Tag Archives: Patient Protection and Affordable Care Act

Wealthy in America-Inequality in America; where is the ROI? Higher taxes on the “wealthy” is a losing strategy

18 Feb

A favorite theme of today’s politicians is income inequality; not paying ones fair share, etc. However, inequality has been with all societies since time began. Inequality is not necessarily bad and can result simply from the high achievements of a relatively few in a society. This is not unfair as long as the successful have not intentionally prevented the mass of people from achieving success. For example, through unfair taxation or poor educational opportunity.

In a society such as in the U.S. opportunity abounds regardless of how difficult ones situation may be as the result of circumstances of birth. Some people rise above their circumstances to amazing heights, some rise modestly, some plod along and some do nothing positive, what’s new?

Economically - Challenged & illiterate .. CIA ...

Today we focus on the taxes paid by the rich; billionaires such as Warren Buffett claim they pay too little because most, if not all, of their income is taxed at capital gains or dividend rates. While true that those rates result in a low effective tax rate for the super wealthy, that argument seems to ignore the many government transfers and credits applicable to the majority of Americans. Various tax credits and deductions are unavailable or are limited for higher income (starting in some cases around $80,000 in annual income) Americans. If circumstances such as the number of children one decides to have can result in no income tax payable, how is it unfair that income invested (already taxed once) and at risk is taxed at a lower rate than ordinary income?

Higher income (far below millionaires and billionaires) Americans are limited in their tax advantages in many ways such as the taxation of Social Security benefits, higher Medicare premiums, limited IRA contributions, the alternative minimum tax, the estate tax (which the new Obama budget wants to raise to 45%), limited retirement benefits and 401(k) contributions, several new taxes under the Affordable Care Act including a new 3.8% tax on unearned income such as taxable profit from selling a home and more.

Virtually every tax advantaged program passed by Congress contains limitations or exclusions applicable to higher income individuals. In other words our tax system goes out of its way to benefit the non wealthy which is one of the reasons nearly 50% of Americans pay no income tax. Despite this, we are besieged with criticism of the 1% and far lower who, according to our President, don’t pay their fair share.

We struggle even defining wealthy. Is it income or is it assets and net worth? Is the senior citizen living on Social Security and a modest pension wealthy? What if he has accumulated $500,000 in savings and investments and has a fully paid home worth $400,000? Many government transfer programs ignore such assets when defining eligibility. One could easily have a half million dollars in net worth and still avoid taxation of Social Security and higher Medicare premiums. Is that fair?

Is it fair a man can be married three times, be divorced twice and each of those ex and current wives receive his Social Security benefit based on his earnings alone? Not only do higher income people (again, far from millionaires) pay Medicare payroll taxes on all of their wage income, they pay higher Medicare Premiums, while the taxes they pay on their Social Security benefits also pay for a portion of Medicare.

Should higher income people pay more to their government and get less, ok that’s a fair argument. But what is not fair is claiming the successful in America are not now paying their fair share.

If you are poor or low-income and have lived your life accordingly, you have received a disproportional amount of wealth transfer (not to mention access to hundreds of government programs designed to improve your education and lift you out of poverty) and will continue to do so in old age. If you are middle-income, you should remain middle-income in retirement and if you are higher income the same holds true. You lived your life, made your choices, reaped the rewards or suffered the consequences.

And who are these wealthy Americans? We all know about the Wall Street crowd, hedge fund managers, and CEOs, but what about the small business owners, the cop and teacher whose combined income puts them over the limit for many government transfers? Do we think of the prudent middle-income couple who have paid off their mortgage and accumulated a nice nest egg or the government worker with a generous pension and health benefits, plus 403b plan? Probably not.
Frankly it doesn’t bother me that Warren Buffet pays a lower tax rate than I do or that I pay a higher effective tax rate than the majority of Americans. What bothers me is that the politicians have framed the discussion so Americans believe that being fair means taxing the “wealthy” more so that mismanaged government programs and unrealistic promises made by politicians can be partially paid for. That is a losing strategy for all of us.  What we should be asking is what have we gotten for our investment in government programs since the War on Poverty in the 1960s. Why haven’t all the programs in the last fifty years closed the income gap from the bottom up?

Forget the “Pill” we need a new common sense pill for politicians. Now insurance companies will pay the full cost of oral contraceptives.

