Move Over, Ghostbusters

If there’s something strange in your health benefits plan, who you gonna call?

Numberbusters (aka the American Academy Of Actuaries (AAA)).

For example, take a look at the just-introduced H.R. 3962, the Affordable Health Care for America Act, which is an amalgam of proposals already approved by three House Committees and which is scheduled to be debated on the House floor next week (see below for some details).

As in all other health reform proposals, a common element is reliance on actuarial estimates and by extension, the importance of the American Academy of Actuaries to employer compliance with health reform.

Here are three of more than a dozen instances in which H.R. 3962 looks to the actuarial profession for help:

1.  Sec. 213: “The Commissioner shall estimate the basic per enrollee, per month cost, determined on an average actuarial basis, for including coverage under a basic plan of the services.”

2. Sec. 222: “The cost-sharing under the essential benefits package shall be designed to provide a level of coverage that is designed to provide benefits that are actuarially equivalent to approximately 70 percent of the full actuarial value of the benefits provided under the reference benefits package.”

3. Sec. 303: “A basic plan shall offer the essential benefits package required under title II for a qualified health benefits plan with an actuarial value of 70 percent of the full actuarial value of the benefits provided under the reference benefits package.”

The importance of actuaries has been formalized for retirement plans ever since ERISA was enacted. In health care plans, however, actuarial estimates of costs, while common, often have been optional in legislation, as in the requirements for COBRA continuation of coverage.

Now, because all health reform proposals being considered include reliance on actuarial estimates, employer health plans will need to value their health care plans for compliance.

Existing rules for employers to qualify for the Medicare Part D retiree drug subsidy suggest how exactly health reform might specify “actuarial equivalence.” Under these Medicare rules, retiree pharmacy plans must be at least "actuarially equivalent" to the basic standard Medicare Part D plan. And it is a requirement that a “qualified” actuary or an actuary who is a member of the American Academy of Actuaries make a determination of actuarial equivalence.

The AAA agrees, in a May 2009 report on actuarial equivalence in health reform: “Requiring that actuarial equivalence attestation be performed by members of a U.S.-based actuarial organization can help ensure that appropriate methods and assumptions are used.” This report also provides an excellent analysis of how actuarial estimates can and should be used in health reform legislation.

Details In H.R. 3962

On October 29, Rep. John Dingell (Mich.) introduced H.R. 3962, the Affordable Health Care for America Act. According to House Speaker Nancy Pelosi (Cal.), the bill costs under $900 billion over a ten-year period, insures 36 million more Americans, and "does not add a dime to the debt."

Many of the provisions would have a direct effect on employer provided health care plans, some immediately, and some in future years:

Immediate Reforms

Reforms in H.R. 3962 that would take effect on Jan. 1, 2010, include these:

• Any health insurer in the small or large group market would have to issue rebates to enrollees if its medical loss ratio fell below 85%.
• Group health plans that offer dependent coverage would have to offer the coverage to dependents up to age 27.
• The look-back period allowed for group health plans to apply preexisting conditions exclusions is temporarily reduced to 30 days and the preexisting conditions exclusion period itself is reduced from 12 months to three months. Preexisting condition exclusions would be prohibited starting in 2013.
• Any individual covered by COBRA continuation of coverage on or after the date of enactment could continue the coverage until a national insurance exchange took effect in 2013.
• Postretirement reductions in health care benefits would be prohibited. In other words, plans would be prohibited from reducing the benefits provided to a retired participant if the reduction of benefits occurs after the date the participant retired.

Not-So-Immediate Reforms

In 2013 or later, the following employer plan reforms would take place under H.R. 3962:

• All plans would be prohibited from imposing preexisting conditions exclusions and would be required to provide guaranteed issue and guaranteed renewal.
• Qualified health benefit plans would have to provide coverage that had an actuarial equivalence of 70% of the "reference benefits package," which in general would be comprehensive health coverage with no cost sharing.
• Employers would have to offer employees a qualified health plan, would have to contribute at least 72.5% of the cost of individual coverage and 65% of the cost of family coverage.

H.R. 3962 also includes a public health insurance option beginning in 2013 that would negotiate rates with providers and a repeal of the health insurance antitrust exemption in the McCarron-Ferguson Act.

Employers that do not provide coverage to their employees would be required to contribute up to 8% of payroll into a Health Insurance Exchange Trust Fund.

Fly to France for a face lift?

If you were facing a decision about having elective surgery, would you give some thought to where you’d have it? I don’t mean which hospital. I mean which country.

That’s the idea behind medical tourism – a relatively new approach that involves an individual traveling to another country to seek medical care.

In 2007 more than 750,000 Americans traveled abroad for outbound medical care, according to a new report from the Deloitte Center for Health Solutions. The report, “Medical Tourism: Update and Implications,” indicates that since 2007, medical tourism has experienced a slow down driven by the economic recession and consumers putting off elective medical procedures over the past two years with an estimated 540,000 Americans traveling abroad for medical care in 2008 (a 20 percent decrease) and a projected 648,000 (a 10 percent decrease) doing so in 2009.

The report also notes that the economic recovery may help spur a sustainable 35 percent annual growth rate for the medical tourism industry by 2010.

“Barring any tempering factors, such as supply constraints, resistance from health plans, increased domestic competition or government policies, we project that outbound medical tourism could reach upwards of 1.6 million patients by 2012,” said Paul Keckley, Ph.D. and executive director, Deloitte Center for Health Solutions, based in Washington, D.C. “Medical tourism has transitioned from a cottage industry to an acceptable alternative for elective care that despite the setbacks of the economic downturn may begin to recover in 2010, as quality is better defined, new business models emerge, insurers, legislators and employers explore pilots and programs, health care providers become increasingly involved in coordinating care and consumers continue to test it out to explore savings.”

