Health Insurance Info for Colorado

news & commentary on health insurance and benefits

Sebelius: The health insurance “death spiral”

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As if we didn’t already know this: The infamous HHS Secretary tells us what she really thinks in Congressional testimony.

Read the comments on that page, too – very interesting.

Another story on this topic references the infamous McKinsey study released last year. “At least 30 percent of employers are likely to stop offering health insurance once provisions of the U.S. health care reform law kick in in 2014, according to a study by consultant McKinsey,” Reuters reported. “McKinsey, which based its projection on a survey of more than 1,300 employers of various sizes and industries and other proprietary research, found that 30 percent of employers will ‘definitely’ or ‘probably’ stop offering coverage in the years after 2014, when new medical insurance exchanges are supposed to be up and running.”

The Obama Administration went to a full-court press in an attempt to deflect and discredit this story as being a put-up job by a) the insurance industry, b) Republican operatives, and c) all of the above, even going so far as to label it an “outlier” (whatever that means!). In fact, Democrats used these and other arguments in a kitchen sink attempt to discredit a study that was, by the way, funded entirely by McKinsey. Their efforts were less than successful, and I can assure you that the survey’s results are, anecdotally, true: I’ve been told the same thing by many clients.

Surprisingly, even Howard Dean says that the McKinsey study is one that “the Democrats don’t like but I do and I think it’s true.” Dean likes it because it will remove a burden from small businesses. Note that Dean, always a proponent of single-payor, pulls no punches as he advocates for a government system, whereas the Obama folks are trying to camouflage their real intent: destroying private insurance companies by crashing their reserves and limiting their ability to offset health care costs with appropriate premiums, which will lead to the same thing.



No HSA plans in Health Insurance Exchanges due to MLR rules

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“When I say ‘If you have your plan and you like it,… or you have a doctor and you like your doctor, that you don’t have to change plans..”

“What I’m saying is the government is not going to make you change plans under health reform.”

(Editors note: unless you have an HSA!)

These are well-known comments from POTUS Obama in the time leading up to the passage of The Affordable Care Act, and afterwards as he flew around ginning up support for an incredibly bad piece of legislation. We now know that these comments aren’t accurate, or even, strictly, truthful. And they directly impact so-called Bronze plans, of which HSAs should be a component. Only, they won’t be.

It should come as no surprise that Democrats despise Health Savings Accounts (HSA for short). Their leading left-wing think tanks routinely lambast them. It’s been somewhat hard to understand why the Administration hasn’t been dissing them openly since the passage of Obamacare; now we know why. They are simply going to eliminate them without a shot being fired, due to a complex series of rules and regs that could only be interpreted as willful, and involve the actuarial percentage of benefits paid in each Gold, Silver, and Bronze plan, and the confusing effects from a price control enacted for political purposes.

The Medical Loss Ratio (MLR) Rule is the culprit. HSAs, under this regulation, cannot qualify.

The MLR Rule requires insurers to spend no more that 20% of premium on administration in the small group and individual markets and 15% in the large-employer market. This spells trouble for high-deductible health plans in exchanges, since only 5% of those with an HSA qualified health plan in a year have any claims paid by their insurance.

HSAs, in summary, are high deductible plans that allow cash to be set aside in a fully tax-deductible savings plan to be used to pay for out-of-pocket expenses before the deductible is met. HSA-qualified health insurance policies are usually lower cost than many fully-featured health plans, and are especially well suited for many small business sole proprietors, or others who believe saving money to pay for their own out-of-pocket costs is better than giving it to an insurer, who is in essence subsidizing other health insurance claims with their dollars.

Here’s part of the problem: payments made by an insurer for health care expenses count towards meeting the MLR Rule; payments by individuals out of their health savings accounts do not. Taking into account the complex rules for “credibility adjustment” and “cost-sharing adjustment” for companies that sell high-deductible plans, HSA-qualified or not, it appears that, given the lower claims-paying of HSA  or other high deductible plans, it is mathematically impossible for any plan to meet the MLR of 80%. This would mean no Bronze plans in the Exchanges, since they cannot meet the complex and required Minimum Loss Ratio Rules.