10 Feb
Birth control pill

Read this:

Politico: Birth-Control Compromise To Be Announced By White House
President Barack Obama is scheduled to deliver a statement at 12:15 p.m. He is expected to announce that he wants insurance companies to pick up the cost of providing free contraceptives for religious employers, according to one source familiar with the announcement. White House officials briefed reproductive rights groups and Democratic lawmakers Friday morning on the expected announcement (Budoff Brown, 2/10).

From Bloomberg Businessweek:  Under the new policy, religious employers will not be required to offer contraception and will not have to refer their employees to places that provide it. Instead, the employer’s insurance company must provide birth control for free in a separate arrangement with workers who want it

“He wants insurance companies to pick up the cost of providing free contraceptives for religious employers!”  Holy crap! (no pun intended).  

Insurance companies you say, has anyone told those in the White House that nearly all employers of any size are self-insured and there is no insurance involved, who will be paying for this coverage? 

Only in the case of religious organizations will insurance companies have to carry the full cost?  You are kidding right, all other employers must pay this added expense which will be shared by all employees.  What utter nonsense.

This is the most absurd issue to date with regard to the Affordable Care Act.  Birth control pills are not health care, pregnancy is not an illness and the cost of the pill is already affordable to anyone, poor, rich or otherwise.  Read the political rhetoric on this and you would think working women cannot afford contraception.  This isn’t about the poor, it is about people who earn a good living, in some cases the so-called wealthy, who now need a federal law to require a pill that does not treat an illness and is taken voluntarily (I know it can be used for certain medical conditions, but that is not the issue) to be free.

The argument that it is cheaper to pay for the pill than for a pregnancy is equally misleading.  It is still cheaper for everyone if individuals who voluntarily choose to take a contraceptive to pay their own way.  This is not a tradeoff, it is misuse of insurance. 

This isn’t about women’s health, it is about government furthering certain  agendas.  I think men who buy condoms should be covered 100%, men who need a hairpiece should be covered 100% on the basis of the psychological injury caused by baldness, reversal of a vasectomy should be covered at 100% as should the full cost of in-vitro fertilization.  You see anyone can make the case for “free” stuff without regard to logic or the consequences.

If this is going to be the way the Affordable Care Act is interpreted and administered, we are all in serious trouble. 

Related articles

“Unreasonable” premium increases denied-stand up and cheer?

23 Jan

If any insurance company, say your auto insurer or home owners insurer raised your premiums an unreasonable amount what would you do? I suspect you would switch insurance companies, perhaps give that little lizard a boot in the butt.  When it comes to health insurance it takes the federal government to tell you what is unreasonable. We all better hope that the denials being made by regulators are themselves reasonable. A small change in assumptions can make a big difference in outcomes and if premiums are too low, there will be a great deal of catching up to do. Remember, a premium set in 2011 is designed to cover claims incurred through 2012 which may not be reflective of experience in the past twelve months. Actuaries know this of course, but let us hope political pressure is not influencing the many variables that go into setting premiums.

If you look at the release below you will see a rate cut for Anthem Blue Cross in Connecticut. However, when you go to the HHS link in the press release you find this:

Connecticut Rate Review

The Rate Review program began September 1, 2011. No insurers in Connecticut have proposed rate increases of 10% or more since that time. Check back regularly for updates.

Then we have the following hype.  HHS is incapable of preparing a press release containing just facts, but rather must include more and more spin and unsubstantiated claims.

“The Affordable Care Act includes several policies, including rate review, to continue this slow growth.  By fighting fraud, better coordinating care, preventing disease and illness before they happen and creating a new state-based insurance marketplace, it helps keep health care cost growth low.”

In fact only rate review has been implemented, the efforts at coordinated care are focused on Medicare, preventive disease programs have been used by employers for many years with no measurable results and the state-based marketplace is two years away.

News Release

Affordable Care Act holding insurers accountable for premium hikes.  Health insurance premium increases in five states have been deemed “unreasonable” by the U.S. Department of Health and Human Services, HHS Secretary Kathleen Sebelius announced today.

After independent expert review, HHS determined that Trustmark Life Insurance Company has proposed unreasonable health insurance premium increases in five states—Alabama, Arizona, Pennsylvania, Virginia, and Wyoming.  The excessive rate hikes would affect nearly 10,000 residents across these five states.

To make these determinations, HHS used its “rate review” authority from the Affordable Care Act (the health care law of 2010) to determine whether premium increases of over 10 percent are reasonable.

“Before the Affordable Care Act, consumers were in the dark about their health insurance premiums because there was no nationwide transparency or accountability,” said Secretary Kathleen Sebelius.  ”Now, insurance companies are required to disclose rate increases over 10 percent and justify these increases.  It’s time for Trustmark to immediately rescind the rates, issue refunds to consumers or publicly explain their refusal to do so.”