Reform's effect. Health care reform will likely propel growth in the elective outpatient market, particularly if flex account expenditures are limited to $2,000 or less, and elective cosmetic and dental procedures are not considered “basic benefits,” the study finds.

House Dems consider re-branding public option as Medicare Part E

Who can forget the irate protestors at town hall meetings last summer loudly proclaiming “keep your government hands off my Medicare”? In an effort to capitalize on the popularity of the Medicare program and possibly provide some “political cover” for the public option, House Democrats are considering renaming the public option as “Medicare Part E” that is, Medicare for Everyone.

Though the public option has been steadily gaining in popularity among the American public in recent months, there’s a sense that many people don’t really understand the public option concept. Medicare itself is wildly popular and relatively well-understood by the general public. In face, Medicare’s approval rating is 79 percent, a figure that most American politicians would give their eyeteeth for. Maybe some of that popularity would rub off on the public option.

In Capitol Hill jargon, the plan would be called the “robust option” or Medicare Plus 5, which would tie provider reimbursement rates to Medicare, with an additional five percent. At this point, it’s not certain how this plan would operate. According to The Hill, “some want to expand Medicare itself to uninsured people under 65. Others want to simply rename what is now called the public health insurance option.”

Shakespeare observed “What's in a name? that which we call a rose by any other name would smell as sweet” so what would a name change really accomplish? In this instance, a name change might not mean all that much, though, it could it might provide some political cover. Some believe, for instance, that “the strategy could benefit Democrats struggling to bridge the gap between liberals in their party, who want the public option, and centrists, who are worried it would drive private insurers out of business.”

After all, who could possibly oppose Medicare, without incurring the wrath of seniors everywhere? For the moment at least, momentum seems to be building for a public option and a name change could help that process along. That could be what House Democrats are banking on.

Reduce Wasteful Healthcare Spending To Fund Reform

A new study released yesterday by Thomson Reuters’ healthcare analytics arm found that the U.S. healthcare system wastes between $505 billion and $850 annually, or about one-third of the dollars we spend for healthcare In this blog, we have discussed this issue previously (here and here).

Among the culprits of this wasteful spending are unnecessary care such as overuse of antibiotics and laboratory tests (said to be responsible for 37% of the wasted dollars) and, no doubt, due to failure of medical providers to coordinate patient care. Fraud is responsible for more than one-fifth of wasted healthcare dollars—a segment on CBS’s program 60 Minutes on Sunday October 25 addressed the billions of dollars the Medicare program looses every year to fraudulent medical claims.

Other sources of waste are preventable chronic conditions and complications of disease, as many experts, including Dee Eddington, director of the University of Michigan’s Health Management Research Center, explained to a U.S. Chamber of Commerce meeting in a 2008 presentation.

Time will tell if the healthcare industry, Congress, and the Obama administration can cooperate on reducing healthcare waste, as they promised earlier this year, as part of health reform. And, yes, we can do this while improving healthcare quality and vice versa.

Health insurers and baseball: a parting of the ways?

Since 1945, the insurance industry and baseball have had one thing in common: each enjoys an exemption from the federal antitrust laws.

Now, if Democrats get their way, that exemption may be coming to an end--at least for health insurance issuers. Last week the House Judiciary Committee approved a measure that would strip health insurance issuers of the protections of the McCarran-Ferguson Act. This 1945 law grants nearly exclusive jurisdiction over the regulation of the business of insurance to the states. Shielded by McCarran-Ferguson, insurance companies over the years have worked together to develop a series of model laws (the NAIC Model Acts) that have been used by most states as a guide to establish relatively uniform insurance laws, according to Wolters Kluwer's 403(b) Answer Book (click here to order).

H.R. 3596 carves out an exception of its own, for the "information gathering and rate setting activities" of any State insurance commissioner.

House Democrats have signaled their intention to try to add the proposal as an amendment to the version of health care reform moving through the House. Senator Patrick Leahy (D-VT) plans a similar strategy in the Senate.

House Judiciary Committee Chairman John Conyers (D-MI) hailed the measure as a means to promote "real competition" in the health insurance markets. Maybe so, although some reports indicate that the Democrats' sudden "trust-busting" zeal may actually be nothing more than payback for recent attempts by insurance industry lobbyists to stall President Obama's reform initiative. Congress' own version of hardball, in other words.

I Guess We Haven’t Tried Everything Else Yet

Every one of the five health reform proposals in Congress purports to attack the quality issue*—you know, the minor problem in this country that results in

• as much as 30% of all health care costs being attributed to waste fraud and abuse
• thousands of deaths each year from shoddy or inadequate medical care
• variations in care so extreme that some areas of the country look more like the third world and other areas provide the best care in the world.

And now the National Committee for Quality Assurance says quality is not getting better.

The 2009 State of Health Care Quality Report from the National Committee for Quality Assurance reveals that after 10 years of quality improvement, “the quality of care in America appears to have reached a plateau.” The report goes on to note that “With a few key exceptions, quality measures in the three major sectors of our system — commercial insurance, Medicare and Medicaid — were flat.”

Richard Sorian, vice president of public policy with NCQA, attributed the slowing performance of health plans to the economy and the pay-for-service model. "In many cases employers and health plans have taken their eye off quality to focus on cost-cutting," Mr. Sorian said, adding that the health industry's pay-for-service model does not create an incentive to improve the quality of care.

