine question.
If they guess wrong, and President Obama is re-elected, I expect we'll see the Administration issuing waivers to states to give them more time to build their own exchange plans. So the "drop-dead date" for the formation of health exchanges will slip from January, 2014 to 2015 or later.
None of this should leave small business owners hopeful for long-term price relief any time soon. And yet, despite the confusion, the health insurance environment for small businesses hasn't really changed all that much. After all, if you've been swallowing 15-25 percent per year increases for the last 15 years, can it really get worse?
Wednesday, June 6, 2012
Will CO-OPs Bring A Sense Of "Community" Back To Health Care?
Okay, so...
The Supreme Court has upheld the constitutionality of PPACA. And the sun came up the next day.
I don't expect that the Court's decision changed anybody's mind about Obamacare. People who hated it still hate it, and are adjusting their political strategies accordingly. And those who hailed the law still like it.
But only in Washington does passing (or sustaining) a law mean the same thing as solving a problem. With the constitutionality of the law settled (for now, at least), the next focus should be on execution...implementation of some parts of the law that could have a positive impact on the availability of affordable health coverage in a more transparent and competitive market.
And one element of Obamacare which may have the potential to change a few markets is, in effect, an experiment to turn back the clock to a simpler (and vastly less expensive) time, when the health of a community was in the hands of community members themselves.
These experiments are called "Consumer Operated And Oriented Plans," or "co-ops."
Before there was employer-sponsored health coverage, before there were insurance companies, health care was often a community responsibility. The "communities" were church groups, ethnic organizations, or "benevolent societies," self-selecting communities through which members cared for one another. Everybody pitched in a little money, and if any member became ill, the "community" would assist the family in meeting medical expenses.
Those societies began to be replaced in the 1930's by Blue Cross and Blue Shield plans, larger, non-profit mutual insurance companies with Boards selected from among the members. These plans became the vehicles through which, especially after World War II, large employers began to provide health coverage to their workers, with the premiums covered as a substitute for wages, which were frozen for a time after the War.
Relatively few of these not-for-profit entities remain in the market today. The Cross and Shield plans began consolidating in the '90's into corporate giants. The Boards of a number of once-prominent non-profit health plans decided around the same time that their members' interests would be best served by being acquired by larger companies, the proceeds of the sale being used to set up foundations to maintain a sense of "community purpose."
Each step in the evolution of non-profit benevolent societies into corporate giants has moved health plans an additional step or two away from the interests of the member/customer/patient. With few exceptions, health plans are very large, very corporate, and their leaders are very dependent upon meeting the expectations of Wall Street, rather than of "Main Street."
That could begin to change...Maybe...
Thus far, 16 non-profit groups in 16 states have received nearly $1.25 billion in loans to establish non-profit health plans whose governing bodies will be selected from among their members, and whose surplus earnings (if there are any) will be re-invested in the development of improvements to the plans themselves, rather than distributed among stockholders. A complete list of the groups which have received funding is here: http://www.healthcare.gov/news/factsheets/2012/02/coops02212012a.html.
With the issue of PPACA's constitutionality settled, these groups should begin receiving funds to get themselves organized, and to achieve the killer deadline of bringing new, non-profit health plans into their markets by December, 2013, with coverage effective dates of January 1, 2014.
Most of these erstwhile co-ops have already announced their plans to offer plans in co-operation with their states' insurance exchanges...even in states which have yet to act to get into the exchange business.
The non-profits sponsoring these co-ops have considerable expertise, and some presence, in their states' health care and insurance markets, often as Medicare and Medicaid managed care plans. Some have a particular affinity for groups within their states, i.e., targeted markets to serve; the biggest winner is New York's Freelancers Union, which has won $340 million in loans to create plans for self-employed professionals in New York, New Jersey, and Oregon.
All of these groups have pledged to be "not just another insurance company." In many cases, that translates into pay for co-op leaders which is not "excessive." Other than that, plus the composition of their Boards (presumably volunteers), and their pledge to re-invest their surplus earnings, I'm hard-pressed to see what important differentiations will separate them from all those other insurance companies.
