Friday, February 26, 2010

Reconciliation Is Next

At the end of the seven-hour health reform summit held on February 25 in Washington, D.C., President Barack Obama clearly laid out the path for health reform debate in the next six weeks—and that path is reconciliation. While they ponder their next moves, I have a suggestion for Congress (see the end of this post). .
Oh, there did appear to be a few areas of general agreement at the summit, including these:

  • preventing waste and fraud in Medicare and Medicaid;

  • addressing medical malpractice reform;

  • reforming the insurance market;

  • giving individuals more choices in coverage, and giving small businesses the opportunity to pool coverage for their employees.

However, even within these areas of agreement, there remained at least two fundamental differences. Mr. Obama and the Democrats want a comprehensive approach and the Republicans want an incremental step-by-step approach.

More importantly, Republicans believe that insurance reform can be done by individual states, and Democrats believe that there needs to be a minimum set of national standards for insurance reform to be effective.

Mr. Obama said that “There is a legitimate debate about who should be in control –states or federal government.

“The general idea has been that we should set some minimal standards that anyone should know that if you get sick you will treated and won’t be left with high expenses—the principal of pooling is at the center of both Republican and Democratic proposals—that is not the issue—the issue is how much should government set the baseline.”

He went on to say that the Congress and federal workers have a plan with baseline coverage.

Rep. Eric Cantor (Vir.) said that “We have a philosophical difference—if D.C is the one to define health benefits we [Republicans] have a difficulty with that.

Mr. Obama noted that the most contentious issue was “how do we provide coverage for those who don’t have coverage and for those who have preexisting conditions?”

He also said that “We cannot have another year-long debate,” and he set a maximum of six weeks to make a serious effort to resolve differences. He noted that “There may not be any reason for Republicans to do anything—this would be very hard politically.”

He concluded the summit, attended by more than 50 Congressional members and staffers, with a clear reference to the likely use of the reconciliation process  to move health reform along, and said that Democrats would have until the November elections to test out their “visions of the country.”

The entire seven hours is available for viewing in here.

My Suggestion

At one point at the summit, Mr. Obama asked Sen. John Barasso (Wyo.) if he thought it would be better if every member of Congress should just have catastrophic coverage. Mr. Barasso said, “Yes I think we would be better if we had skin in the game, especially if we had a [health] savings account.”

I think we should up the ante a bit.  Because Congress apparently agrees that imposing preexisting condition exclusions is a bad idea in general, let’s strip all 535 members of Congress of their current health care coverage (no COBRA because they still have their jobs) and let them all go out and get individual coverage on their own. Of course almost half the Senate and 60 members of the House are at least 65 years old, so they can hop on the Medicare bandwagon.  But for the rest, watch out preexisting conditions.

Sure, most of them are wealthy and can probably pay out of pocket for many expenses, but what will happen when a spouse of a child has a serious health event?  They will be in the same position millions are in now.

And maybe that’s the way it should be, unless members of Congress would like to extend their current health care access to those of us who put them in office.

Thursday, February 25, 2010

Yes we can . . . get to yes?

Back in April 2009, I wrote about the importance of cooperation in reaching the health care reform goal. I mentioned that it would be nice if we could avoid business as usual and perhaps use some of the negotiation techniques found in the well-known book “Getting to Yes.”

Well, we all know what happened since then.

It was business as usual, and we didn’t get to “yes.”

But, wait! There’s still an opportunity to do so. Yes, really. There’s an important meeting taking place today in Washington DC, and if the invited parties will just take a moment to consider some additional techniques from the book, perhaps some progress can be made. (I know, I know – hope springs eternal. I sound like a Cubs fan, but I assure you – I’m not.)

People problems. Chapter 2 of “Getting to Yes” is called “Separate the People from the Problem.” The authors write, “A major consequence of the ‘people problem’ in negotiation is that the parties’ relationship tends to become entangled with their discussions of substance. On both the giving and receiving end, we are likely to treat people and problem as one.”

The authors note that people problems fall into three basic categories: perception, emotion, and communication. They suggest the following for dealing with these:

  • Put yourself in their shoes,

  • Don’t deduce their intentions from your fears,

  • Don’t blame them for your problem,

  • Discuss each other’s perceptions,

  • Look for opportunities to act inconsistently with their perceptions,

  • Give them a stake in the outcome by making sure they participate in the process, and

  • Make your proposals consistent with their values.

  • First recognize and understand emotions, theirs and yours,

  • Make emotions explicit and acknowledge them as legitimate,

  • Allow the other side to let off steam,

  • Don’t react to emotional outbursts, and

  • Use symbolic gestures.

  • Listen actively and acknowledge what is being said,

  • Speak to be understood,

  • Speak about yourself, not about them, and

  • Speak for a purpose.

Check out the meeting today at WhiteHouse.gov/live, and let me know if you spot any of these techniques.

What do you think – can we still get to yes?

Wednesday, February 24, 2010

Repeal Of Antitrust Exemption On Fast Track

Soon after the White House summit on health care tomorrow, look for the House of Representatives to consider and vote on a limiting the antitrust exemption currently enjoyed by health insurers

On February 22, Rep. Thomas Perriello (Vir.) introduced H.R. 4626, “to restore the application of the Federal antitrust laws to the business of health insurance to protect competition and consumers.”

The bill has been put on a fast track for consideration and will be discussed without amendments.

H.R. 4626 has 72 cospsonsors, and reportedly President Barack Obama has signaled he supports the legislation.

The proposal would amend the McCarran-Ferguson Act so that the antitrust rules would apply to “the business of health insurance” to the extent that insurers engage in unfair methods of competition.