Improving health care quality would have significant benefits beyond the health care system itself, according to NCQA. The organization estimates that were all health plans able to perform at the level of the top 10% of plans, the U.S. would avoid up to 115,000 thousand deaths and save at least $12 billion in medical costs and lost productivity every year.

Health Reform Talk already has elaborated on these quality issues (for example, here, here, and here), and virtually every legislator, health care expert, and interest group advocates for quality improvements as a part of health care reform.

So why do many of us suspect that quality improvement in health care will remain elusive under any of the proposed reform bill? Why do thousands of deaths caused by a chaotic health care system elicit so little outrage?  Why don’t proven employer approaches to quality and cost control (like those of Pitney Bowes) spread like wildfire throughout country?

I can only hope that the well known quote attributed to Winston Churchill is accurate in regard to health care: “You can always count on Americans to do the right thing‑after they've tried everything else.”

*See, for example, all of Title III of the Senate Finance Committee's America's Healthy Future Act.

Get covered! Young adults can under House plan

You’ve probably heard by now that young adults are one of the age groups in our nation that have a high uninsured rate. To combat this problem, the House health care reform legislation, which is currently being finalized, will include a provision that will allow young adults up to age 26 to have access to their parents’ health insurance plans.

In a recent press conference with Speaker Nancy Pelosi, Assistant to the Speaker Chris Van Hollen, and representatives from major youth advocacy groups, Congresswoman Kathy Dahlkemper (D-PA3) recently announced that the House’s health care reform bill will include a provision based on her original legislation, The Young Adults Healthcare Coverage Act of 2009.

“The Young Adult Health Care Coverage Act is a no-cost, common-sense solution to this nationwide problem. Giving young adults the option of staying on their parents’ health care coverage while they move in and out of school and jobs is a simple solution to give them support and stability during this very volatile time of their lives,” Dahlkemper said.

Thirty states already have an extended dependent health care coverage option, according to Dahlkemper’s press release. (For more information about these state laws, Wolters Kluwer subscribers can take a look at ¶10,715 in the Employee Benefits Management Guide). Dahlkemper’s legislation creates continuity in the national health care system, so young adults from every state will have the option to retain coverage under their parents’ plans.

“The Young Adult Health Care Coverage provision is a critical piece of the overall health care puzzle that will help reduce costs, expand quality, affordable health care to all Americans,” she noted at the press conference.

Shape up—or the sunscreen police might get you

Picture this—it’s a sunny, pleasant fall afternoon and, knowing that you could stand to lose a few pounds, on the spur of the moment, you decide to go for a walk and enjoy the great outdoors. After an hour or so, you’re feeling hungry after all that exertion and decide to stop at a sidewalk café and have lunch. While indulging in a tasty, though greasy, cheeseburger washed down with a cold beer or two (after all, good intentions can carry you only so far), you notice someone standing behind you with a clipboard, taking notes on your behavior.

Far-fetched, you say? True, this is almost certainly an exaggeration, but it’s not that far beyond the realm of possibility if the Senate Finance Committee has its way. Under the SFC version of health reform, upon enactment, your employer might be able to charge you 30 percent less for your health insurance (50 percent less if government regulators approve) if you don’t engage in risky health behaviors and can meet certain wellness standards. As a result, some employees could have thousands of dollars on the line.

Maintaining an unhealthy weight, smoking, drinking excessively, not wearing sunscreen or even not wearing a car seatbelt or not having a working home smoke detector could potentially result in your forfeiting the premium discount, depending on what behaviors your employer considers as unhealthy and how it structures its program. If your blood pressure, body mass index, or cholesterol numbers are too high, your wallet could end up being much lighter.

The SFC provision includes an exception for those people who have a valid medical reason for not meeting a particular target. In this situation, the wellness program could offer a reasonable alternative compliance standard or even a waiver. According to the SFC, the wellness program could require “verification of these circumstances, including a statement from an individual's physician.”

Controversy. Not surprisingly, the law change is backed by major employer organizations and opposed by unions and some major health organizations. Supporters say that substantial economic incentives could prompt employees to make better health choices.

However, as the Washington Post points out, “critics say employers could use the rewards and penalties to drive some workers out of their health plans.” Given that the stated goal of health reform is to increase health insurance coverage, and among other things, getting rid of preexisting condition exclusions, the wellness program rule could actually end up having a curious result: driving employees out of their employer-sponsored health plans by making these plans unaffordable.

Effects of the change. Currently, there’s only a 20 percent maximum penalty for engaging in unhealthy behaviors and many employers reward effort not results. In fact, right now, many employer wellness programs consist of filling out a health risk questionnaire (including questions on sunscreen and seatbelt usage, exercise habits, blood pressure, and other health-related issues) in exchange for a more modest premium discount. Employees get credit for “the old college try,” for instance, an employee can get the discount by participating in a smoking cessation program, though not necessarily stopping smoking completely. Even so, some companies already have taken this a step further and mandate certain results, increasing insurance premiums but then giving employees discounts if they can meet specified standards for blood pressure readings and cholesterol numbers.

So, what’s the bottom line? Eat your vegetables, stop smoking, cut back on your drinking, get plenty of exercise, drink plenty of water, always wear sunscreen, always wear your seatbelt, get a good night’s sleep every night, and keep those smoke detector batteries replaced, and you might see a hefty discount on your health insurance premiums. If not, and the SFC provision is included in the final bill, you might want to watch out for the sunscreen police (or fast food police or seatbelt police).

CO-OPs: Misplaced Faith?