In these five states, Trustmark has raised rates by 13 percent.  For small businesses in Alabama and Arizona, when combined with other rate hikes made over the last 12 months, rates have increased by 27.2 percent and 18.1 percent, respectively.  These increases were reviewed by independent experts to determine whether they are reasonable.  In this case, HHS determined that the rate increases were unreasonable because the insurer would be spending a low percent of premium dollars on actual medical care and quality improvements, and because the justifications were based on unreasonable assumptions.

In addition to the review of rate increases, many states have the authority to reject unreasonable premium increases.  Since the passage of the health care reform law, the number of states with this authority increased from 30 to 37, with several states extending existing “prior authority” to new markets.

Examples of how states have used this authority include:

In New Mexico, the state insurance division denied a request from Presbyterian Healthcare for a 9.7 percent rate hike, lowering it to 4.7 percent;In Connecticut, the state stopped Anthem Blue Cross Blue Shield, the state’s largest insurer, from hiking rates by a proposed 12.9 percent, instead limiting it to a 3.9 percent increase;In Oregon, the state denied a proposed 22.1 percent rate hike by Regence, limiting it to 12.8 percent.In New York, the state denied rate increases from Emblem, Oxford, and Aetna that averaged 12.7 percent, instead holding them to an 8.2 percent increase.In Rhode Island, the state denied rate hikes from United Healthcare of New England ranging from 18 to 20.1 percent, instead seeing them cut to 9.6 to 10.6 percent.In Pennsylvania, the state held Highmark to rate hikes ranging from 4.9 to 8.3 percent, down from 9.9 percent.

Today’s announcement comes the same week that a report showed that health care spending has grown at remarkably low rates.  According to an analysis done each year by the Centers for Medicare & Medicaid Services, U.S. health care spending experienced historically low rates of growth in 2009 and 2010.  A recent study released by Mercer Consulting also showed a slow-down in the average employee health benefit cost to businesses.

The Affordable Care Act includes several policies, including rate review, to continue this slow growth.  By fighting fraud, better coordinating care, preventing disease and illness before they happen and creating a new state-based insurance marketplace, it helps keep health care cost growth low.

For more information on the specific determinations made today, please visit http://companyprofiles.healthcare.gov/

Related articles

2012 is the start of new fees and taxes on health care organizations…what are the possible consequences? First up, a new excise tax on pharmaceutical companies

18 Jan
English: Novamoxin Prescription Drug - Amoxici...

First target

One of the criticisms of the Affordable Care Act has been that few people actually know what is contained in the Act.  Having spent untold hours reading the Act along with various independent assessments of the Act, I can testify to its immense complexity.   

For example, in order to pay for the expansion of subsidized health insurance to millions of Americans, the Affordable Care Act adds numerous new fees and taxes on individuals’, employers and the health insurance industry.  In 2010, there was a new tax on indoor tanning facilities (ok, so that is not a big deal, anyone who uses one of those deserves to be taxed). In 2014 there are new fees on employers and insurance companies, all of which have the potential of being passed along to consumers.  In 2012 pharmaceutical companies that sell to the federal government are assessed what is called an annual fee (excise tax). 

The various fees and taxes contained in the Act are among the few elements that are reasonably quantifiable.  Other elements of the Act that are to reduce costs rely on assumptions of long-term success for well-meaning, but untried programs generally related to Medicare.  To be successful, hospitals, physicians, other health care providers and Medicare beneficiaries must all work in a coordinated effort under new paradigms for providing health care.

Taking billions of dollars each year in new taxes impacts these organizations which then must find ways to mitigate this loss.  It is tempting to simply dismiss such taxes as justified on highly profitable organizations.  However, we should never forget that everything we do is connected to something else and every action has its consequences (think housing crisis).  Generating revenue for some means a loss for others, a savings here means less revenue there and in some cases that may mean a loss of jobs, less invested in research or simply passing costs along to another party. When additional costs are imposed on employers, especially related to health benefits, it generally means greater cost sharing for employees and a shift in compensation from cash to employee benefit programs.  Good benefits are valuable, but they don’t buy groceries or pay college tuition.

The following is excerpted from the IRS regulations with regard to the new fees on drug manufacturers (a very small sample of the hundreds of thousands, ultimately millions, of pages of regulations implementing the Affordable Care Act). 

