PNHP

Insurance trade group sues to protect rescissions

Insurance trade group sues to protect rescissions

Trade group sues over new Calif. insurance rules

By Shaya Tayefe Mohajer
San Francisco Chronicle
August 19, 2010
A new regulation that makes it harder for health insurance companies to drop individual policyholders in California is being challenged in court by an industry trade group.
The California Department of Insurance’s new regulations, which took effect Wednesday, require insurers to investigate the medical histories of those seeking individual policies before accepting any premiums.
The Association of California Life and Health Insurance Companies sued to stop the rules on Monday, accusing the state of acting “in excess of its jurisdiction and authority” by creating regulation that conflicts with the state’s insurance code.
Insurance Commissioner Steve Poizner on Thursday called the lawsuit “shortsighted and morally wrong.”
“Sometimes I think representatives in this industry have their heads permanently stuck in the sand. Illegal rescissions are a repugnant industry practice,” said Poizner.
http://www.sfgate.com/cgi-bin/article.cgi?f=/n/a/2010/08/19/financial/f132925D03.DTL

One of the most egregious offenses of the health insurance industry has been to retroactively revoke an insurance policy after the insured individual files a medical claim, a process known as rescission. Public outrage over this injustice helped to drive the process that brought us the Patient Protection and Affordable Care Act (PPACA).
Apparently the insurance industry has learned nothing. Their trade organization in California has the gall to infuriate all of us by suing to protect their right to do their underwriting after a claim is filed rather than before the policy is issued, whacking the patients when they are down.
Since PPACA will make rescissions more difficult, you would think that the industry would be quiet and accept the inevitable. No. Instead they reveal that they are not simply an amoral industry but rather a truly immoral one by insisting on their right to retroactively deny payment of medical bills run up by the hapless patient, merely to save the costs of timely underwriting.
This is not the industry that should be managing our health care financing. We need our own public financing entity – a single payer national health program.

Why are large employers unable to control their costs?

Large Employers’ 2011 Health Plan Design Changes

By Karen Marlo, Dannel Dan, and Craig Lykens
National Business Group on Health
August 2010

The National Business Group on Health conducted its annual plan design survey with members in the spring/summer of 2010.

Changes as a Result of Health Care Legislation

While there was uncertainty about the regulations determining grandfathered plan status, the majority of employers (53%) were still planning to make changes to their plan designs.

Medical Plan Costs

Employers estimated an average increase in health care costs of 7.0% for 2010, with reported estimates ranging from a 2.7% decrease to a 14.0% increase. For 2011, employers are estimating a slightly larger increase, an average trend of 8.9%.

In 2011, 63% of employers will be increasing the employee percentage contribution to premium costs, and 46% will increase out-of-pocket maximums, while 44% will increase in-network deductibles.

Consumer-Directed Health Care

Of the respondents, 61% will offer a CDHP in 2011. Of those offering a CDHP, 20% indicated that they will or have moved to a full replacement plan (i.e., no other option), up from 10% in 2010. The most common type of CDHP employers will offer in 2011 is a high-deductible health plan (HDHP) with a health savings account (HSA) (64%).

Pharmacy Benefits

To manage pharmacy benefits, the techniques employers are most likely to use are prior authorization (73%), followed by step therapy (63%), three-tier design (63%), and mandatory mail order for maintenance medications (47%).

Retiree Health

Very few employers offer retiree health benefits for new hires, with 18% offering coverage to pre-65 retirees and 11% offering post-65 supplemental coverage to new hires.

The top strategies being used to control retiree health care costs are caps on company contributions (46%), increasing employee contributions (37%), and eliminating coverage for future retirees (33%).

http://www.businessgrouphealth.org/pdfs/Plan%20Design%20Survey%20Report%20Public.pdf

Comment:

By Don McCanne, MD

The National Business Group on Health represents primarily Fortune 500 companies and large public-sector employers with self-insured health benefit programs. Because of their market power and their ability to eliminate the risk pooling function of private insurer intermediaries, you would think that these large employers would be immune from the high health care costs inflicted on the rest of us by our dysfunctional system of financing health care, but you would be wrong.

This report shows that escalating health care costs continue to plague our nation’s largest employers, so much so they they are turning to some of the same ill-advised cost containment measures used throughout our system. Amongst the most perverse is that they are shifting ever more costs to those individuals who most need to be protected by the benefit programs – their employees and family members who have health care needs. It is bad enough to have health problems, but it is even worse to be financially penalized for having them.

Why is it that these large employers, with their tremendous purchasing power and ability to bypass the extortion of risk-bearing private insurers, have been unable to control their health care costs? The reason is quite simple. Our fragmented, dysfunctional, multi-payer system permeates the entire health care delivery system, and these employers are unable to function in an isolated delivery system that has not been damaged by the financing perversities.