Health insurance cooperatives, examined in a toolkit by the Alliance for Health Reform, form the backbone of the recently approved Senate Finance Committee’s health reform proposal, America’s Healthy Future Act of 2009. The legislative language of the bill was released yesterday, October 19. In an earlier post we discussed this committee’s Consumer Operated and Oriented Plan, or CO-OP.

North Dakota Sen. Kent Conrad.is a major proponent of co-ops.. He and other co-op supporters think that the health insurance co-ops will be able to negotiate as a group to obtain lower rates from medical providers. Since these co-ops would be “consumer-owned and operated,” they, rather than private insurers, will benefit from any profits and savings they obtain..

Unfortunately, experience in the United Sates with health insurance co-ops is very limited. Two co-ops are often cited for their success: Group Health Cooperative of Puget Sound, in Washington state, and HealthPartners, in the Twin Cities of Minneapolis and St. Paul in Minnesota. These co-ops have been in existence for more than 50 years and they are recognized for high quality care, but not necessarily for lower costs and premiums. It takes many years to establish such an operation. And still they cover a tiny segment of the insured population.

One expert who has researched co-ops, Timothy S. Jost, a law professor at the Washington and Lee University law school, told National Public Radio’s Morning Edition on October 2: “Where I've seen cooperatives in operation, they don't really compete on price. They compete on quality, on customer satisfaction. That's good. We need more quality. We need insurance products people are really happy with. But what we need most is cost control."

Furthermore, new co-ops would require a huge infusion of federal and state dollars for startup costs, and experts say that it is hard for new “insurers” to compete in a market with established, “dominant” insurers..

Based on the limited experience we have with co-ops, wouldn’t it be more cost-effective to focus our funds and our energies on a national, proven insurance program similar to Medicare?

Ending the "Advantage" in Medicare Advantage?

Under Medicare Advantage programs, participants have the option to receive Medicare benefits through private health insurance plans. Participants receive the same benefits as those receiving traditional Medicare, plus certain additional benefits that can include free drugstore sundries and gym memberships. Premiums can be low (or even nonexistent), although some managed care restrictions apply.

Seems like a great deal, right? Where’s the controversy?




Well, part of the reason the plans offer added value to participants is that they receive additional subsidies from the government, as compared to traditional Medicare. Studies have shown that private insurance companies offering Medicare Advantage plans are paid an average of 114 percent of what Medicare pays for fee-for-service Medicare for similar services.

Versions of health care reform in the House and the Senate would each reduce the subsidies paid as part of the Medicare Advantage program. H.R. 3200, for example, would, by 2013, reduce Medicare Advantage payments to match fee-for-service payments. The Baucus bill would transition current Medicare Advantage payments based on statutory benchmarks to payments based on competitive bids from insurances.

Proponents of reducing payments for Medicare Advantage argue that MA offers perks that can be easily cut without affecting participants’ core Medicare benefits. Defenders counter that seniors should not see their benefits cut. Both sides agree on one thing: MA would be less—dare we say it?—advantageous if current reform proposals become law.

(For continued updates on Medicare Advantage and other proposed changes to Medicare in the health reform bills, go to health.cch.com and sign up for free news updates.)

The Gloves Are Off

The gloves have come off in what everyone probably knew would be a bare-knuckled battle between Congress and the White House in one corner and the health insurance industry in the other corner.


America’s Health Insurance Plans and the Blue Cross Blue Shield Association have released reports critical of the Senate Finance Committee’s recently passed health reform proposal. Those reports, done by PricewaterhouseCooper and Oliver Wyman, are here and here.

The White House has fought back, noting correctly that in some cases that the reports are skewed and self serving (see here, here, and here).

Within these arguments are some expected disputes: the government wants more ratings reforms, the insurers want fewer; the government wants more substantial minimum benefit levels, the insurers want lower benefit levels.

Nevertheless, both AHIP and the Blues point out provisions in the Finance Committee bill that dilute the mixture of mandates and rating reforms that brought the insurance industry to the health reform table at the beginning, namely:

If a health reform plan can ensure that almost all Americans have health care coverage, that large increase in the potential market would allow insurers to compromise on ratings reforms.

According to the Congressional Budget Office, the Finance Committee proposal leaves as many as 25 millions Americans uninsured, far more than under any of the other reform proposals circulating in Congress (here, here, here, and here).

Ironically, even though AHIP and the Blues may be self serving in their criticisms, their arguments that link insurance reforms to coverage mandates that are immediate and effective still may be the best path to universal coverage.

Donut holes aren’t a tasty treat for seniors

Donuts are such tasty treats, aren’t they? And what about those fun items from Dunkin Donuts called Munchkins – also known as donut holes? Yummy!

But there’s another kind of “donut hole” in our health care system that’s neither tasty nor fun. The Medicare Prescription Drug, Improvement, and Modernization Act of 2003, added, among other provisions, a Part D to Medicare. Part D is a voluntary benefit that covers outpatient prescription drugs.

Part D coverage gap. Under Medicare Part D, the standard drug benefit includes a $295 deductible (in 2009) and 25 percent coinsurance until the enrollee reaches the initial coverage limit ($2,700 in total covered drug spending). After the initial coverage limit, there is a gap in coverage (that’s the donut hole) in which the beneficiary is responsible for 100 percent of drug costs. Beneficiaries must spend $3,454.75 out of pocket before they reach the catastrophic benefit. Once they reach the catastrophic coverage limit ($6,153), they are responsible for 5 percent of drug costs.

In 2007, over 8 million seniors hit the donut hole, according to a press release from the Department of Health and Human Services (HHS). For those who are not low-income or have not purchased other coverage, average drug costs in this coverage gap are $340 per month, or $4,080 per year, according to HHS.