Co-ops must still enter into agreements with hospitals, physicians, and other providers, at some cost. Some co-ops are sponsored by existing managed care plans, which see branching out into the private market as a way to augment patient volume. Will those providers expect their privately-insured customers to be treated at about the same rates as their Medicare and Medicaid recipients, or will they expect a higher rate of payment, thus leading to the cost shifts typical of most provider networks?
How will they distribute and sell their products? Will they try to develop networks of agents, and pay them accordingly, or will they take the risk of experimenting with more cost-effective, technology-oriented marketing solutions?
While they may be technically non-profit, presumably the co-ops will still be subject to state premium taxes. They will have to maintain state-mandated reserves. The plans will need to comply with all coverage mandates required by their states.
My sense is that, whatever they may SAY, in real life, co-ops will need to operate very much like real insurance companies in order to compete and succeed in the marketplace. They're going to have to pay providers, sell products to customers, pay claims, and market themselves in states which are already dominated by huge competitors with very deep pockets. A very tall order.
The way for these groups to succeed will be 1) to get some sort of preferential pricing from providers (good luck), 2) keep their administrative ratios under 15%, 3) sell direct via the Web, and 4) use whatever short-term advantages they can produce to create enough critical mass (customers) to strengthen their hands in their continuing dealings with providers who want to get paid.
Co-ops will work best if their Boards see themselves as advocates for their members, and are in a position to negotiate in a constructive, but adversarial way with their providers. AND if their product and pricing mix is attractive enough that their markets view the co-ops as THEIR health plans, working for them. Part of that will be marketing, but a LOT will be execution, for the long term.
A famously aggressive Cleveland hospital CEO once responded to being cut out of a regional PPO network by starting up her health system's own health plan. To attract providers, the plan offered higher levels of reimbursement than the big PPO did. To attract distribution, the plan offered higher commissions. Employees of the health system were required to obtain coverage through the system's own health plan. At first, there was a lot of fanfare, including the CEO's own pronouncement that "any fool can run a health plan." The company soon went bust. Turns out the CEO was right: Any fool CAN run a health plan. But it takes a very special kind of fool to run a health plan right...and for the right reasons: to benefit the members collectively, for the long term...
The Supreme Court has upheld the constitutionality of PPACA. And the sun came up the next day.
I don't expect that the Court's decision changed anybody's mind about Obamacare. People who hated it still hate it, and are adjusting their political strategies accordingly. And those who hailed the law still like it.
But only in Washington does passing (or sustaining) a law mean the same thing as solving a problem. With the constitutionality of the law settled (for now, at least), the next focus should be on execution...implementation of some parts of the law that could have a positive impact on the availability of affordable health coverage in a more transparent and competitive market.
And one element of Obamacare which may have the potential to change a few markets is, in effect, an experiment to turn back the clock to a simpler (and vastly less expensive) time, when the health of a community was in the hands of community members themselves.
These experiments are called "Consumer Operated And Oriented Plans," or "co-ops."
Before there was employer-sponsored health coverage, before there were insurance companies, health care was often a community responsibility. The "communities" were church groups, ethnic organizations, or "benevolent societies," self-selecting communities through which members cared for one another. Everybody pitched in a little money, and if any member became ill, the "community" would assist the family in meeting medical expenses.
Those societies began to be replaced in the 1930's by Blue Cross and Blue Shield plans, larger, non-profit mutual insurance companies with Boards selected from among the members. These plans became the vehicles through which, especially after World War II, large employers began to provide health coverage to their workers, with the premiums covered as a substitute for wages, which were frozen for a time after the War.
Relatively few of these not-for-profit entities remain in the market today. The Cross and Shield plans began consolidating in the '90's into corporate giants. The Boards of a number of once-prominent non-profit health plans decided around the same time that their members' interests would be best served by being acquired by larger companies, the proceeds of the sale being used to set up foundations to maintain a sense of "community purpose."