Let’s look at some of the excess costs that they face. First, U.S. health care prices are the highest in the world. Even with their purchasing clout, the employers are not able to slow the unrelenting escalation in health care prices; they still have to pay prices close to those negotiated by the private insurance industry. In fact, most of them use private insurers for administrative functions such as claims processing, so they’re playing the same ball game.

Second, and most importantly, the health care delivery system has built into it very high administrative costs due to the necessity of interacting with a multitude of payers, each with different contract requirements. There is no way that large employers can avoid paying these excess costs because they are fixed costs built into the delivery system.

It is true that large employers escape some of the costs of private insurance, such as the expense of marketing health plans, or the necessity of paying profits to investor-owned insurance companies. However they are exposed not only to the massive indirect administrative costs imposed on the health care delivery system, they also have their own excessive administrative costs.

The U.S. model of health care financing depends on provider networks, and these large employers must either establish their own networks, or, much more likely, rent these networks from the private insurers. It defies logic that they should pay extra to take choice away from patients, but they do. (Keep in mind that Medicare controls prices without the need of establishing restrictive provider networks.)

They also must either establish their own claims processing system, or again more likely, use private insurers or claims processing managers which profit from the services they are selling to the employers.

With the increase in consumer-directed health care plans employers have increased administrative responsibility for managing the various cost sharing provisions, ranging from tallying services before the deductible is met to management of payments from health savings accounts.

It is easy to see why being self-insured has not protected these large businesses. Their direct insurance-type administrative costs may be comparatively low, but the costly burden of our dysfunctional financing infrastructure has been placed upon the entire health care delivery system, and they must pay for that. (Yes, I repeat myself, but this is the crucial take-home message.)

Although some might want to give the private insurers a pass because the employers are not dependent on them for risk pooling, that would be a mistake. The private insurers and their political supporters are very much to blame because they have perpetuated this dysfunctional financing system that the large employers have been unable to penetrate. The politicians perhaps bear the greatest blame because they have supported the private insurance industry at a great cost to the rest of us.

What the United States lacks that all other industrialized nations have is a monopsony (single purchaser) to purchase health care. Even in those nations with multiple payers, government oversight pulls them together as a de facto single purchasing entity. In the private sector, a monopsony can be as evil as a monopoly, but a public monopsony is different because it purchases health care for the benefit of the nation’s patients.

Our nation’s largest employers, with all of their purchasing power, still lack the strength of a monopsony. They are making a tragic mistake in trying to solve their problems by passing more of the health care burden onto their workers.

If the leadership of the business community had just a little bit more vision, they would realize that it is time to establish a monopsony that would not only control their costs, but would work for all of us. The ideal monopsony for this nation, of course, would be an improv
ed Medicare that covers everyone.

For Cost Control, Vouchers and Medicare Don't Mix

By Austin Frakt
Kaiser Health News, Aug 19, 2010

With the ambition of reducing the federal debt, Congressman Paul Ryan has offered a proposal to convert Medicare to a voucher-based program. Under the plan, in time all Medicare beneficiaries would receive program benefits from private plans subsidized by government payments (vouchers). In principle, such a system could reduce federal Medicare costs if the subsidy grows more slowly than medical inflation, shifting more of the costs to care to individuals. The history of Medicare and its politics suggest it is unlikely to work out that way.

About Ryan’s plan, economist Paul Krugman wrote in the New York Times, “[W]e already know, from experience with the Medicare Advantage program, that a voucher system would have higher, not lower, costs than our current system.” Krugman is correct: When it comes to Medicare, vouchers and cost control, it seems you can’t get all three.

Though rarely described this way, the private Medicare Advantage plans are a (voluntary) voucher system. When covering a beneficiary, an Advantage plan receives a fixed monthly payment from Medicare that depends on the beneficiary’s county of residence and health status. That fixed monthly payment is tantamount to a voucher. With it, beneficiaries can select from any Advantage plan operating in their county. They can also stick with traditional fee-for-service Medicare–and about three in four beneficiaries do so.

But today, the market-based arm of the program costs more, not less, per beneficiary. Those fixed monthly payments to Advantage plans are, on average, 13 percent above fee-for-service Medicare costs. It didn’t start out that way. Originally, private Medicare plans were paid 95 percent of per beneficiary fee-for-service costs. The logic was that private plans ought to be able to provide Medicare services more efficiently than traditional Medicare through a combination of controlling utilization and driving hard bargains with providers. So, Medicare used to take five percent off the top.

Then Congress began to ratchet up payments, first with the 1997 Balanced Budget Act and more recently with the 2003 Medicare Modernization Act. (This year’s health reform law aims to reduce Advantage payments, though still not below 100 percent of fee-for-service costs on average.) Ironically, traditional Medicare payment regulatory reforms–like the prospective payment of hospitals and home health agencies–have been more successful (even if not anywhere near successful enough) in mollifying the rate of growth in the program’s costs.