Closing the gap. The Senate Finance Committee’s bill would close this coverage gap over time. While the closure of the coverage gap is phased in, this proposal would provide seniors with a discount of 50 percent on their brand name medication costs in the coverage gap, according to HHS.

The proposal would “provide for manufacturer discounts on brand-name drugs that are covered under Part D and are on plan formularies or treated as being on plan formularies through exceptions and appeals processes. The discount would be available during the entire coverage gap—that is, at the point when total prescription costs of a beneficiary exceeds the initial coverage limit ($2,700 in 2009) and reaches the catastrophic coverage limit ($6,153 in 2009) each year. Once the prescription costs of a beneficiary exceed the catastrophic limit, the discount would end and the catastrophic portion of the drug benefit would apply as under current law,” according to the bill.

SFC acts on health reform, now what?

The Senate Finance Committee (SFC) vote, on October 13, in favor of its sweeping health reform proposal is momentous, some might even say historic. As the Washington Post comments: "not since Theodore Roosevelt proposed universal health care during the 1912 presidential campaign has any such bill come this far." Despite the historic nature of the vote it is just another step, albeit a big step, en route to the ultimate destination—reforming the American health insurance system. In the SFC vote, all 13 Democrats on the panel joined with one Republican member, Senator Olympia Snowe (R-ME), in favor of the measure. This means that all five Congressional committees with jurisdiction have now passed their own version of health reform legislation. So, what comes next?



Well, there’s a long road ahead. Sorry if this starts to sound a bit like Schoolhouse Rock and “I’m just a bill on Capitol Hill” but I think a refresher on the upcoming political process would be useful at this point.

Actually, now comes the hard part, reconciling the more conservative SFC bill with the more expansive (and expensive) version passed earlier by the Senate Health, Education, Labor and Pensions (HELP) Committee. This could be quite a difficult undertaking as the HELP and SFC versions differ substantially, including varying takes on such controversial issues as a public option, the level of government subsidies to help people buy health insurance coverage, and employer mandate, just to name a few. Sen. Majority Leader Harry Reid (D-NV) likely will hold private negotiations with Senators Max Baucus (D-MT), Tom Harkin (D-IA) (who replaced the late Ted Kennedy as chairman of the HELP committee), and Christopher Dodd (D-CT) who shepherded the bill through the HELP committee during Kennedy’s illness. When a bill will emerge is anyone’s guess, though a Reid spokesperson has said that a reconciled bill could reach the Senate floor sometime during the week of October 26.

This timetable might be overly optimistic and here’s why: the Democrats have 60 votes in the Senate, which is exactly what they’d need to defeat a Republican filibuster. To get a bill through, the Democrats would need to keep their team together, despite a wide array of political views. To score political points, they’d also love to be able to get Senator Snowe or another Republican senator or two on board. Finalizing a bill that would be acceptable to all could prove to be a challenge.

Once Senate negotiators develop a compromise health reform bill, the nonpartisan Congressional Budget Office must again weigh in with a cost estimate on the bill.

Meanwhile, back at the ranch, House leaders also have to reconcile health reform bills from the three House committees that have approved health reform measures. The goal of the House leaders is to get a bill to the floor of the House within the next few weeks.

If (and this is a lot of if’s, I realize) both the House and the Senate pass their own versions of health reform, a conference committee, consisting of members of both the House and the Senate, would meet to hammer out final details, reconciling differences between the House and Senate versions and combining them into one final bill. Again, the public option would be a major and likely, contentious, issue at the conference committee stage.

If and when the conference committee settles on a compromise bill, the House and Senate would each have to vote on the revised measure arising out of the House/Senate conference. If both the House and Senate approve it, it would go to President Obama for his signature (or his veto).

Whew!! To paraphrase poet Robert Frost, there are “miles to go before we sleep” on this health reform journey. The SFC vote is just the beginning of the fourth quarter in a closely-contested football game, with plenty of action yet to come.

Senate Finance Plan--Is It Good Value?

On October 8, the Congressional Budget Office released its preliminary assessment of the impact on the federal budget of the Senate Finance Committee’s America’s Healthy Future Act. The much touted CBO score concluded that the proposal ultimately would reduce federal budget deficits by $81 billion over the ten year period beginning 2010. The CBO anticipates this deficit reduction even while expanding insurance coverage to 29 million people. Pundits have rejoiced in the CBO’s report and proclaimed the America’s Healthy Future Act as the model for reform.


The question is, does this so called, health reform scheme represent good value for us, the American people?

For one thing, this Act still leaves 25 million Americans uninsured. But, the CBO estimates that about one third of these uninsured are “unauthorized” immigrants, and they don’t count. After all, we don’t want to reward those illegals with health insurance. So you see, it’s not as bad as it sounds.

Furthermore, the Act’s rating ratio for older adults allows insurers in a health insurance exchange to charge older people premiums that are four times the amount the premium charged to the youngest insureds for the same coverage. This would likely make the insurance unaffordable for folks ages 55 to 64, many of whom would not qualify for a premium subsidy, if the Urban Institute’s analysis is correct. Where does this leave the large Baby Boomer generation?

Then there’s expansion of the number of people that could be covered by Medicaid, a program that, at least here in Illinois, grossly underpays (or doesn’t pay) medical providers. And the federal government would end up paying a much greater share than they now pay of the cost of Medicaid and the Children’s Health Insurance Program. States pay the balance of the cost of those public programs, with the poorest states getting bigger subsidies than better off states.