Tuesday, February 23, 2010

President Obama’s Blueprint Takes Senate Proposal For Foundation

On February 22, President Barack Obama released a health reform proposal to be used as the basis for discussion at the February 25 health care summit. The President’s proposal primarily makes some changes to H.R. 3590, the Senate-passed Patient Protection and Affordable Care Act, with some concessions to the House bill (forget the public plan option). Retained with modifications are provisions for the excise tax on so-called “Cadillac” plans, phase-out of the Medicare donut hole, and state-based health insurance exchanges. (not federal, national exchanges, as proposed in the House).

Also included is the provision from the House and Senate bills is health insurance premium controls, fortified by the President’s proposal to create a new Health Insurance Rate Authority to provide needed oversight at the federal level and help states determine how rate review will be enforced and “monitor insurance market behavior.” This new HIRA appears to be a response to the recent attempt by Anthem Blue Cross of California to raise individual health insurance premiums by up to 39%.

Meanwhile, while our legislators fiddle on health reform, “Insurance Companies Prosper, Families Suffer” a report on the U.S. Department of Health and Human Services-managed Web site Health Reform.gov asserts. The report reviews health insurance premiums requested by the largest health insurers over the last year in various states, such as 56% in Michigan, 24% in Connecticut, 23% in Maine, 20% in Oregon, and 16% in Rhode Island... In response, California Sen. Dianne Feinstein has vowed to introduce legislation to prevent insurers from raising premiums “unfairly.” The Commonwealth Fund in 2009 issued several reports examining the economic and coverage effects of health insurance premiums and out-of-pocket costs.

An HHS review of the literature found that “some of the premium increases requested by insurance companies are 5 to 10 times larger than the growth rate in national health expenditures,” while “profits for the ten largest insurance companies increased 250 percent between 2000 and 2009, ten times faster than inflation.” Furthermore, the five largest health insurance companies – WellPoint, UnitedHealth Group, Cigna, Aetna, and Humana – took in combined profits of $12.2 billion, up 56% over 2008, and their CEOs were each compensated up to $24 million in 2008.

At any rate, opinions on what needs to be done for health reform continue to pour in. In a statement issued on February 19, Jeffrey C. McGuiness, President and CEO of the the HR Policy Association, said that “policy makers should give far greater consideration to the views of the employer community which provides billions of dollars annually to fund the nation’s employment-based system of health care and administers health care programs covering millions of Americans through their self-insured plans….Although the proposals passed by the House and Senate last year embraced several key elements needed for true reform, four essential elements are still missing—robust provider payment reform, aggressive actions to advance transparency, increased individual responsibility, and medical malpractice reform.”.

The Society of Actuaries also is providing its members’ suggested “ideal components of a health reform package,” in the first of four articles published in the February/March 2010 issue of Actuary. .Although, as the article noted, there are nearly as many actuary opinions as there are actuaries, many agreed that cost control and efficiency must be given priority and that likely there would a need for a broad-based tax to fund coverage expansion.

All of this shows that we can at least lay the foundation for health reform then continue to upgrade the structure.

Monday, February 22, 2010

With or without reform, how will employers control health care costs?

The Employee Benefit Research Institute held a forum last December on the future of employment-based health benefits. Representatives from many of the key stakeholders in employment-based health insurance-- employers, insurers, and consultants--contributed their perspectives. EBRI’s communications director Stephen Blakely offers a nice summary of the highlights of the forum.

Now, recall that when the forum took place on December 10, the Senate was debating its version of reform, and enactment of a final package in January seemed likely. (That seems like a lifetime ago: today the President released a repackaged proposal as part of his effort to secure passage.) Even then, though, Blakely says, some forum attendees expressed their disappointment that the legislation under debate focused mostly on solving the problems of covering and financing health insurance, rather than on the problems of health care delivery, and—key for employers—the cost of health care.

Given that disappointment, large employers and their benefits consultants engaged in a lively debate on how to control costs.

Do wellness programs work? Yes, says Beth Umland, head of Mercer’s health and benefits research unit. While controversy persists, “data is starting to accumulate that show that these programs actually are cost effective.” Among those employers that have tried to measure the ROI for wellness programs, “about three-quarters say it’s been very successful,” Umland continued. Pam French, director of benefits for Boeing, Inc., also endorsed the value of wellness programs.

Taking the opposing view was Bruce Pyenson, a consulting actuary with Milliman. Disease management and other wellness programs don’t work, he said. “The theory that you can spend more now to save money later in health care is just wrong. If you want to spend less in health care, you should spend less in health care,” according to Pyenson.

Should employers provide insurance?  David Guilmette of TowersPerrin warned that large employers, seeing no end to rising costs, are privately discussing pulling the plug on employer-provided health benefits. He quoted one Fortune 500 CFO as saying: “This is pretty straightforward—we’ve got to get out because the economics are compelling for us to exit.”

So what’s holding the big employers back? According to Guilmette:
  • No employer wants to take the big (bad) publicity hit by being the first employer to make such a radical decision.
  • Some employers worry about a permanent rupture in the employer-worker bond, one that would put the employer at a competitive disadvantage when better economic times return.
Interested in learning more about managing health care costs? If you're a subscriber to CCH Employee Benefits Management, go to ¶18,010. Not a subscriber? Go here to learn more.

Friday, February 19, 2010

Bipartisan Commission To Tackle Social Security, Medicare

In the wake of the failure by Congress to agree to a binding commission to restore fiscal stability by recommending changes to Social Security, Medicare, and Medicaid, President Barack Obama has established by executive order the National Commission on Fiscal Responsibility and Reform.