What’s going on? Why is the market-based Advantage voucher system not helping to control Medicare costs? The answer is that health care cost control is tough, technically and politically. Provider groups typically resist it. When it pertains to Medicare, beneficiaries resist it too. By adding another private-sector layer to the program–health insurers–the Advantage program invites a third source of political pressure. Rent-seeking by providers and insurers, as well as the power of the beneficiary constituency, align in their encouragement of higher Advantage payments. Congress, apparently, is willing to yield to that encouragement.

So, it’s really no surprise that Advantage plans have not, to date, been part of a Medicare cost control solution. Congress has not consistently been willing to say no to the combination of powerful interests that advocate for higher payments to private plans. Given the track record, it is also not unreasonable to conclude the mandatory voucher program Ryan advocates wouldn’t save money either. As Krugman suggests, it could even be worse because in time 100% of beneficiaries would be enrolled in vouchers, not the 24 percent that are enrolled today.

The politics of Medicare are such that Ryan’s idea, paying for care entirely through private plans, costs more. That’s not due to a market failure, but a political one. Congress likes to spend money; insurers, providers and beneficiaries like to receive it. Congress spends even more when it can satisfy those interests under the guise of a seemingly pro-market, pro-competitive program.

When it comes to cost control and considering the political calculus of Congress, vouchers and Medicare don’t add up.

Austin Frakt is a health economist and an Assistant Professor of Health Policy and Management at Boston University’s School of Public Health. He blogs at The Incidental Economist .

http://www.kaiserhealthnews.org/Columns/2010/August/081910Frakt.aspx

For Cost Control, Vouchers and Medicare Don’t Mix

By Austin Frakt
Kaiser Health News, Aug 19, 2010

With the ambition of reducing the federal debt, Congressman Paul Ryan has offered a proposal to convert Medicare to a voucher-based program. Under the plan, in time all Medicare beneficiaries would receive program benefits from private plans subsidized by government payments (vouchers). In principle, such a system could reduce federal Medicare costs if the subsidy grows more slowly than medical inflation, shifting more of the costs to care to individuals. The history of Medicare and its politics suggest it is unlikely to work out that way.

About Ryan’s plan, economist Paul Krugman wrote in the New York Times, “[W]e already know, from experience with the Medicare Advantage program, that a voucher system would have higher, not lower, costs than our current system.” Krugman is correct: When it comes to Medicare, vouchers and cost control, it seems you can’t get all three.

Though rarely described this way, the private Medicare Advantage plans are a (voluntary) voucher system. When covering a beneficiary, an Advantage plan receives a fixed monthly payment from Medicare that depends on the beneficiary’s county of residence and health status. That fixed monthly payment is tantamount to a voucher. With it, beneficiaries can select from any Advantage plan operating in their county. They can also stick with traditional fee-for-service Medicare–and about three in four beneficiaries do so.

But today, the market-based arm of the program costs more, not less, per beneficiary. Those fixed monthly payments to Advantage plans are, on average, 13 percent above fee-for-service Medicare costs. It didn’t start out that way. Originally, private Medicare plans were paid 95 percent of per beneficiary fee-for-service costs. The logic was that private plans ought to be able to provide Medicare services more efficiently than traditional Medicare through a combination of controlling utilization and driving hard bargains with providers. So, Medicare used to take five percent off the top.

Then Congress began to ratchet up payments, first with the 1997 Balanced Budget Act and more recently with the 2003 Medicare Modernization Act. (This year’s health reform law aims to reduce Advantage payments, though still not below 100 percent of fee-for-service costs on average.) Ironically, traditional Medicare payment regulatory reforms–like the prospective payment of hospitals and home health agencies–have been more successful (even if not anywhere near successful enough) in mollifying the rate of growth in the program’s costs.

What’s going on? Why is the market-based Advantage voucher system not helping to control Medicare costs? The answer is that health care cost control is tough, technically and politically. Provider groups typically resist it. When it pertains to Medicare, beneficiaries resist it too. By adding another private-sector layer to the program–health insurers–the Advantage program invites a third source of political pressure. Rent-seeking by providers and insurers, as well as the power of the beneficiary constituency, align in their encouragement of higher Advantage payments. Congress, apparently, is willing to yield to that encouragement.

So, it’s really no surprise that Advantage plans have not, to date, been part of a Medicare cost control solution. Congress has not consistently been willing to say no to the combination of powerful interests that advocate for higher payments to private plans. Given the track record, it is also not unreasonable to conclude the mandatory voucher program Ryan advocates wouldn’t save money either. As Krugman suggests, it could even be worse because in time 100% of beneficiaries would be enrolled in vouchers, not the 24 percent that are enrolled today.

The politics of Medicare are such that Ryan’s idea, paying for care entirely through private plans, costs more. That’s not due to a market failure, but a political one. Congress likes to spend money; insurers, providers and beneficiaries like to receive it. Congress spends even more when it can satisfy those interests under the guise of a seemingly pro-market, pro-competitive program.