And just yesterday, the health insurance lobby, represented by the America’s Health Insurance Plans, released a report prepared by PriceWaterhouseCoopers claiming that the Senate Finance Committee plan would cost the typical family $4,000 more in premiums than projected by 2019..

Finally, the reform provisions would not take effect until 2013, by which time……You can fill in the blank. Your guess is as good as mine.

Efforts to block San Francisco health reform delayed

As we await tomorrow’s Senate Finance Committee vote on the Baucus health reform proposal, here’s an update on the progress of legal maneuvering intended to block the employer mandate portion of a local reform initiative: the Healthy San Francisco plan.

Enacted in 2006, San Francisco’s Health Access Plan uses a combination of public funding and mandatory employer contributions to provide coverage for uninsured working people of low or moderate incomes.

The plan survived initial court challenges by employer associations (and the Bush Administration) and started collecting required employer contributions in January 2008. The plan’s opponents didn’t give up, though: they asked the Supreme Court to overturn the Ninth Circuit’s ruling in favor of the City (Golden Gate Restaurant Ass’n v. City and County of San Francisco, 546 F.3d 639 (9th Cir. 2008). Plan opponents were perhaps hopeful that the High Court’s views would align more closely with those of the Fourth Circuit, which held in Retail Industry Leaders Association v. Fielder, 475 F.3d 180 (4th Cir. 2007) that ERISA preempted a Maryland employer mandate. The Fourth Circuit concluded that the Maryland law effectively forced employers to restructure their ERISA plans. (The Ninth Circuit tends to be liberal, the Fourth Circuit conservative.)

A decision from the High Court was expected this month, but the Court’s order last week didn’t offer either side of the dispute any certainty.



In effect, the Supreme Court decided not to decide whether to decide or not. Instead, it asked the Obama Administration to join the fray: does Obama’s Solicitor General agree with the Ninth Circuit’s conclusion that the San Francisco employer mandate does not impermissibly regulate an employer benefit plan? Or, does ERISA preempt the employer mandate, as argued by Golden Gate Restaurant Association (and the Bush Labor Department). The court won’t decide whether to hear this case until the Solicitor General weighs in.

Why the delay? Well, as observers point out, it’s not uncommon for the Court to seek the current Administration’s opinion, especially in situations where justices have doubts about agreeing to hear a particular case. In this case, though, the Court may be awaiting the outcome of the federal health care debate. If final legislation amends ERISA in a way that clarifies preemption disputes (or provides a federal employer mandate, or provides preemption waivers for state-based legislation), then the Court may decide that the issue has been resolved and refuse to hear the case.

For more on ERISA preemption and health care reform, see here. For one perspective on whether Healthy San Francisco is on track to achieve its goals, see here.

Employer Wellness Programs Get Boosted And Blindsided In The Same Week

Pop Quiz: What do the following have in common?


--Carper Amendment #C2


--Safeway


--GINA

The answer is employer-based wellness programs, and how these items are related tells a lot about the complications employee benefit plans will face in dealing with health reform.

So, what are these three related items?

Carper/Ensign Amendment # C2 is a provision added to America’s Healthy Futures Act, the Senate Finance Committee health reform bill that is scheduled for a vote next Tuesday. The provision would increase wellness program rewards from 20% to 30% of the cost of employee-only coverage under the plan, and it would allow the Secretaries of Health and Human Services, Department of Labor, and Department of the Treasury the discretion to increase the reward up to 50% of employee cost. This amendment was proposed by Sens. Thomas Carper (Del.) and John Ensign (Nev.) and passed by a vote of 18 to 4. The current 20% reward limit is a provision in the Health Insurance Portability and Accountability Act (HIPAA).

Safeway, the grocery store chain, operates a wellness program called Healthy Measures that uses the existing HIPAA wellness provisions to provide rewards of up to $1,560 per year for an employee and spouse who don’t smoke and keep to specified levels of body mass index, blood pressure, cholesterol and blood sugar. The Safeway Program has been cited as the source for the Carper/Ensign amendment.

"It's a pretty simple formula, said Safeway CEO Steve Burd in a radio interview. Very few companies have done it, for one reason or another, and you know, we're confident that the nation could adopt a similar formula if the legislation gets written correctly," says Burd. "And you could not only reverse the obesity trends, you can reverse the cost curve as well."

According to Mr. Burd, Safeway has kept its costs flat for the past five years. He argues that if similar programs were implemented across the nation, health care spending would be drastically reduced.

Despite what appears to be an enormous success withy strong Congressional support, the Safeway program does have its critics, who argue that Safeway's health care savings have not been independently verified, that such a program discriminates against those who may be less healthy, and that that corporate wellness programs often administer surveys that ask employees personal questions that invade one’s privacy.

GINA. The privacy question brings us to GINA, the Genetic Information Nondiscrimination Act, for which regulations were issued on October 7.

According to these regulations, wellness programs that provide rewards for completing Health risk assessments that request genetic information, including family medical history, violate GINA. This is true even if rewards are not based on the outcome of the assessment, a plan design that is allowed under the 2006 final HIPAA nondiscrimination rules regarding wellness programs.

One law firm already has advised that “employers that sponsor any health or wellness program will need to review the plan documents and administration for compliance with these new rules prior to Jan. 1, 2010 for calendar year plans.”

Thus, the legislators give, but the regulators taketh away.

Say goodbye to employer deduction for retiree drug subsidies?

Tucked away in the amended version of America’s Healthy Future Act of 2009 is a provision that would repeal the business deduction for federal subsidies for certain retiree prescription drug plans.