Obviously, plans with higher deductibles are being intentionally disadvantaged by this arcane formula because they cannot count claims incurred below the deductible. Since Bronze plans under the PPACA cover 60% of the benefit costs of the plan, it seems unlikely that HSA plans will be eligible under this scenario, even though the original guidance showed HSA plans as being eligible based on their deductible range (See here). Further, the carrier must still process claims below the deductible to track deductible expenses, but no cost of that processing can be applied to the MLR’s.

I draw my final conclusions from this study prepared by the HSA Coalition:

“Clearly, the MLR adjustment factors for cost-sharing and credibility help companies offering high deductible plans but only if they have low enrollment. Most [insurance] companies will likely see little benefit because the adjustments end up being minimal and ultimately disappear because of the way the MLR formula is constructed. In the short-term, this could limit future growth of HSAs in the fully-insured markets (individual, small group, large group) and put extra pressure on premium pricing to minimize potential rebates. Insurance companies (especially the current market leaders) may be encouraged to sell more expensive plan designs with more first-dollar coverage (e.g., HMOs and traditional PPOs)because it will be easier to meet the MLR requirements. The result could be a future market dominated by more expensive plans, dramatically reducing affordability of coverage and adding significantly to the costs of income-based subsidies provided under the law, since the subsidies are based on the weighted average premiums for Silver plans in the “market area.”

The end result will be that the exchanges will likely be dominated by high-cost health plans with few lower cost options available, leaving people out of the market – until they desperately require health insurance coverage. This will quickly drive up the cost of coverage, expanding the subsidies needed to pay for it.

A summary of the problem is here. And, here is a detailed article on MLR’s Potential Effect of HRAs and HSAs.

UPDATE on 2/26/12 – Quote: “The obstacles Obamacare creates for consumer-driven health plans could lead to their extinction, even though they are an affordable form of coverage that is gaining in popularity.” See this link.




Canada: Back To The Future?

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A recent study shows that Canadians are facing the longest waiting times for medically necessary care in almost two decades.

With all the talk about how bad Obamacare will be, with its standardized benefit structures, centralized command and control, and over-arching subsidy program that will drive as many as 80 million Americans into Medicaid (yes, you read that right, it’s in the bill!) one should remember why so many Canadians have come south of the border to access care: they can’t get any, which is something we are going to be facing in the not-too-distant future, as anyone who’s ever studied socialized, government run or controlled, capitated health care delivery systems knows all too well. Remember: in the Orwellian future of American health care, you are no longer the customer – you are a unit.

ITEM: In a report from late last year, the Fraser Institute, Canada’s leading public policy think-tank, said this:

  • “Canadians are being forced to wait almost four-and-a-half months, on average, to receive surgical care, prolonging the pain and suffering patients and their families are forced to endure.”

And this:

  • “Despite significant increases in government health spending, Canadians are still waiting too long to access medically necessary treatment.”

Amazingly, Canadians put with waiting times between referral by a general practitioner or PCP and consultation with a specialist of between 7 1/2 weeks to almost 10 weeks, depending on where they live. Obviously, Canucks are way more patient than anyone in my family.

It gets worse:

-I pity the poor fool who needs orthopedic surgery: average wait is more than 39 weeks (more than 9 months).

-And, this is a stunner: if you need neurosurgery, like, on your brain (!) be prepared to pray a lot: you’ll wait 38.3 weeks.

No wonder Canada has introduced “market reforms” that finally allow some people to buy private health insurance. Too bad we’ve taken the wrong path and will have to learn the hard way what Canada and Britain have already learned.


My Opinion: Exit Stage Left, Health Insurance

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In a brazen and somewhat twisted (in that, it’s so cheerful!) online op-ed piece in the New York Times online, authors Ezekiel Emanuel and Jeffrey Liebman, ex-Obama Administration advisors on health care policy, posits the wondrous new world of “Accountable Care Organizations” (ACOs) amidst the utopia of Obamacare (assuming the Supreme Court doesn’t render it mute; but then, when did the Left ever let something as silly as nine black-robed Justices exercising their constitutional duty stand in the way of equality and social justice?).

Disclaimer: it should be noted that neither of these “experts” has any experience in the private sector.