Each step in the evolution of non-profit benevolent societies into corporate giants has moved health plans an additional step or two away from the interests of the member/customer/patient. With few exceptions, health plans are very large, very corporate, and their leaders are very dependent upon meeting the expectations of Wall Street, rather than of "Main Street."
That could begin to change...Maybe...
Thus far, 16 non-profit groups in 16 states have received nearly $1.25 billion in loans to establish non-profit health plans whose governing bodies will be selected from among their members, and whose surplus earnings (if there are any) will be re-invested in the development of improvements to the plans themselves, rather than distributed among stockholders. A complete list of the groups which have received funding is here: http://www.healthcare.gov/news/factsheets/2012/02/coops02212012a.html.
With the issue of PPACA's constitutionality settled, these groups should begin receiving funds to get themselves organized, and to achieve the killer deadline of bringing new, non-profit health plans into their markets by December, 2013, with coverage effective dates of January 1, 2014.
Most of these erstwhile co-ops have already announced their plans to offer plans in co-operation with their states' insurance exchanges...even in states which have yet to act to get into the exchange business.
The non-profits sponsoring these co-ops have considerable expertise, and some presence, in their states' health care and insurance markets, often as Medicare and Medicaid managed care plans. Some have a particular affinity for groups within their states, i.e., targeted markets to serve; the biggest winner is New York's Freelancers Union, which has won $340 million in loans to create plans for self-employed professionals in New York, New Jersey, and Oregon.
All of these groups have pledged to be "not just another insurance company." In many cases, that translates into pay for co-op leaders which is not "excessive." Other than that, plus the composition of their Boards (presumably volunteers), and their pledge to re-invest their surplus earnings, I'm hard-pressed to see what important differentiations will separate them from all those other insurance companies.
Co-ops must still enter into agreements with hospitals, physicians, and other providers, at some cost. Some co-ops are sponsored by existing managed care plans, which see branching out into the private market as a way to augment patient volume. Will those providers expect their privately-insured customers to be treated at about the same rates as their Medicare and Medicaid recipients, or will they expect a higher rate of payment, thus leading to the cost shifts typical of most provider networks?
How will they distribute and sell their products? Will they try to develop networks of agents, and pay them accordingly, or will they take the risk of experimenting with more cost-effective, technology-oriented marketing solutions?
While they may be technically non-profit, presumably the co-ops will still be subject to state premium taxes. They will have to maintain state-mandated reserves. The plans will need to comply with all coverage mandates required by their states.
My sense is that, whatever they may SAY, in real life, co-ops will need to operate very much like real insurance companies in order to compete and succeed in the marketplace. They're going to have to pay providers, sell products to customers, pay claims, and market themselves in states which are already dominated by huge competitors with very deep pockets. A very tall order.
The way for these groups to succeed will be 1) to get some sort of preferential pricing from providers (good luck), 2) keep their administrative ratios under 15%, 3) sell direct via the Web, and 4) use whatever short-term advantages they can produce to create enough critical mass (customers) to strengthen their hands in their continuing dealings with providers who want to get paid.
Co-ops will work best if their Boards see themselves as advocates for their members, and are in a position to negotiate in a constructive, but adversarial way with their providers. AND if their product and pricing mix is attractive enough that their markets view the co-ops as THEIR health plans, working for them. Part of that will be marketing, but a LOT will be execution, for the long term.
A famously aggressive Cleveland hospital CEO once responded to being cut out of a regional PPO network by starting up her health system's own health plan. To attract providers, the plan offered higher levels of reimbursement than the big PPO did. To attract distribution, the plan offered higher commissions. Employees of the health system were required to obtain coverage through the system's own health plan. At first, there was a lot of fanfare, including the CEO's own pronouncement that "any fool can run a health plan." The company soon went bust. Turns out the CEO was right: Any fool CAN run a health plan. But it takes a very special kind of fool to run a health plan right...and for the right reasons: to benefit the members collectively, for the long term...
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