When it comes to cost control and considering the political calculus of Congress, vouchers and Medicare don’t add up.

Austin Frakt is a health economist and an Assistant Professor of Health Policy and Management at Boston University’s School of Public Health. He blogs at The Incidental Economist .

http://www.kaiserhealthnews.org/Columns/2010/August/081910Frakt.aspx

The Flimflam Man

By PAUL KRUGMAN, Op-Ed Columnist
The New York Times, August 5, 2010

One depressing aspect of American politics is the susceptibility of the political and media establishment to charlatans. You might have thought, given past experience, that D.C. insiders would be on their guard against conservatives with grandiose plans. But no: as long as someone on the right claims to have bold new proposals, he’s hailed as an innovative thinker. And nobody checks his arithmetic.

Which brings me to the innovative thinker du jour: Representative Paul Ryan of Wisconsin.

Mr. Ryan has become the Republican Party’s poster child for new ideas thanks to his “Roadmap for America’s Future,” a plan for a major overhaul of federal spending and taxes. News media coverage has been overwhelmingly favorable; on Monday, The Washington Post put a glowing profile of Mr. Ryan on its front page, portraying him as the G.O.P.’s fiscal conscience. He’s often described with phrases like “intellectually audacious.”

But it’s the audacity of dopes. Mr. Ryan isn’t offering fresh food for thought; he’s serving up leftovers from the 1990s, drenched in flimflam sauce.

Mr. Ryan’s plan calls for steep cuts in both spending and taxes. He’d have you believe that the combined effect would be much lower budget deficits, and, according to that Washington Post report, he speaks about deficits “in apocalyptic terms.” And The Post also tells us that his plan would, indeed, sharply reduce the flow of red ink: “The Congressional Budget Office has estimated that Rep. Paul Ryan’s plan would cut the budget deficit in half by 2020.”

But the budget office has done no such thing. At Mr. Ryan’s request, it produced an estimate of the budget effects of his proposed spending cuts — period. It didn’t address the revenue losses from his tax cuts.

The nonpartisan Tax Policy Center has, however, stepped into the breach. Its numbers indicate that the Ryan plan would reduce revenue by almost $4 trillion over the next decade. If you add these revenue losses to the numbers The Post cites, you get a much larger deficit in 2020, roughly $1.3 trillion.

And that’s about the same as the budget office’s estimate of the 2020 deficit under the Obama administration’s plans. That is, Mr. Ryan may speak about the deficit in apocalyptic terms, but even if you believe that his proposed spending cuts are feasible — which you shouldn’t — the Roadmap wouldn’t reduce the deficit. All it would do is cut benefits for the middle class while slashing taxes on the rich.

And I do mean slash. The Tax Policy Center finds that the Ryan plan would cut taxes on the richest 1 percent of the population in half, giving them 117 percent of the plan’s total tax cuts. That’s not a misprint. Even as it slashed taxes at the top, the plan would raise taxes for 95 percent of the population.

Finally, let’s talk about those spending cuts. In its first decade, most of the alleged savings in the Ryan plan come from assuming zero dollar growth in domestic discretionary spending, which includes everything from energy policy to education to the court system. This would amount to a 25 percent cut once you adjust for inflation and population growth. How would such a severe cut be achieved? What specific programs would be slashed? Mr. Ryan doesn’t say.

After 2020, the main alleged saving would come from sharp cuts in Medicare, achieved by dismantling Medicare as we know it, and instead giving seniors vouchers and telling them to buy their own insurance. Does this sound familiar? It should. It’s the same plan Newt Gingrich tried to sell in 1995.

And we already know, from experience with the Medicare Advantage program, that a voucher system would have higher, not lower, costs than our current system. The only way the Ryan plan could save money would be by making those vouchers too small to pay for adequate coverage. Wealthy older Americans would be able to supplement their vouchers, and get the care they need; everyone else would be out in the cold.

In practice, that probably wouldn’t happen: older Americans would be outraged — and they vote. But this means that the supposed budget savings from the Ryan plan are a sham.

So why have so many in Washington, especially in the news media, been taken in by this flimflam? It’s not just inability to do the math, although that’s part of it. There’s also the unwillingness of self-styled centrists to face up to the realities of the modern Republican Party; they want to pretend, in the teeth of overwhelming evidence, that there are still people in the G.O.P. making sense. And last but not least, there’s deference to power — the G.O.P. is a resurgent political force, so one mustn’t point out that its intellectual heroes have no clothes.

But they don’t. The Ryan plan is a fraud that makes no useful contribution to the debate over America’s fiscal future.

http://www.nytimes.com/2010/08/06/opinion/06krugman.html

What’s next after 'reform'?

Queen City News
Letter to the Editor
Wednesday, August 11, 2010

To the Editor:

The foreseeable outcome, four months after passage of the Patient Protection and Affordable Care Act of 2010 (PPACA), is greatly in question. Polls show three diverse opinions: the Democratic, the Republicans working to repeal it, and those feeling it makes no difference.