Mr. Obama has appointed former Republican Wyoming Senator Alan Simpson and Erskine Bowles, former White House chief of staff under President Bill Clinton to head the 18-member commission. Other members will be chosen as follows:

  • six members appointed by Mr. Obama, not more than four of whom are from one political party, presumably Democrats;

  • three Senators selected by Majority Leader Harry Reid (Nev);

  • three Representatives selected by Speaker of the House Nancy Pelosi (Cal;

  • three members selected by Senate Minority Leader Mitch McConnell (Ken.); and
    three members selected by House Minority Leader John Boehner (Ohio).

In January, Congress failed to agree to establish the Bipartisan Task Force For Responsible Fiscal Action Act Of 2010. The proposal, introduced as an amendment to H.J.Res.45 (P.L. 111-139, which increased the statutory limit on the public debt), was introduced by Senate Budget Committee Chairman Kent Conrad (N.D.) and Sen. Judd Gregg (N.H.), but it failed to garner the necessary 60 votes for passage.
That task force would have been able to make recommendations to Congress that would have to be voted on without amendment.  The President’s Commission has no binding effect on Congress.

The President’s Commission specifically is charged with making “recommendations designed to balance the budget, excluding interest payments on the debt, by 2015. This result is projected to stabilize the debt-to-GDP ratio at an acceptable level once the economy recovers.… In addition, the Commission shall propose recommendations that meaningfully improve the long-run fiscal outlook, including changes to address the growth of entitlement spending and the gap between the projected revenues and expenditures of the Federal Government.”

Even before members have been appointed, both liberals and conservatives are dooming the work, with the left warning of ominous cuts to programs with Mr. Simpson as chair, and the right predicting nothing but tax increases with a Democratic-controlled commission.

As I already have suggested, cuts to programs and increases in taxes actually are the only solutions.

In an interview, Mr. Simpson also noted that increases in payroll taxes and decreases in benefits as the only legitimate methods to rein in entitlement programs.  And he correctly labeled any attempts to ignore these solutions:

“But the rest of it is B.S. And if the people are really ingesting B.S. all day long, their grandchildren will be picking grit with the chickens.”

Thursday, February 18, 2010

Take a hike, rate hikes!

Last week, Anthem Blue Cross indicated that it would raise premiums for its California customers by as much as 39 percent. U.S. Department of Health and Human Services (HHS) Secretary Kathleen Sebelius sent a letter to Anthem Blue Cross and called on the company to publicly justify its decision, noting that the parent company of Anthem Blue Cross, WellPoint Incorporated, earned $2.7 billion in the last quarter of 2009.

This week, Anthem Blue Cross announced it is delaying raising rates. “While a two month delay offers some temporary relief, what California families need is long-term health insurance security, so that they don’t face sharply higher prices or fewer benefits. This rate increase underscores the urgency of passing real health insurance reform,” Secretary Sebelius said in a statement responding to the announcement.

Review of premium increases. The House-passed bill (H.R. 3962) contains a provision that would address this situation. The name of this provision (and I am not making this up) is “Sunshine on price gouging by health insurance issuers.”

Act Section 104 of the bill outlines a plan for monitoring increases in health insurance premiums. The provision calls upon the HHS Secretary, in conjunction with the states, to establish an annual review process that would require insurers to submit a justification for any premium increases prior to implementation. Insurers also would be required to “prominently” post information regarding premium increases on their websites.

The provision also provides that the Secretary will establish a program of grants available to the states to assist them with carrying out the review process. Currently, review of premium increases can be mandated by state law. About 25 states give their insurance departments the authority to approve premium rates for all individual health insurance plans prior to the rates going into effect.

Wednesday, February 17, 2010

What’s On The Agenda For February 25?

The invitations are out for the February. 25 White House health reform summit at Blair House, but the jockeying has only just begun for what may be the last push for health reform legislation.

What’s on the agenda for the meeting? The White House invitation lists four items:

  • insurance reforms --Does legislation provide adequate protection against abuses by the insurance industry?

  • cost containment --Does legislation bring down costs for all Americans as well as for the federal government, which spends a huge amount on health care?

  • expanding coverage --Does legislation make coverage affordable and available to the tens of millions of working Americans who don't have it right now? and

  • the impact health reform legislation would have on deficit reduction --Does legislation help us get on a path of fiscal sustainability?

Republican leaders have their own ideas about what should be discussed. Additional concerns include the individual mandate, antitrust issues, and the proposed excise tax on high cost health insurance

And finally, the public option has resurfaced. Four Senators have sent a letter to majority leader Sen. Harry Reid (Nev.) asking him to bring for a vote before the full Senate a public health insurance option under budget reconciliation rules.

The letter, originally signed by Sens. Michael Bennet (Col.), Kirsten Gillibrand (N.Y.), Jeff Merkley (Ore.), and Sherrod Brown (Ohio), lists four reasons for supporting a public option: its potential for billions of dollars in cost savings; the growing need to increase competition and lower costs for the consumer; the history of using reconciliation for significant pieces of health care legislation; and the continued public support for a public option.

The senators tell Mr. Reid that "although we strongly support the important reforms made by the Senate-passed health reform package, including a strong public option would improve both its substance and the public’s perception of it. The Senate has an obligation to reform our unworkable health insurance market -- both to reduce costs and to give consumers more choices. A strong public option is the best way to deliver on both of these goals, and we urge its consideration under reconciliation rules."

Four additional senators and 119 members of the House of Representatives have indicated their support of a public option. At least one supporter, Rep. George Miller (Cal.), Chairman of the Education and Labor Committee, is invited to the February 25 summit.

I’ll be watching.  Will you?

Tuesday, February 16, 2010

The Republican Way With Health Reform

In a letter to the White House dated February 8, House Republican leaders Representatives John Boehner of Ohio and Eric Cantor of Virginia make scrapping the two bills approved in the House and Senate and starting over again as a condition for them to participate in President Barack Obama’s February 25 televised summit on health care. Republicans claim that the health care reform process has “excluded” them and their proposals. We have discussed some of these proposals before here. And just what are the Republicans’ proposals for health reform and would they achieve the President’s stated goals to expand affordable, portable health insurance coverage to as many Americans as possible?