The aggregate fee amount each year for all covered entities (referred to as the applicable amount) is $2.5 billion for fee year 2011; $2.8 billion for fee years 2012 and 2013; $3 billion for fee years 2014 through 2016; $4 billion for fee year 2017; $4.1 billion for fee year 2018; and $2.8 billion for fee year 2019 and thereafter. The applicable amount for each year is allocated, using a specified formula, among covered entities with aggregate branded prescription drug sales of over $5 million to specified government programs or pursuant to coverage under such programs.

The specified government programs are the Medicare Part B program, the Medicare Part D program, the Medicaid program, any program under which branded prescription drugs are procured by the Department of Veterans Affairs, any program under which branded prescription drugs are procured by the Department of Defense, and the TRICARE retail pharmacy program (collectively, the Programs).

The annual fee for each covered entity is calculated by determining the ratio of (i) the covered entity’s branded prescription drug sales taken into account during the preceding calendar year to (ii) the aggregate branded prescription drug sales taken into account for all covered entities during the same year, and applying this ratio to the applicable amount. Sales taken into account means branded prescription drug sales after the application of the percentage adjustment table.

Increased number of adult children covered by health insurance as a result of the Affordable Care Act

12 Jan
This image shows the income distribution of Am...

If there is one thing that the Affordable Care Act does well it is expanding health insurance coverage, much like what happened in Massachusetts. In the case of PPACA one goal was to expand coverage available to adult children. Some measure of additional coverage has been accomplished as reported below.  Keep in mind that these children do not have to be dependent on the parent (employee) in order to be covered, may be married and cannot be charged an extra premium for the coverage. In addition, beginning in 2014 these children can be employed and have other coverage available and will still be eligible for their parent’s plan.  Prior to that an employer may deny coverage to an employed adult child.

All this is a good thing if you are one of the families affected, but remember this additional cost is carried by employers and all other insured members of a group.

New Health Law Increased Insurance
Coverage of Adult Children

WASHINGTON—The new federal insurance law has increased the health insurance coverage of adult children between 2009 and 2011, according to a new report by the nonpartisan Employee Benefit Research Institute (EBRI).

The Patient Protection and Affordable Care Act (PPACA) enacted March 23, 2010, requires that group health plans and insurers make dependent coverage available for children until they attain the age of 26, regardless of tax or student status, or dependent status as it relates to financial support. The mandate to offer coverage to adult children ages 19‒25 took effect for policy years that began on or after Sept. 23, 2010, but since January is the beginning of the plan year for many employment-based health plans, many insurers adopted the requirements of the law before the effective date.

To determine whether the coverage mandate had an effect, EBRI examined data from two U.S. Census Bureau surveys (the Current Population Survey, CPS, and the Survey of Income and Program Participation, or SIPP), as well as from the National Health Interview Survey (NHIS) by the Centers for Disease Control. The data indicated:

  • The percentage of persons ages 19‒25 with employment-based coverage as a dependent increased from 24.7 percent in 2009 to 27.7 percent in 2010, according to the CPS. 
  • The percentage of individuals ages 19‒25 with employment-based health coverage as a dependent averaged 26.9 percent during January‒September 2010, and increased to an average 27.1 percent during October and November, per SIPP. 
  • The percentage with private insurance increased from 51 percent to 55.8 percent, and the percentage uninsured fell from 33.9 percent during 2010 to 28.8 percent during the first half of 2011 among those ages 19‒25, according to data from the NHIS. 

“Data from these three surveys show that PPACA has had a positive effect on the percentage of young adults with employment-based coverage as a dependent,” said Paul Fronstin, director of EBRI’s Health Research and Education Program and author of the report.

Full results of the report are published in the January 2012 EBRI Notes, “The Impact of PPACA on Employment-Based Health Coverage of Adult Children to Age 26,” online at www.ebri.org

The Employee Benefit Research Institute is a private, nonprofit research institute based in Washington, DC, that focuses on health, savings, retirement, and economic security issues. EBRI does not lobby and does not take policy positions.

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Medicare premiums 2014, the bogus rumor persists. $247 per month is ridicules

8 Jan

 

An Internet e-mail still circulates that come 2014 the Medicare Part B standard premium will be $247 per person. That’s nonsense for several reasons.

1. The calculation of the premium is set by law and that law has not changed.

2. There is nothing in the Affordable Care Act (Obamacare) that affects the Medicare premium calculation.

3. The President does not, as has been alleged, have the ability to unilaterally change any of this.

4. The standard 2012 premium for Medicare Part B is $99.90 (higher for the 5% higher income beneficiaries). If you used the highest rate of inflation to hit Medicare in the last forty years for both 2012 and 2013 you would get a premium of less than $130.00. The likelihood of that kind of inflation in the next two years is non-existent.