Dr. John Geyman, emeritus professor of medicine at the University of Washington, has written a comprehensive appraisal of PPACA in his book, “Hijacked: The Road to Single Payer in the Aftermath of Stolen Health Care Reform,” September 2010, Common Courage Press (print and eBook format). It is an account to be read by virtually every person who values the future of health care in the U.S.

The four basic system problems that exist in current U.S. health care – costs, affordability, access and quality of care – are intricately related to the alliance of the five biggest players in our failed health care model, namely (a) the insurance industry, (b) the drug industry, (c) the hospital industry, (d) business (e) and organized medicine.

Geyman convincingly lays out the roles played by each and shows how our system, based upon “monopolistic capitalism,” is not the way to hold down costs. It is easy to understand his contention that political buy-out of health policy by the five free market entities at the Congressional level is the mechanism through which thousands of people suffer, and many die unnecessarily, as our health standing among the industrialized countries of the world declines and costs escalate at unsustainable levels.

Geyman warns against the destructive socioeconomic path we are on and the disregard for the health and well-being of the majority of people in this country by our policy makers.

If you are concerned as I am, go to www.healthcare-now.org and become an advocate for single payer.

Richard A. Damon, M.D.
Bozeman, MT

http://www.queencitynews.com/modules.php?op=modload&name=News&file=article&sid=11886

What’s next after ‘reform’?

Queen City News
Letter to the Editor
Wednesday, August 11, 2010

To the Editor:

The foreseeable outcome, four months after passage of the Patient Protection and Affordable Care Act of 2010 (PPACA), is greatly in question. Polls show three diverse opinions: the Democratic, the Republicans working to repeal it, and those feeling it makes no difference.

Dr. John Geyman, emeritus professor of medicine at the University of Washington, has written a comprehensive appraisal of PPACA in his book, “Hijacked: The Road to Single Payer in the Aftermath of Stolen Health Care Reform,” September 2010, Common Courage Press (print and eBook format). It is an account to be read by virtually every person who values the future of health care in the U.S.

The four basic system problems that exist in current U.S. health care – costs, affordability, access and quality of care – are intricately related to the alliance of the five biggest players in our failed health care model, namely (a) the insurance industry, (b) the drug industry, (c) the hospital industry, (d) business (e) and organized medicine.

Geyman convincingly lays out the roles played by each and shows how our system, based upon “monopolistic capitalism,” is not the way to hold down costs. It is easy to understand his contention that political buy-out of health policy by the five free market entities at the Congressional level is the mechanism through which thousands of people suffer, and many die unnecessarily, as our health standing among the industrialized countries of the world declines and costs escalate at unsustainable levels.

Geyman warns against the destructive socioeconomic path we are on and the disregard for the health and well-being of the majority of people in this country by our policy makers.

If you are concerned as I am, go to www.healthcare-now.org and become an advocate for single payer.

Richard A. Damon, M.D.
Bozeman, MT

http://www.queencitynews.com/modules.php?op=modload&name=News&file=article&sid=11886

Will Insurance Companies Game the ACA?

By Kevin Drum
Mother Jones, Mon Aug. 16, 2010

Starting in 2014 insurance companies will no longer be allowed to discriminate against people with preexisting conditions. They’ll have to take all comers for (almost) the same price, regardless of how healthy they are.

The incentive here is obvious: within the confines of the law, insurance companies will do their best to lure the healthiest patients into their programs and convince the sickest ones to switch. But how much leverage do they have to do this? Looking for clues, Aaron Carroll takes us back to a study done in 1997, when Medicare patients were allowed to switch back and forth between HMOs and traditional fee-for-service plans:

What did the researchers find? People who wound up joining the (private) HMOs used 66% less care before joining than those who stayed in the (public) Medicare group. Somehow the private insurance HMOs figured out a way to get the healthy people to jump ship out of the another plan into theirs!

Not only that, but people who left the (private) HMOs and went back to the (public) Medicare used 180% more care after leaving than the people who stayed. Somehow the private insurance HMOs figured out a way to convince the sicker people to jump ship back to the public plans.

Fascinating! But I’m not sure this tells us as much as it seems to. It does appear to tell us that private insurers are pretty good at marketing themselves to healthy people and then signing them up as customers. But the dice are loaded here: they were competing against a publicly funded fee-for-service program that didn’t care if the sickest patients got dumped on them. In fact, it’s worse than that: the fee-for-service folks probably wanted the sickest patients since it meant more money for them. So the private insurers may have done a good job of maximizing their profit, but only because their competition didn’t fight back. Under ACA, it’s mostly going to be private insurers vs. private insurers, and that’s a whole different ball game.