The Republican proposals include creating new state high-risk pools or reinsurance, a measure we explored previously here. Tort-reform, or capping noneconomic damages for medical malpractice (discussed previously here).is a very popular Republican reform option. Shifting responsibility to the states by encouraging them to establish health insurance exchanges and insurance regulatory reform. One of our recent posts reviewed some of the states’ solutions.

One specific piece of Republican-proposed legislation, proposed by Sen. Tom Coburn (Okla.) and Rep. Paul Ryan (Wisconsin) is the Patient’s Choice Act (S.1099 and H.R. 2520) introduced last spring, and, most recently in a new incarnation from Rep. Ryan as the Roadmap for America’s Future (H.R. 4529, introduced on Jan. 27, 2010).

The Patient’s Choice Act would eliminate the federal tax subsidy for employer-sponsored health insurance and replace it with a a refundable tax credit ($2,290 for individuals and $$5,710 for families) to purchase coverage in the individual market. Under this legislation, many people who would lose employer coverage would be unable to find affordable, comprehensive coverage on their own, the nonprofit Center on Budget and Policy Priorities concluded recently. Neither of these Republican bills would address the problems in the individual health insurance market.

“Unfortunately, the Coburn-Ryan plan would likely make comprehensive, affordable coverage less available to many who now have it while failing to significantly reduce the number of uninsured Americans,” the CBPP noted.

The Patient’s Choice Act AND the Roadmap for America’s Future, both would replace guaranteed Medicare benefits for all persons currently under age 55 and replace it with a voucher for individuals to buy health insurance. The bills also would eliminate the federal and state-funded Medicaid programs that provide health care for low-income individuals and replace it with tax credits and subsidies to buy individual health insurance. The long-term care component of the Medicaid program would be changed to a fixed dollar amount block grant to the states.

Paul Krugman, an economist and professor at Princeton University, in an Op-Ed piece in the February 11 New York Times, remarked that while the Republicans object vociferously in public to proposed reductions in Medicare payments for Medicare Advantage plans, they work to cut the successful, and popular, public health care safety net for elderly and disabled—Medicare.

Judge for yourselves how earnest the Republicans are to work with the Democrats and the President to craft “meaningful” health care reform to benefit the most Americans.

Friday, February 12, 2010

The Largest Problem, Known Solutions

While we wait for the February 25 summit that will bring together President Barack Obama, Republicans, and Democrats to discuss the future of health reform, a review of largest problem the government and the country has might be in order.

That’s Medicare.

The Centers for Medicare and Medicaid Services estimates that by 2012, public spending on health care will account for more than half of all U.S. health care spending, compared with 47% in 2008. The CMS projects that private spending in 2010 will grow only 2.8% as a result of both declining private health insurance enrollment because of sustained high rates of unemployment and the end of federal subsidies for COBRA coverage (15 months from Feb. 28, 2010).

In addition, the most recent report from the Medicare trustees indicates that Medicare's hospital insurance (HI) trust fund is expected to pay out more in hospital benefits and other expenditures this year than it receives in taxes and other dedicated revenues. The difference will be made up from trust fund assets. Growing annual deficits are projected to exhaust HI reserves in 2017, after which the percentage of scheduled benefits payable from tax income would decline from 81% in 2017 to about 50% in 2035. Adding to the HI trust fund's financial instability is the current economic recession --with fewer people working, less is being paid into the trust funds for Social Security and Medicare.

In addition, the Medicare supplementary medical insurance (SMI) trust fund that pays for physician services and the prescription drug benefit will continue to require general revenue financing and charges on beneficiaries that grow substantially faster than the economy and beneficiary incomes over time. In December 2008, 45.2 million individuals were covered by Medicare and the program's total expenditures in 2008 reached $468 billion.

In other words, Medicare costs are destined to overwhelm the entire economy.

So far, the reaction of the public and legislators has been to defend every Medicare benefit to the death—citizens scream that the government better not touch their Medicare benefits, and legislators pass resolution after resolution to maintain current benefits.

That won’t work. As with every other cost crisis, there are only two solutions –decreases in expenditures or increases in revenues. Or as the Medicare trustees noted, the health insurance trust fund could be brought into actuarial balance over the next 75 years by changes equivalent to an immediate 134% increase in the payroll tax (from the current rate of 2.9%, shared equally by employers and employees, to 6.78%); or an immediate 53% reduction in program outlays; or some combination of the two. Larger changes would be required to make the program solvent beyond the 75-year horizon.

Don’t expect these rational solutions any time soon.

Thursday, February 11, 2010

Now you see it, now you don't

Imagine for a moment that you just had a car accident. You have car insurance and have been paying premiums for years, so you feel somewhat reassured that your insurance company will pay for the damages. You call in the accident to your insurance company. The next day, the company calls and says it is rescinding your policy back to the date that it became effective; the company will return all the premiums to you, but they won’t pay for the current damages.

The reason? On one of the forms you filled out to obtain your policy, you stated that your car was red, but it’s actually blue. The insurance company says that misrepresentation allows them to rescind your policy.

That scenario sounds a bit wacky, right? I mean, isn’t that the point of insurance? You shell out money for a bit of financial security and some peace of mind. You actually hope never to see the money again because if you do, it means that something bad has happened, such as a car accident, and you’re receiving a check to pay for the damages. And, further, what in the heck does the car being blue instead of red have to do with anything?

Yet, when it comes to health insurance (not a perfect analogy to car insurance, but you get my drift), this practice – called rescission – is perfectly legal in many states.