The problem, dear readers, is this: they aren’t telling you the whole story (what, you’re surprised??). And what story they do tell is full of inaccuracies and oft-quoted myths/distortions. Much like the current brouhaha concerning enforced contraception mandates for all religious organizations, the story is, err, telling more for what it doesn’t spell out accurately as opposed to what it tries to say badly.

So, here’s my take on their not-so-distinguished attempt at becoming fiction writers:

  • “Already, most insurance companies barely function as insurers. Most non-elderly Americans — or 60 percent of Americans with employer-provided health insurance — work for companies that are self-insured. In these cases it is the employer, not the insurance company, that assumes most of the risk of paying for the medical care of employees and their families. All that insurance companies do is process billing claims.”

BEEEEP: Wrong. There are MANY inaccuracies in this statement, but the basic premise is so faulty it’s difficult to even say that this is anything but pure spin, or pure hatred for health insurance companies, who they love to portray as the villains, instead of themselves. While it’s true that many companies, both public and private, “self-insure”, very few (none to my knowledge, actually) do so completely, at least for medical coverage. There are any number of reasons for this; particularly, reserving for future claims of this potential magnitude would be a drag on earnings, and the kind of companies these two are talking about are almost certainly public, not to mention what an unexpected $2M cancer claim could do to the bottom line. No, the reality is that under a self-insured scheme of insurance, an employer contracts with an insurer to take all risk after a certain level of claims, which lowers the cost of premiums. This is called aggregate and specific stop loss coverage, and it’s a marvelous way for companies to lower costs relating to providing health insurance coverage to its employees. Beyond the mega-corps (who use stop-loss coverage almost exclusively) this insurance technique, almost always done under the eye of ERISA regulation at the federal level, is the norm. And of course, the employer sets the level of risk retained, thereby exercising a means to regulate and control their premium costs, based on their unique needs and circumstances. Does it work? YES. As for the last part, “all that insurance companies do is process claims”, is simply false, and denigrates the administrative-services-only component of modern insurance management, as only two eggheads with no practical real-world experience could do. In fact, ASO is just part of what insurers, whether dealing with self funding coverage or fully insured plans, do best: run efficient, honest, and reliable network and claims processes. And let’s not forget that it’s the insurers and their pursuit of negotiated fee networks that have saved patients billions of dollars, unlike government mandates which often inflate the cost of care and therefore insurance costs. These networks are so efficient that the federal government went so far as to contract with them to gain access to their networks – as compared to the dinosaur known as “original Medicare”, which has major problems with doctor availability. Or, have these two policy wonks never heard of Medicare Advantage?

  • “For individuals and small businesses, health insurance companies usually do provide insurance; they take a premium and assume financial responsibility for paying the bills. But the amount of risk sharing that is accomplished is limited because the insurers charge premiums that vary, depending on the health of an individual or a group of employees, and use their data and market power to identify healthy people to cover and unhealthy people to exclude from coverage.”

Oh My. BEEEP. Where have these guys been all these years, stuck in the Executive Office Building reading back issues of  The New Republic? To be fair, they get part of it right: health insurance companies do take a premium and assume financial responsibility for paying the bills. Good enough. But the spin enters promptly when they disregard acres of state regulation of individual and small group insurance that actually prevents much of what they allege happens. In Colorado, and in much if not all of the nation, small group insurers aren’t allowed to charge more for health conditions present at time of underwriting except in very narrow circumstances and in very limited amounts, and employers aren’t expected or even allowed to carry their own claims, as all claims must be pooled. In point of fact, insurers in Colorado aren’t even allowed to rate up OR down at time of underwriting, except for basic underwriting criteria such as, say, SIC Code and address. They must also make available guaranteed-issue plans for business groups of one, again, without regard to the health of any individual in the group. In the individual market, very few medical conditions actually result in outright declination of coverage, and many insurers have very liberal underwriting standards that allow for sensible rate-ups or exclusions for medical conditions present that might prove to be too risky for the insurer to accept and still be able to meet reserve requirements mandated by regulatory agencies. As usual, these two spin-meisters miss the point: no health insurer in the individual market can knowingly accept obviously uninsurable conditions and attempt to stay in business and do what their corporate charter almost certainly mandates: provide a pool of money to pay for catastrophic or other kinds of medical illnesses and injury, without regard to rationing or other capitation schemes that are at the heart of Obamacare. As an individual health insurance agent for many years, I fail to see ANY evidence of the charge they make: using their data and market power to cherry-pick the market, especially given the regulatory environment in Colorado. As pointed out in this piece, they use their ability to provide quality coverage to increase their client base, the governing rule of insurance being the law of large numbers. And assessing premiums relative to risk is the heart and soul of insurance underwriting – something that these two propeller heads obviously don’t think is very important, especially since they’ve never had to worry about covering costs except by raising taxes. Strike Two.