But what about the second half of this study, which shows that private insurers were good at dumping sick people? That’s more worrisome. It’s still the case that they could only succeed as well as they did because the public system wasn’t fighting back. But that only speaks to why they succeeded so brilliantly. When it’s private insurers vs. private insurers, dumping tactics probably won’t work as well, but they’ll still have to be used by any insurer who wants to stay in business. After all, if even one private insurer is aggressively trying to dump its sick patients, every other private insurer has to do the same thing if they want to stay profitable. In the end, the sick patients might all stay in the system (though there will probably be some leakage to Medicaid), but they’re going to be treated badly the entire time as insurers do their best to get them exasperated enough to try switching to someone else.

Aaron’s conclusion: “Insurance companies are very, very good at what they do. I don’t doubt that they will find ways to remain profitable. That’s not a moral judgment. I don’t hate them for it; it is their nature.” In other words, the fight isn’t over yet. The quality and detailed nature of the regulations HHS puts in place are going to make a big difference to the success of ACA. Insurance companies are going to be keeping a very sharp eye on this, and hopefully the rest of us will too.

http://motherjones.com/kevin-drum/2010/08/will-insurance-companies-game-aca

Why are large employers unable to control their costs?

Large Employers’ 2011 Health Plan Design Changes

By Karen Marlo, Dannel Dan, and Craig Lykens
National Business Group on Health
August 2010
The National Business Group on Health conducted its annual plan design survey with members in the spring/summer of 2010.
Changes as a Result of Health Care Legislation
While there was uncertainty about the regulations determining grandfathered plan status, the majority of employers (53%) were still planning to make changes to their plan designs.
Medical Plan Costs
Employers estimated an average increase in health care costs of 7.0% for 2010, with reported estimates ranging from a 2.7% decrease to a 14.0% increase. For 2011, employers are estimating a slightly larger increase, an average trend of 8.9%.
In 2011, 63% of employers will be increasing the employee percentage contribution to premium costs, and 46% will increase out-of-pocket maximums, while 44% will increase in-network deductibles.
Consumer-Directed Health Care
Of the respondents, 61% will offer a CDHP in 2011. Of those offering a CDHP, 20% indicated that they will or have moved to a full replacement plan (i.e., no other option), up from 10% in 2010. The most common type of CDHP employers will offer in 2011 is a high-deductible health plan (HDHP) with a health savings account (HSA) (64%).
Pharmacy Benefits
To manage pharmacy benefits, the techniques employers are most likely to use are prior authorization (73%), followed by step therapy (63%), three-tier design (63%), and mandatory mail order for maintenance medications (47%).
Retiree Health
Very few employers offer retiree health benefits for new hires, with 18% offering coverage to pre-65 retirees and 11% offering post-65 supplemental coverage to new hires.
The top strategies being used to control retiree health care costs are caps on company contributions (46%), increasing employee contributions (37%), and eliminating coverage for future retirees (33%).
http://www.businessgrouphealth.org/pdfs/Plan%20Design%20Survey%20Report%20Public.pdf

The National Business Group on Health represents primarily Fortune 500 companies and large public-sector employers with self-insured health benefit programs. Because of their market power and their ability to eliminate the risk pooling function of private insurer intermediaries, you would think that these large employers would be immune from the high health care costs inflicted on the rest of us by our dysfunctional system of financing health care, but you would be wrong.
This report shows that escalating health care costs continue to plague our nation’s largest employers, so much so they they are turning to some of the same ill-advised cost containment measures used throughout our system. Amongst the most perverse is that they are shifting ever more costs to those individuals who most need to be protected by the benefit programs – their employees and family members who have health care needs. It is bad enough to have health problems, but it is even worse to be financially penalized for having them.
Why is it that these large employers, with their tremendous purchasing power and ability to bypass the extortion of risk-bearing private insurers, have been unable to control their health care costs? The reason is quite simple. Our fragmented, dysfunctional, multi-payer system permeates the entire health care delivery system, and these employers are unable to function in an isolated delivery system that has not been damaged by the financing perversities.
Let’s look at some of the excess costs that they face. First, U.S. health care prices are the highest in the world. Even with their purchasing clout, the employers are not able to slow the unrelenting escalation in health care prices; they still have to pay prices close to those negotiated by the private insurance industry. In fact, most of them use private insurers for administrative functions such as claims processing, so they’re playing the same ball game.
Second, and most importantly, the health care delivery system has built into it very high administrative costs due to the necessity of interacting with a multitude of payers, each with different contract requirements. There is no way that large employers can avoid paying these excess costs because they are fixed costs built into the delivery system.
It is true that large employers escape some of the costs of private insurance, such as the expense of marketing health plans, or the necessity of paying profits to investor-owned insurance companies. However they are exposed not only to the massive indirect administrative costs imposed on the health care delivery system, they also have their own excessive administrative costs.
The U.S. model of health care financing depends on provider networks, and these large employers must either establish their own networks, or, much more likely, rent these networks from the private insurers. It defies logic that they should pay extra to take choice away from patients, but they do. (Keep in mind that Medicare controls prices without the need of establishing restrictive provider networks.)
They also must either establish their own claims processing system, or again more likely, use private insurers or claims processing managers which profit from the services they are selling to the employers.
With the increase in consumer-directed health care plans employers have increased administrative responsibility for managing the various cost sharing provisions, ranging from tallying services before the deductible is met to management of payments from health savings accounts.
It is easy to see why being self-insured has not protected these large businesses. Their direct insurance-type administrative costs may be comparatively low, but the costly burden of our dysfunctional financing infrastructure has been placed upon the entire health care delivery system, and they must pay for that. (Yes, I repeat myself, but this is the crucial take-home message.)
Although some might want to give the private insurers a pass because the employers are not dependent on them for risk pooling, that would be a mistake. The private insurers and their political supporters are very much to blame because they have perpetuated this dysfunctional financing system that the large employers have been unable to penetrate. The politicians perhaps bear the greatest blame because they have supported the private insurance industry at a great cost to the rest of us.
What the United States lacks that all other industrialized nations have is a monopsony (single purchaser) to purchase health care. Even in those nations with multiple payers, government oversight pulls them together as a de facto single purchasing entity. In the private sector, a monopsony can be as evil as a monopoly, but a public monopsony is different because it purchases health care for the benefit of the nation’s patients.
Our nation’s largest employers, with all of their purchasing power, still lack the strength of a monopsony. They are making a tragic mistake in trying to solve their problems by passing more of the health care burden onto their workers.
If the leadership of the business community had just a little bit more vision, they would realize that it is time to establish a monopsony that would not only control their costs, but would work for all of us. The ideal monopsony for this nation, of course, would be an improved Medicare that covers everyone.