 In "Coverage Denied: How the Current Health Insurance System Leaves Millions Behind", the authors explain, “When a person is diagnosed with an expensive condition such as cancer, some insurance companies review his/her initial health status questionnaire. In most states’ individual insurance market, insurance companies can retroactively cancel the entire policy if any condition was missed – even if the medical condition is unrelated, and even if the person was not aware of the condition at the time. Coverage can also be revoked for all members of a family, even if only one family member failed to disclose a medical condition.”

The report indicates that “[a] recent Congressional investigation into this practice found nearly 20,000 rescissions from three large insurers over five years, saving them $300 million in medical claims – $300 million that instead had to come out of the pockets of people who thought they were insured, or became bad debt for health care providers.”

Reforming rescission. Both the House and Senate reform bills include provisions that address rescission. In the House bill, Act Sec. 103 prohibits health insurers in the group and individual markets from rescinding coverage unless an independent, external third party has determined there is clear and convincing evidence of fraud. Further, rescission may not take effect until the insured is given notice of the proposed rescission and an opportunity for review by an independent, external third party.

In the Senate bill, Act Sec. 1001(5) prohibits group health plans or health insurance issuers offering group or individual coverage from rescinding such plan or coverage with respect to an enrollee once the enrollee is covered under such plan or coverage involved. The provision doesn’t apply to a covered individual who has performed an act or practice that constitutes fraud or makes an intentional misrepresentation of material fact as prohibited by the terms of the plan or coverage. Further, such plan or coverage may not be cancelled except with prior notice to the enrollee.

Health care summit agenda. On February 25, President Obama will hold a televised health care summit with Republicans and Democrats to try to get the stalled reform legislation moving. The issues to be discussed aren’t clear right now. Well, how about putting the rescission issue on the agenda? Would anyone defend this practice on national television? I doubt it. But I also doubt this issue will be discussed at the summit. Why? A few reasons jump to mind, but Wendell Potter, a former insurance executive who testified about this issue last summer, focused on one of the more unsettling ones when he said, “I saw how [health insurance companies] confuse their customers and dump the sick — all so they can satisfy their Wall Street investors.”

Wednesday, February 10, 2010

Back To The States?

President Barack Obama has called a televised summit for Democrats and Republicans on Feb. 25 to discuss health reform, and some Republicans already are deriding the idea as “political theater.”

With federal prospects for reform dimming, for the moment at least, it might be instructive to take a peek at what the states are doing about health care.

California. The state senate has approved creating a government-run health care system for the state, ignoring a veto threat from Gov. Arnold Schwarzenegger. The plan would cost an anticipated $200 billion per year. Also, the California Department of Managed Health Care has released rules that limit HMO wait times. The rules require that patients be treated by HMO doctors within ten business days of requesting an appointment and by specialists within 15 days. In addition, patients seeking urgent care that does not require prior authorization must be seen within 48 hours. California is the first state to set time standards for HMOs, which serve approximately 21 million state residents.

Connecticut. Insurance regulators in the state have given three of the top five insurers approval to raise rates for 2010 by double-digit percentages. Anthem Blue Cross and Blue Shield, Health Net of Connecticut, and ConnectiCare asked for group health plan rate increases of 15.78%, 19.09%, and 14.5%, respectively, for 2010. According to the health insurers and the Connecticut Insurance Department, the increased premiums will keep premiums in line with medical costs.

Florida. Major health insurers in the state have agreed to pay for care for members diagnosed with cancer who participate in clinical trials to avoid a legislative mandate on the issue. The “Clinical Trials Compact” ensures that cancer patients will receive continued benefits while being treated with experimental drugs and other therapies. Participating insurers are: Blue Cross and Blue Shield of Florida, Humana, Aetna, Cigna, UnitedHealthcare, Vista Healthplans, and AvMed Health Plans. In recent months, there had been a move toward legislation to eventually cover all phases of these cancer clinical trials, but these health insurers wanted to avoid a legislative mandate. Florida is the fifth state to use a compact for cancer trials, after Georgia, Michigan, Nebraska, and New Jersey.

Georgia. Georgia Health Commissioner Rhonda Medows has urged state lawmakers to adopt a tax hike on hospitals and health care plans to help with the state’s Medicaid deficit problem. Beginning on July 1, the state will face a $506 million shortfall in Medicaid funds. The recession has caused enrollment in Medicaid to soar: enrollment has increased 7.7% from June 2009 to 2010 to more than 1 million people.

Illinois. The Illinois Supreme Court has struck down a medical malpractice law enacted in 2005 that limited monetary damages to $1 million from hospitals and $500,000 from doctors for pain and suffering. The court said the law violates the state’s separation-of-powers clause between the branches of government by allowing lawmakers to interfere with a jury’s right to determine damages. According to the American Medical Association, courts in 16 states have upheld these types of laws, while those in 11 states have overturned them.

Maryland. A bill pending in the state would allow young adults to continue enrollment in their parents’ health care plan until age 30. Current law allows dependent individuals to remain on a parent’s plan until they are 25 years old. By expanding this to age 30, graduate students, veterans returning to school, and young adults who have been laid off and are seeking employment would be helped. Similar laws exist in New Jersey, New York, and Pennsylvania.

Minnesota. The state plans to charge counties extra to cover health care for their neediest residents beginning March 1. Previously, a $400 million General Assistance Medical Care program was available to help provide coverage for the poorest in the state, but the program is ending in an attempt to balance the budget. State legislators have proposed funding the program through surcharges on hospitals and health groups to draw down federal dollars and would levy a 10% match by counties to share the program’s cost.