In case you didn’t know, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 created a retiree drug subsidy program to encourage employers and unions to continue providing high quality prescription drug coverage to their retirees. Employers who continue to maintain retiree health plans that provide prescription drug coverage can receive a tax-favored subsidy. The subsidy (which can be excluded from an employer's income) is equal to 28% of the allowable costs, including administrative costs, attributable to covered prescription drug costs incurred by a qualifying retiree of between $295 (cost threshold) and $6,000 (cost limit) in 2009.

Double dipping. The amended version of the Senate Finance Committee’s reform bill explains that employers may claim a business deduction for covered retiree prescription drug expenses incurred even though the employer excludes from income the subsidy allocable to such expenses.

This is apparently a deviation from standard tax practices. (It sounds like double dipping to me, which is a bad thing when onion dip or salsa is involved, but delightful when it comes to taxes (as allowed by law, of course!).)

The amended bill explains that the Internal Revenue Code provides an exception to these standard tax practices so that “the exclusion of the qualified retiree prescription drug plan subsidy from income is not taken into account in determining whether any deduction is allowable with respect to any covered retiree prescription drug costs that are taken into account in determining the subsidy payment.”

Repeal of the deduction. The amended bill would change this so that the amount otherwise allowable as a deduction for retiree prescription drug expenses would be reduced by the amount of the excludible subsidy payments received. The provision would be effective for taxable years beginning after December 31, 2010.

Members of Congress would get their health coverage through exchanges

Throughout this entire health reform debate, the comment I’ve heard most often from friends and family who aren’t following the day-to-day discussion is: “why can’t average Americans get the same kind of health insurance as members of Congress?” This hope is one step closer to reality, thanks to a recent Senate Finance Committee amendment.

Last week, members of the Senate Finance Committee unanimously approved an amendment introduced by Senator Charles Grassley (R-IA) that would require members of Congress and their staffers to purchase their own health coverage through a state-based health insurance exchange (which would be created by the pending SFC version of health reform), rather than using the traditional Federal Employees Health Benefits Plan (FEHBP).

This is actually a watered-down version of Grassley’s original amendment that would’ve required all federal employees to participate in the exchange, effectively ending the FEHBP, according to the Washington Post. Currently all employees of the federal executive, judicial and legislative branches and the Postal Service, whether full or part-time, are eligible to enroll in the FEHBP.

Sounds like common sense, doesn’t it? Noting that “Congress should live under the same laws it passes for the rest of the country,” Grassley suggested that the “more that Congress experiences the laws we pass, the better the laws are likely to be.”

Actually, the exchanges that would be established by the pending SFC bill text are modeled after the FEHBP and would give participants the same kind of choices and options for health care coverage as federal employees. Note, too, that, like other health plans, the FEHBP would be affected by health reform changes, just as any large employer would be. Uncle Sam would be “on the hook” for any mandates or excise taxes, for example. Meeting the rules for the exchange should presumably be easier for the federal government to do, since the plans in the exchange are based on what the FEHBP already has.

Of course, there’s still a long way to go in the process but it’ll be interesting to see whether this proposal survives intact and makes it into final health reform legislation. In the meantime, we can all ponder what impact, if any, this provision would have on the medical perks members of Congress get at the Office of the Attending Physician. That's something I think we'd all love to have.

Employer--Provided Coverage Expands In Massachusetts, As Do Costs

As I think most of us are aware, the Massachusetts health reform initiative, begun in 2006, has become a model for our federal legislators currently crafting national health reform. Previous posts in April, May, June, and July have discussed varied issues with that initiative.

Depending on what source you use, it appears that the Massachusetts reform has been successful to a great extent. A September report from Blue Cross and Blue Shield of Massachusetts and two national non-profit organizations found that the rate of working-age adults who were uninsured in the state dropped from 13% to 4%.

The report also found that, since reform, employer-sponsored coverage remains strong: it rose from 66.5% to 71.4% among all adults, and from 37.4% to 43.5% for lower-income adults. The report noted that "with [employer-sponsored insurance] coverage higher under health reform, there continues to be no evidence that any expansion in public insurance coverage under health reform is 'crowding out' or replacing [employer-sponsored insurance] coverage, as is often the case in reform efforts that focus on public expansions."

A new study published in the October 1 online issue of Health Affairs confirms the positive effect of Massachusetts health reform on employer-provided coverage. At least as of the fall 2008 and as reported by workers, the rate of coverage through employers had risen and the scope and quality of coverage improved, too, even among small employers with 50 or fewer workers, noted the article, “Massachusetts Health Reform: Employer Coverage From Employees’ Perspective.” However, workers’ premiums and out-of-pocket costs have become an issue for workers at small firms, although it does not seem to have negatively affected participants’ access to needed medical care.

Yet, rapidly growing health care costs remain a challenge and a barrier both to coverage and care for many people, just as it does for the rest of the nation, The Access Project, a Boston-based nonprofit, has observed. One of the two groups that are still having difficulty paying for health care are lower-income workers covered by employer-sponsored health insurance. Because these workers have access to other insurance, they are not eligible for Commonwealth Care. And, though their incomes are similar to those of people covered by Commonwealth Care, unlike Commonwealth Care plans, employer-sponsored plans can have high deductibles and out-of-pocket costs, and premiums that are not based on income.

Employers in Massachusetts are watching the national health reform process with trepidation, as Jon Hurst, the president of the Massachusetts Retailers Association, noted in a post on the Boston public radio station blog, Commonhealth.