  • “Many health insurance companies also impose barriers — like requiring prior authorization for tests and treatments and denying payment for covered services, which forces patients to appeal — to discourage patients from using the medical services for which they are insured and to attempt to avoid paying for those services.”

Health insurers aren’t fools, and know (and respect, even fear) the power of the regulatory apparatus that claims “consumer protection” as its primary goal, so this statement is suspect on its face. So-called “barriers”, such as prior authorization, aren’t designed as gate-keepers to that care, but are designed to ensure that premium dollars are used for medically necessary procedures or treatments, and that the treatment is appropriate – which saves money for care that is needed and appropriate. Denying payment for covered charges in, for instance, fully-insured, state regulated plans triggers an avalanche of remedies, including economic sanctions in the form of market conduct fines or other penalties that all insurers wish to avoid at all costs; in ERISA governed plans, remedies can be brutal in federal court or via federal regulatory remedies. To be sure, self-insured plans that are governed or managed by a complacent Third Party Administrator with an employer allowed to run rough-shod over the governing documents, are a problem in some instances (and has nothing to do with the general health insurance industry, a fact not commonly or even casually reported). Fraudulent, self-insured Multiple Employer Welfare Arrangements (MEWAs) can also be a problem; this has been the case for as long as they’ve been in existence, though. But this hardly represents the current state of the industry in terms of insured health insurance coverage, which is remarkably free of corruption, impropriety, taint, market excess, or accounting or claims issues. This is fear mongering, much akin to the famous and ill-advised rant of a certain former Speaker of the House, who famously railed against “evil insurance companies” with little or no evidence to support her emotional outburst. Foul Ball.

  • “Because most physicians and hospitals today are paid on a fee-for-service basis, medical care is organized around treating a specific episode of illness rather than the whole patient. This system encourages overtreatment and leads to mistakes and miscommunication when patients are sent between their primary care doctors, specialists and hospitals.”

Obviously these two have never been to a physician who advises a reduction in salt, exercise, and blood pressure medication after a physical that shows.. wait for it.. high blood pressure. This statement simply ignores the fact that the vast majority of physicians always perform care using ethical guidelines that promote returning the patient to health, regardless of treatment required or billed, or where the physician practices medicine. This statement is akin to a physician treating a long-standing headache, or history of headaches, with a dose of aspirin and doing nothing more – and nothing could be further from the truth (physicians, already faced with trial attorneys’ who salivate at the chance to cash in on a lawsuit alleging substandard or negligent care, go too far the other way, practicing “litigation medicine” in the absence of realistic tort reform). Fee-for-service is just what it claims to be: you buy a service and you pay for it, which is in fact the way most services are provided in our free enterprise system. In fact, most physicians nowadays aren’t governed by pure retail fees in any event, but in fact already accept, due to negotiated contracts with health insurance companies and their networks, fees based on a pre-determined schedule that substantially lowers the insureds’ cost of coverage and out-of-pocket costs. In response to this, the authors’ claim, in the classic Alinsky Method, that the system somehow, even in the face of insurers who relentlessly pursue fraud (currently a small fraction of expenses compared to estimated Medicare losses) and unwarranted health care expenses and charges, promotes “overtreatment” and mistakes or miscommunication without advancing any rationale or basis for this claim – we are simply to accept their assertion of “fact” as accurate (and disregard or ignore the fact that the federal government doesn’t even attempt to calculate the fraud and mismanagement in original Medicare – a fact seemingly lost to these two snake oil purveyors). One thing is certain, though – they have identified their enemy, and it’s private, fee-for-service physicians and the health insurers that pay out millions in claims and live on 2-3% profit before taxes that they wish to destroy. Foul Ball Two.