Pennsylvania. Premiums for the state’s adultBasic health insurance plan will double in March from $330 per month to $600 per month. In addition, more than 40,000 participants will face new higher out-of-pocket costs, with higher copayments for doctor and emergency room visits and more expensive coinsurance requirements for services including chemotherapy, dialysis, and outpatient surgery. The Pennsylvania Insurance Department cited higher medical service use and escalating health care costs, combined with limited state funding, as the reason for the coverage changes.

Utah. The state has proposed legislation that would establish a state risk adjuster board to ensure consumer health risks are spread evenly among private insurers as they increase access to health insurance for 350,000 uninsured Utahns. The bill, HB294, also would permit businesses in Utah with more than 50 employees to be part of the Web-based exchange for medical insurance and information.

Washington. The state’s domestic partnership law went into effect on Dec. 3, 2009, and has some implications for employers in the state. The law provides that for all purposes, registered domestic partners must be treated the same as married spouses. This means that employment-related benefits must be extended to the registered domestic partner of employees on the same basis as spouses.

Tuesday, February 9, 2010

Who's Really Paying For Health Care?

Health care reform opponents have been screaming that they don’t want the federal government to take over their health care (including Medicare, of course). Yet, according to Centers for Medicare and Medicaid Services Office of the Actuary recent estimates on U.S. spending for health care, if the current trend continues, by 2012, public spending (Medicare and Medicaid and others) on health care will account for more than half of total health care spending in the U.S..

The CMS projects that private spending in 2010 will grow only 2.8% as a result of both declining private health insurance enrollment because of sustained high rates of unemployment and the end of federal subsidies (yet another government-funded health care "program) for COBRA coverage (15 months from Feb. 28, 2010).

Interesting, isn’t it? “People” say they want government out of their health care, and yet, more and more of the responsibility for health care funding is falling on our federal government, and, for Medicaid and the States’ Children’s Health Insurance Program, state governments with the federal government. And the federal share of funding for state programs is increasing by leaps and bounds as state economies falter. Ask beneficiaries of all those public programs how much governments interfere with their medical care.

The public also ignores another way that the federal government funds our nation’s health care spending—through our employer-sponsored health insurance, including insurance for public employees. Those of us fortunate enough to still be able to get our health insurance through our employers pay our premiums pre-tax, thus lowering not only our income taxes, but also our (and our employers’ share of) employment taxes for Social Security and Medicare. In other words, the federal government provides a significant financial subsidy for our health insurance. A study published in 2002, estimated that these tax benefits add about 15 percentage points to the CMS estimates of federal government spending on health care.

A new Harris Interactive Poll reveals that a large proportion of Americans (45%) believe that health care is the most important issue for government to address. Are we on the same page?

Monday, February 8, 2010

Antitrust exemption bill: first step in new reform strategy?

If Speaker Pelosi has her way, this week the House will take up legislation that would strip health insurance issuers of their exemption from the federal antitrust laws.

Sound familiar? As we discussed last fall, a similar provision was included in the House version (scroll to page 155) of health care reform. The measure, co-sponsored by freshman legislators Tom Perriello (D-VA) and Betsy Markey (D-CO), would strip health insurance issuers, and the issuers of medical malpractice policies, of the protections of the McCarran-Ferguson Act.

Now, one fairly recent GAO study suggests that the exemption has already been narrowed by various court decisions over the years, and many experts doubt that repealing the exemption would either increase coverage or lower health costs in any significant way.

Regardless, observers see two reasons for House Democrats to pursue the measure now. For one thing, it gives the Speaker an opportunity to provide a nice PR boost for two freshman Congressmen reportedly in tough reelection fights.

More importantly, though, it’s a first test of an alternative strategy for getting health reform done: break the larger bills down into smaller pieces. The theory is that, as Rep. Perriello describes it, “a simple, clean bill—no carve-outs or special deals” will be easier to pass.

Maybe so. But the antitrust exemption wasn’t included in the Senate package passed in December—one report suggests that Ben Nelson (D-NE) (to name one) opposed it. So what’s changed to make Senate passage more likely? Will Scott Brown, the newly sworn-in Republican Senator from Massachusetts, be the 60th vote? Really?

Friday, February 5, 2010

We’ll Never Know

At a recent meeting with Congressional Republicans, President Barack Obama noted that the effects of passing national medical malpractice tort reform legislation was estimated to be modest: “At best, this could reduce health care costs relative to where they're growing by a couple of percentage points, or save $5 billion a year.”

Mr. Obama’s figures come from a Congressional Budget Office analysis in 2009 which estimated that the savings from tort reform would be ten times greater than previously estimate:

“CBO had previously estimated that enacting a common package of tort reform proposals would reduce federal deficits by $4 billion from 2010 to 2019, but CBO now estimates that those proposals would reduce federal deficits by about $54 billion during that period. The latest estimates are substantially larger for four principal reasons:
  • “The estimates include a larger effect of tort reform on medical malpractice costs;

  • “The estimates incorporate the effect of a gradual reduction in the utilization of health care services resulting from changes in the practice patterns of providers;

  • “The estimated effect on federal revenues was substantially smaller in the previous estimate (which reflected only a reduction in malpractice costs) than the estimated effect on revenues in the current estimate (which reflects the combined effects of the reduction in malpractice costs and the change in spending attributable to changes in practice patterns); and

  • “The reduction in utilization is projected to generate a proportionately larger reduction in federal spending on health care than in other spending on health care.”

In an economy in which health care costs trillions of dollars, a $54 billion reduction in the federal deficit does seem modest. It is, however, in the same range as the effects of the proposed individual and employer penalties in the Senate’s health reform proposal. According to the CBO, those penalties would have totaled about $41 billion over a ten-year period

At the meeting with Republicans, Mr. Obama said that tort reform by itself “will not bend the cost curve long term or reduce premiums significantly … you can't make the claim that that's the only thing that we have to do.”