Mr. Hurst advised federal law makers to “learn from the Bay State and not penalize employers in the rush toward reform.” Double digit cost growth continued for small employers and their employees, due not only to the merger of the individual and small group health insurance markets, but also to the lack of negotiating ability for non-taxpayer subsidized plans.

Furthermore, business leaders complain that the Massachusetts health reform rules are so confusing that many employers are having a hard time understanding what is required of them, the Boston Globe reported in conjunction with the results of an audit that revealed that 40% of audited employers were not making the required contributions for employees’ health insurance premiums. Many of the audited firms were restaurants, temporary help firms, and providers of home health care or janitorial services and they faced substantial penalties for noncompliance.

Rising health care costs combined with the current economic recession could undermine some of the law's successes, acknowledged the Urban Institute in its third annual Update on Health Reform in Massachusetts.

So, dear (very dear) federal legislators, take note and learn from Massachusetts’ experience.

SFC health reform vote set for Tuesday?

Some news outlets are reporting that the Senate Finance Committee will vote Tuesday on its amended version of the America's Health Future Act of 2009. That may be optimistic (CBO must first score the amended version), but a vote this week is likely.

Here's the amended version of the Chairman's mark. Changes are redlined, so it's easy to spot the provisions that didn't survive the Committee's marathon mark-up sessions. Apparently there are a few mistakes in the redlined version (could Senate staffers have gotten much sleep in recent days?) so check out these technical corrections as well.

Interested in some pre-game analysis of the final Committee vote? Pundits have viewed Senator Snowe's vote as critical for some time, while others now view Senator Lincoln (D-AR) as a bellwether for the ultimate endorsement of the plan by centrist Democrats.

Could This Also Be The Benefit Administrator’s Full Employment Act?

As President Barack Obama noted early this morning in response to the Senate Finance Committee finishing its version of health care reform, America's Healthy Future Act, “We are now closer than ever before to finally passing reform that will offer security to those who have coverage and affordable insurance to those who don’t.”

Closer than ever before stretches at least back to the mid-20th Century efforts of President Harry S. Truman to pass some type of national health legislation.

If the Finance Committee work is any indication, employers will have their work cut out for them once a final piece of legislation is agreed to by the Congress and signed by the President (yes, that seems the most likely outcome now).

We already know that employers think the general effects will be cost increases (see here and here) .

For those benefit managers and administrators who deal with plan details every day, what also will be important is how health reform will affect existing plans and policies. Here are just a few likely possibilities, based on the Finance Committee’ work:

An increase to 30% in the Health Insurance Portability and Accountability Act (HIPAA) cap on the cost of the employer-sponsored coverage a reward for wellness programs that require satisfaction of a standard related to a health factor.

A cap on annual health flexible spending account (FSA) elections, possibly $2,500.

An affordability test for employees in small firms that would allow these employees to receive tax credits to help pay for coverage. If employer-sponsored coverage cost an individual more than eight to 10 percent of his or her income, that person would be eligible to receive a Health Care Affordability Tax Credit in an exchange.

Add in coverage mandates in state or national exchanges, requirements to pay fees for those who are not covered by the employer plan, a host of new reporting and disclosure requirements, and various other effects on employer health plan provisions in ERISA, the Internal Revenue Code, and the Public Health Service Act.

Enough to keep benefits managers and administrators busy for quite some time.

Legal eagles debate individual mandate

In the midst of all the chatter about health care reform, have you given any thought to the U.S. Constitution? I knew that’s how you’d answer! Well, me neither (ok, maybe just a little). But some folks out there have been giving it lots of thought and have been examining whether an individual mandate to purchase health insurance might violate the Constitution.

(In case you forgot, such a mandate has been included in the House proposal (H.R. 3200), the Senate HELP Committee’s bill, and the Senate Finance Committee’s proposal.)

Can Congress require us to buy health insurance? No, according to David B. Rivkin, Jr. and Lee A. Casey, partners in the D.C. office of Baker Hostetler LLP who served in the Justice Department under presidents Ronald Reagan and George H.W. Bush. In an article in the Washington Post, they write, “The Constitution assigns only limited, enumerated powers to Congress and none, including the power to regulate interstate commerce or to impose taxes, would support a federal mandate requiring anyone who is otherwise without health insurance to buy it.”

The authors argue that an individual mandate is a noneconomic activity that goes beyond Congress’ authority to regulate interstate commerce pursuant to the Constitution’s Commerce Clause.

Not everyone agrees with that assessment, however. Mark A. Hall, J.D., the Fred D. and Elizabeth L. Turnage Professor of Law and Public Health at Wake Forest University School of Law and School of Medicine, writes, “Congress can use its Commerce Clause powers or its taxing and spending powers to create such a mandate.” He argues that Congress has “ample power and precedent . . . to regulate just about any aspect of the national economy. Health insurance is quintessentially an economic good.”

Steven D. Schwinn, Associate Professor of Law, John Marshall Law School, agrees with Hall. He writes, “An individual mandate is almost surely commercial in nature -- in requiring folks to buy health insurance, it requires a commercial exchange. Rivkin and Casey argue that the mandate is not commercial in nature, because it's triggered simply by ‘being an American.’ This may be true, but it misses the point of the regulation: It requires Americans to engage in a commercial exchange. This is the definition of commerce.”

Who’s right? I’m no Constitutional scholar, so I’ll refrain from taking sides on this engaging debate. If an individual mandate makes it into final reform legislation, there’s a chance that opponents of the mandate will challenge it in court. Perhaps the Supremes – the ultimate Con Law scholars – will provide us with answers, adding yet another perplexing Commerce Clause case to its archives. Future law students, beware!