  • “A.C.O.’s are not simply a return to the health maintenance organizations of the 1990s. Although in both models patients are members of a provider network with a specific group of doctors and hospitals, and both are paid primarily per member rather than per procedure or test, there are big differences between them. H.M.O.’s were often large national corporations far removed from their members.”

In actuality, the public rejected the HMO model on a nation-wide basis for issues relating to access to care, per member per month limitations on care, restrictive gatekeeper provisions, and a host of other issues; mention “managed care” to anyone who had such a plan in the 90s and the reaction is usually negative, probably due to the inability to access care easily, especially specialists. Even many local health maintenance organizations of the type  that ACOs are supposedly drawing their identification with have issues relating to high doctor to patient ratios, long waiting lists for specialist care and other issues; pod plans, so-called because they represented a group of doctors and other care providers that practiced in a specific facility and thereby represented a mini-network of care for insureds, had limited success and appeal and were never wholeheartedly accepted by the public; they most closely mirror the structure of ACO’s but with troubling and ominous “big differences”, such as the fact that ACOs will increasingly come under the sway of the Centers for Medicare and Medicaid Services (CMS), which will use that power to enact more and more top-down, bureaucratic control over Americans’ health care choices, including the recommendations of the Independent Payment Advisory Board (IPAB). This is, folks, proof of the sinister take-down of the private health delivery system in our country, replaced by a government funded and controlled single-payor style, collectivist health delivery system modeled as a co-op, non-profit socialized version of the British National Health System, with physicians who are employees rather than private docs and nurses that can be more easily unionized. And if that doesn’t scare you…

This will:

  • “Today, consumers have to choose among insurance plans with a bewildering array of copayments, deductibles and annual out of pocket maximums — choices that few of us are any good at making.”

All of which I thought was… choice. Now, they’ll do our choices, for us. Strike Three.

Gosh, a thinking human being might have to apply some basic cognitive skills and assess what might be best for themselves based upon a set of criteria as complex as a copay, or a deductible, or out of pocket costs. Wow. Thank you, THANK YOU! Federal Government – what would we do without you? Will you help me choose a new car now? It’ll be green, I’m told. Or, perhaps, help me so that my VCR (yes, I still have one) stops blinking. I am soooooo thankful that we have actual Government Bureaucrats that will come to our aid when we need it…most. I’m just stunned… these difficult questions will now finally be answered for me. Tell me, will all of these be, say, less confusing than your current Medicare rules and process which, I have to say, isn’t..umm… user-friendly. Every year I have seniors who call me up and ask me … beg me actually… to try and explain, in some manner related to common-sense, what all of that Medicare mumbo-jumbo means, what with the 300 page booklets full of government-speak that no one understands (alas, I’m no longer allowed to speak to seniors except in very very limited circumstances, so.. no help for you!!).

The reality, and what is NOT written in their upbeat, everything-is-just-going-to-be-fine-with-Obamacare article, is that ACOs represent an intrusion into the private medical care of all Americans that will not be pretty: in the words of The Heritage Foundation, “they are more like a vessel for Centers for Medicare and Medicaid Services (CMS) statisticians and health policy gurus to work their craft than a mechanism that actually delivers better care.” And that is not the prescription for health care that many Americans will find appealing, especially from advocates who distort and mislead the public about the very disturbing nature of their prized tool for re-making the American health care delivery system, especially when coupled with Medicare cuts and the nature of IPAB. Because, the patient isn’t the customer. And that is the most troubling conclusion of all.

To learn more, go here. And, here. For background on ACOs, click here. For research and commentary, see this. For a simple example deconstructing how they will likely work, go here. John Goodman’s Health Policy Blog has excellent articles/links on ACOs – search! And last but not least, a comment from the FTC Commissioner that says ACO’s will make everything worse, in Forbes.

In closing, my opinion: the condescending attitudes and arrogance expressed by these two “public servants”, and their hatred of  private sector mechanisms, is telling, and clearly demonstrate their “government is the solution” mentality,  which should give all Americans pause to stop and think about whom to vote for this November. Liberty comes in many forms; being beholden to a government that views health care as an item on the bottom line is synonymous with a loss of that liberty – especially if you are no longer working and “contributing” to society. Food for thought.

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