The already passed Senate and House health reform bills do many of those things that Mr. Obama believes would bend the cost curve—but they do not include tort reform.

Would it have made a difference to the stalled health reform effort if Democrats had conceded the $54 billion in savings from tort reform and included a medical malpractice reform measure in their bills?

We’ll never know.

Thursday, February 4, 2010

Silence of single-payer option falls on deaf ears in California

Single payer.

Amid all the recent health reform chatter, those are words we haven’t heard much lately. At this point in the reform journey, most people have gotten an earful about the pros and cons of a single-payer system. They’ve heard and accepted the message that it’s not an option.

But, you know, some people have selective hearing. That appears to be the case for some California state senators. On January 28, 2010, the California Senate, by a vote of 22-14, passed a bill (SB 810) that would create a single-payer health insurance system in California.

According to the bill’s sponsor, Senator Mark Leno (D-San Francisco), The California Universal Health Care Act “creates a private-public partnership to provide every California resident medical, dental, vision, hospitalization and prescription drug benefits and allows patients to choose their own doctors and hospitals. This ‘Medicare for All’ type of program works by pooling together the money that government, employers and individuals already spend on health care and putting it to better use by cutting out the for-profit middle man.”

Senator Leno says that the bill “creates no new spending, and in fact, studies show that the state would save $8 billion in the first year under this single-payer health care plan.”

Governor Arnold Schwarzenegger has indicated he would veto the bill. In 2008, the governor vetoed a similar bill (SB 840).

Wednesday, February 3, 2010

Beginning in July, Employers Will Be Subject To Mental Health Parity Rules

Both the House (H.R. 3962) and the Senate (H.R. 3590) version of the now-stalled health reform bills use the existing provisions of the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act (MHPAEA) of 2008 to define how mental health plans must provide benefits.

Employers and plan sponsors now have extensive rules to follow in that part of health reform. Detailed guidance for determining parity between mental health benefits and health care benefits, in particular for financial requirements and treatment limitations, is included in interim final rules published in the Feb. 2, 2010, Federal Register

The rules, which apply to group health plans and group health insurance issuers for plan years beginning on or after July 1, 2010, go into great detail about the design and implementation of mental health benefits, and all plan sponsors should start preparing now for compliance. Calendar year benefit plans have until the beginning of 2011 to implement these rules.

Extensive Changes In New Rules
The regulations amend the meanings of medical/surgical benefits and mental health benefits and add a definition for substance use disorder benefits. Medical/surgical benefits are benefits for medical or surgical services, as defined under the terms of the plan or health insurance coverage, but do not include mental health or substance use disorder benefits. Mental health benefits and substance use disorder benefits are benefits with respect to services for mental health conditions and substance use disorders, as defined under the terms of the plan and in accordance with applicable federal and state law.

These regulations also provide that plan terms defining whether the benefits are mental health or substance use disorder benefits must be consistent with generally recognized independent standards of current medical practice. This requirement is included to ensure that a plan does not misclassify a benefit in order to avoid complying with the parity requirements.

General requirements

The core of the regulations explain the general parity requirement, which prohibits a plan (or health insurance coverage) from applying any financial requirement or treatment limitation to mental health or substance use disorder benefits in any classification that is more restrictive than the “predominant” financial requirement or treatment limitation applied to “substantially all” medical/surgical benefits in the same classification.

The general parity requirement applies separately for each type of financial requirement or treatment limitation (that is, for example, copayments are compared to copayments, and deductibles to deductibles.

The parity requirements for financial requirements and treatment limitations are applied on a classification-by-classification basis. There are six exclusive classifications used for purposes of satisfying the parity requirements:
  • inpatient, in-network;

  • inpatient, out-of-network;

  • outpatient, in-network;

  • outpatient, out-of-network;

  • emergency care; and

  • prescription drugs.

If a plan provides any benefits for a mental health condition or substance use disorder, benefits must be provided in each classification for which any medical/surgical benefits are provided. This is because any treatment limitations applied to mental health or substance use disorder benefits may be no more restrictive than the predominant treatment limitations applied to substantially all medical/surgical benefits.

The statute describes treatment limitation as including limits on the frequency of treatment, number of visits, days of coverage, or other similar limits on the scope or duration of treatment, but it is not limited to such types of limits.

The regulations make a distinction between quantitative treatment limitations (such as day limits, visit limits, frequency of treatment limits) and non-quantitative treatment limitations (such as medical management, formulary design, step therapy).

For example, if a plan provides benefits for a mental health condition in one or more classifications but excludes benefits for that condition in a classification (such as outpatient, in-network) in which it provides medical/surgical benefits, the exclusion is a treatment limitation and prohibited under the rules. It is a limit, at a minimum, on the type of setting or context in which treatment is offered.

Measuring Benefits

The regulations establish standards for measuring plan benefits. The portion of plan payments subject to a financial requirement or quantitative treatment limitation is based on the dollar amount of all plan payments for medical/surgical benefits in the classification expected to be paid under the plan for the plan year. Any reasonable method may be used to determine the dollar amount expected to be paid under the plan for medical/surgical benefits subject to a financial requirement or quantitative treatment limitation.

The first step in applying the general parity requirement is to determine whether a financial requirement or quantitative treatment limitation applies to “substantially all” medical/surgical benefits in a classification. A financial requirement or quantitative treatment limitation applies to substantially all medical/surgical benefits in a classification if it applies to at least two-thirds of the benefits in that classification.