Is NAIC agreement on medical loss ratios in patients' interests?

Commissioners OK health rate plan

By Sarah Kliff
Politico
August 17, 2010

The National Association of Insurance Commissioners approved Tuesday morning (by a unanimous vote) a preliminary outline of what insurers will be able to count as medical costs, a document necessitated by the health reform bill’s requirement that insurers spend at least 85 percent of subscriber premiums on medical costs in the large group market and 80 percent for small group and individual plans.

While insurance commissioners moved forward unanimously, familiar fault lines emerged between consumer advocates and industry over the document and how it categorizes medical spending.

“In general, we are very pleased,” said NAIC consumer advocate Timothy Jost, a professor of health policy at Washington & Lee University. “The process has been very open and participatory. We feel like our concerns have been listened to.”

“The NAIC is conducting a transparent and thorough process as it develops the [medical loss ratio] MLR definition, but the current proposal could have the unintended consequence of turning back the clock on efforts to improve patient safety, enhance the quality of care and fight fraud,” AHIP president Karen Ignagni said in a statement.

http://www.politico.com/news/stories/0810/41179.html

NAIC approved reporting form (blank):
http://www.naic.org/documents/index_health_reform_mlr_blanks_proposal.pdf

Letter from AHIP’s Karen Ignagni:
http://www.politico.com/static/PPM153_ahip_081510.html

Comment: 

By Don McCanne, MD

The National Association of Insurance Commissioners (NAIC) has finally come to agreement on the reporting form that likely will be used to determine whether or not the private insurers are in compliance with the required medical loss ratios (MLRs). The agreement is being reported as a victory for health care consumers and a defeat for the private insurance industry, but this ignores the crucial overriding issue.

The debate was over how much of their administrative costs the private insurers would be able to pass off as quality improvements that could be classified as medical expenses. Such reclassifications would allow the insurers to spend more for other non-medical purposes such as marketing and profits. Much of their attempted overreach – some described in Karen Ignagni’s letter – was rejected.

This is not a victory for the health care consumer. We are still stuck with a middleman industry that has been granted the right to keep 15 to 20 percent of our premium dollars to use for their own purposes. Congress and the President rejected a model of reform – an improved Medicare for all – that would have eliminated much of this waste plus the waste of the excess administrative burden that the insurers place on physicians and hospitals. The insurers get to include the latter as medical costs, further padding their margins, but administrative waste doesn’t benefit anyone’s health.

With all of the attention being given to the details of implementing the Patient Protection and Affordable Care Act (PPACA), too many have forgotten about the fact that the financing model in PPACA is irreparably flawed and can never bring us affordable health care for everyone. Instead of frittering away our efforts in the peripheral skirmishes, we need to pull together and win this war.

Is NAIC agreement on medical loss ratios in patients’ interests?

Commissioners OK health rate plan

By Sarah Kliff
Politico
August 17, 2010

The National Association of Insurance Commissioners approved Tuesday morning (by a unanimous vote) a preliminary outline of what insurers will be able to count as medical costs, a document necessitated by the health reform bill’s requirement that insurers spend at least 85 percent of subscriber premiums on medical costs in the large group market and 80 percent for small group and individual plans.

While insurance commissioners moved forward unanimously, familiar fault lines emerged between consumer advocates and industry over the document and how it categorizes medical spending.

“In general, we are very pleased,” said NAIC consumer advocate Timothy Jost, a professor of health policy at Washington & Lee University. “The process has been very open and participatory. We feel like our concerns have been listened to.”

“The NAIC is conducting a transparent and thorough process as it develops the [medical loss ratio] MLR definition, but the current proposal could have the unintended consequence of turning back the clock on efforts to improve patient safety, enhance the quality of care and fight fraud,” AHIP president Karen Ignagni said in a statement.

http://www.politico.com/news/stories/0810/41179.html

NAIC approved reporting form (blank):
http://www.naic.org/documents/index_health_reform_mlr_blanks_proposal.pdf

Letter from AHIP’s Karen Ignagni:
http://www.politico.com/static/PPM153_ahip_081510.html

Comment: 

By Don McCanne, MD

The National Association of Insurance Commissioners (NAIC) has finally come to agreement on the reporting form that likely will be used to determine whether or not the private insurers are in compliance with the required medical loss ratios (MLRs). The agreement is being reported as a victory for health care consumers and a defeat for the private insurance industry, but this ignores the crucial overriding issue.

The debate was over how much of their administrative costs the private insurers would be able to pass off as quality improvements that could be classified as medical expenses. Such reclassifications would allow the insurers to spend more for other non-medical purposes such as marketing and profits. Much of their attempted overreach – some described in Karen Ignagni’s letter – was rejected.

This is not a victory for the health care consumer. We are still stuck with a middleman industry that has been granted the right to keep 15 to 20 percent of our premium dollars to use for their own purposes. Congress and the President rejected a model of reform – an improved Medicare for all – that would have eliminated much of this waste plus the waste of the excess administrative burden that the insurers place on physicians and hospitals. The insurers get to include the latter as medical costs, further padding their margins, but administrative waste doesn’t benefit anyone’s health.

With all of the attention being given to the details of implementing the Patient Protection and Affordable Care Act (PPACA), too many have forgotten about the fact that the financing model in PPACA is irreparably flawed and can never bring us affordable health care for everyone. Instead of frittering away our efforts in the peripheral skirmishes, we need to pull together and win this war.

Is NAIC agreement on medical loss ratios in patients' interests?

Commissioners OK health rate plan

By Sarah Kliff
Politico
August 17, 2010
The National Association of Insurance Commissioners approved Tuesday morning (by a unanimous vote) a preliminary outline of what insurers will be able to count as medical costs, a document necessitated by the health reform bill’s requirement that insurers spend at least 85 percent of subscriber premiums on medical costs in the large group market and 80 percent for small group and individual plans.
While insurance commissioners moved forward unanimously, familiar fault lines emerged between consumer advocates and industry over the document and how it categorizes medical spending.
“In general, we are very pleased,” said NAIC consumer advocate Timothy Jost, a professor of health policy at Washington & Lee University. “The process has been very open and participatory. We feel like our concerns have been listened to.”
“The NAIC is conducting a transparent and thorough process as it develops the [medical loss ratio] MLR definition, but the current proposal could have the unintended consequence of turning back the clock on efforts to improve patient safety, enhance the quality of care and fight fraud,” AHIP president Karen Ignagni said in a statement.
http://www.politico.com/news/stories/0810/41179.html
NAIC approved reporting form (blank):
http://www.naic.org/documents/index_health_reform_mlr_blanks_proposal.pdf
Letter from AHIP’s Karen Ignagni:
http://www.politico.com/static/PPM153_ahip_081510.html

The National Association of Insurance Commissioners (NAIC) has finally come to agreement on the reporting form that likely will be used to determine whether or not the private insurers are in compliance with the required medical loss ratios (MLRs). The agreement is being reported as a victory for health care consumers and a defeat for the private insurance industry, but this ignores the crucial overriding issue.
The debate was over how much of their administrative costs the private insurers would be able to pass off as quality improvements that could be classified as medical expenses. Such reclassifications would allow the insurers to spend more for other non-medical purposes such as marketing and profits. Much of their attempted overreach – some described in Karen Ignagni’s letter – was rejected.
This is not a victory for the health care consumer. We are still stuck with a middleman industry that has been granted the right to keep 15 to 20 percent of our premium dollars to use for their own purposes. Congress and the President rejected a model of reform – an improved Medicare for all – that would have eliminated much of this waste plus the waste of the excess administrative burden that the insurers place on physicians and hospitals. The insurers get to include the latter as medical costs, further padding their margins, but administrative waste doesn’t benefit anyone’s health.
With all of the attention being given to the details of implementing the Patient Protection and Affordable Care Act (PPACA), too many have forgotten about the fact that the financing model in PPACA is irreparably flawed and can never bring us affordable health care for everyone. Instead of frittering away our efforts in the peripheral skirmishes, we need to pull together and win this war.