If a financial requirement or quantitative treatment limitation does not apply to at least two-thirds of the medical surgical benefits, that type of requirement or limitation cannot be applied to mental health or substance use disorder benefits

The statute provides that a financial requirement or treatment limitation is “predominant” if it is the most common or frequent of a type of limit or requirement. Under the 2010 regulations, the predominant level is one that applies to more than one-half of medical/surgical benefits subject to the financial requirement or quantitative treatment limitation in that classification.

Accumulating Deductibles

The statute does not specifically address how to deal with accumulating deductibles for medical and mental health benefits. According to the regulations, there are two opposing views on this issue:
  1. A plan can have deductibles that accumulate separately for medical/surgical benefits on the one hand, and mental health or substance use disorder benefits on the other, as long as the level of the two deductibles is the same (separately accumulating deductibles).

  2. E expenses for both mental health or substance use disorder benefits and medical/surgical benefits must accumulate to satisfy a single combined deductible before the plan provides either medical/surgical benefits or mental health or substance use disorder benefits (combined deductible).

According to the regulations, prohibiting separately accumulating financial restrictions and quantitative treatment limitations is more consistent with the policy goals of mental health parity, and thus a plan may not apply cumulative financial requirements or cumulative quantitative treatment limitations to mental health or substance use disorder benefits that accumulate separately from cumulative financial requirements or quantitative treatment limitations established for medical/surgical benefits.

Reporting Requirements

The statute includes two new disclosure provisions for group health plans, which the regulations adopt without substantial change. First, the criteria for medical necessity determinations with respect to mental health or substance use disorder benefits must be made available to any current or potential participant, beneficiary, or contracting provider upon request. Comments are requested on what additional clarifications might be helpful to facilitate compliance with this disclosure requirement for medical necessity criteria.

The statute also provides that the reason for any claims denial must be made available, upon request to the participant or beneficiary. The regulations clarify that, in order for plans subject to ERISA (and health insurance coverage offered in connection with such plans) to satisfy this requirement, disclosures must be made in a form and manner consistent with the rules for group health plans in the ERISA claims procedure regulations, which provide (among other things) that such disclosures must be provided automatically and free of charge.

In the case of non-Federal governmental and church plans (which are not subject to ERISA), the regulations provide that compliance with the form and manner of the ERISA claims procedure regulations for group health plans satisfies this disclosure requirement. Comments also are requested regarding any additional clarifications that would be helpful to facilitate compliance with this disclosure requirement.

Comments, which are due on or before May 3, 2010, may be submitted to the. Federal eRulemaking Portal: http://www.regulations.gov. Follow the instructions for submitting comments. Any comment will be shared with all three Departments. Commenters are asked not submit duplicates.

Spencer’s Benefits Reports, a publication of Wolters Kluwer law and Business, will publish a comprehensive analysis of the new regulations in the near future.

Tuesday, February 2, 2010

State High Risk Pools A Viable Health Reform Tool?

Each bill approved in both houses of Congress includes a provision to establish a temporary national high-risk pool to provide health coverage to individuals with pre-existing medical conditions.. U.S. citizens and legal immigrants who have a pre-existing medical condition and who have been uninsured for at least six months might qualify. Furthermore, as discussed in a previous blog post, Republicans’ health reform proposals include federal funding for states to use for high-risk pools in the individual insurance market and reinsurance programs in the small group market.

State high-risk pools are state programs that offer health insurance to residents who, because of pre-existing medical conditions, are unable to purchase affordable, or any, coverage in the individual health insurance market. A paper issued in January by the Kaiser Family Foundation provides an overview of these types of pools. As of December 2008, 34 states have high-risk pools which collectively enrolled nearly 200,000 people. The only states that do not maintain a high-risk pool are Arizona, Delaware, the District of Columbia, Georgia, Hawaii, Idaho, Maine, Massachusetts, Michigan, Nebraska, New Jersey, New York, Ohio, Pennsylvania, Rhode Island, Vermont, and Virginia. Many of these states have alternative health insurance programs and Massachusetts has health insurance reform.

The majority of states (29) also use high-risk pools instead of reforming the individual health insurance market as required by the Health Insurance Portability and Accountability Act (HIPAA) to guarantee individual health insurance coverage for eligible individuals who lose group health insurance.

States’ high-risk pool eligibility, coverage, and pricing provisions vary significantly, and high costs for individuals, as well as pool waiting lists, pose a significant barrier to coverage. For example, Minnesota, with a population of 5 million, has more than 27,000 individuals covered through its high-risk pool, while Texas, with 24 million residents, covers nearly 27,000 individuals. In UnitedHealth Foundation’s Health Rankings for 2009, Minnesota ranked 6th in the top “healthy” states among the 50 states and the District of Columbia and only 8.5% of its residents were uninsured. In contrast, Texas ranked 39th and 25% of state residents were uninsured.

A look at these two states’ high-risk pool provisions provides some important perspectives as to the reasons for the difference between the two states’ healthiness rankings and rate of uninsurance. As of Jan. 1, 2010, preexisting condition waiting periods were 12 months in the Texas high-risk pool, but six months for the Minnesota one. Furthermore, the Minnesota pool gives insureds credit for prior health insurance coverage, while Texas does not.

The high-risk plan with the lowest deductible costs $498 in Minnesota for a $673 deductible, but $983 in Texas for a plan with a $1,000 deductible. In Texas, premiums have increased every six months and have more than doubled (from $478) since 2002, while at the Minnesota pool premiums have risen annually. In Texas, the annual coinsurance maximum ranges from $4,000 to $12,500; in Minnesota it is $3,000 to $10,000. Premiums cover 45% of the high-risk pool costs in Minnesota, but 70% in Texas. Premium subsidies are available under Minnesota’s pool, but not under Texas’ pool.

Some people think that health reform should be left up to the states. Which state would you choose to live in to obtain the best, most affordable coverage?