5. There is nothing in the 2011 Medicare Trustees report to indicate other than normal rates of cost increases over the next several years. In fact, the Trustee’s project that by 2020 the Part B premium will be $158.60. Even that is based on a premium for 2012 of $106.60 (not $99.90).

6. Most Medicare beneficiaries (95%) are protected from high increases in Medicare premiums under the Social Security hold harmless provision. This means that an increase in Medicare premiums cannot cause a net reduction in the Social Security payments. So, for example, if you are receiving $1,000 a month in Social Security benefits and you receive a 3% COLA increase, your Part B premium cannot increase my more than $30. Do the math and you will see there would have to be whopping COLA increases in Social Security in the next two years to get most people anywhere near $247 and that ain’t gonna happen.

English: President signing the Medicare Bill a...

1965

Are any of these projections 100% accurate? Certainly not, there are too many unknowns. However, before you pass along some outrageous story about Medicare premiums (or a tax on the sale of your home, or that the value of health benefits is now taxable income or that Obama was stopping the 2011 Social Security COLA – all of which were circulated in the last year), get the facts.

Unfortunately too many people out there are so obsessed with opposition to this or that, their judgement is clouded …or they are simply ignorant and that’s scary because they can still vote.

By the way, the story about a brain surgeon being at a meeting in Washington where denying care to Americans 70 and over was discussed is also a lie. There was no such meeting, there is nothing in the Affordable Care Act remotely related to that and the caller to a talk show giving the story was not a brain surgeon.

Read other articles related to Medicare under the “Medicare” and “Healthcare” categories on this Blog. 

A decline in the Medicare Part B deductible is a poor long-term strategy

6 Jan

Spend now, worry later!

Through 2005 the Medicare Part B deductible was set by statute. Thereafter it reflects the per capita cost for Medicare beneficiaries. In 1967 the Part B deductible was $50.00. Today after decreasing for 2012 it is only $ 140.00.  

However, if the deductible had been allowed to increase at the rate of general inflation (not even medical inflation) it would be $338.00.         

As a result of the Medicare Modernization Act, the Part B deductible was increased to $110 in 2005 and is indexed thereafter by the annual percentage increase in the Part B actuarial rate for aged beneficiaries.  In 2012, the Part B deductible will be $140, a decrease of $22 from 2011.  (The actuarial rate is set by law at one-half of the total estimated per-enrollee cost of Part B benefits and administrative expenses, adjusted as necessary to maintain an adequate contingency reserve.)

This seems to mean that the per-enrollee cost of Part B is expected to decrease by 13.5%, is that really a likely occurrence?   Did the contingency reserve used in calculating the Part B deductible consider the likely reversal of cuts to physician payments as was apparently the case with the Part B premium?  Regardless, a deductible that should by simple math be $338, should not be decreased under any circumstances, that is simply poor long-term planning.   

Medicare Part B covers a portion of the cost of physicians’ services, outpatient hospital services, certain home health services, durable medical equipment, and other items. By law, the standard premium is set to cover one-fourth of the average cost of Part B services incurred by beneficiaries aged 65 and over, plus a contingency margin. The contingency margin is an amount to ensure that Part B has sufficient assets and income to (i) cover Part B expenditures during the year, (ii) cover incurred-but-unpaid claims costs at the end of the year, (iii) provide for possible variation between actual and projected costs, and (iv) amortize any surplus assets.  Most of the remaining Part B costs are financed by Federal general revenues.  (In 2012, about $2.9 billion in Part B expenditures will be financed by the fees on manufacturers and importers of brand-name prescription drugs under the Affordable Care Act.) 

The largest factor affecting the contingency margin for 2012 is the current law formula for physician fees, which will result in a payment reduction of about 29 percent in 2012.  For each year from 2003 through 2011, Congress has acted to prevent smaller physician fee reductions from occurring. The 2012 reduction is almost certain to be overridden by legislation enacted after Part B financing has been set for 2012. In recognition of the strong possibility of increases in Part B expenditures that would result from similar legislation to override the decrease in physician fees in 2012, it is appropriate to maintain a significantly larger Part B contingency reserve than would otherwise be necessary.  The asset level projected for the end of 2012 is adequate to accommodate this contingency.  

In summary, benefits have increased, the deductible is lower, the premium increase is extremely modest, nothing related to the Affordable Care Act has been implemented that would measurably lower Medicare costs or future trends, the planned cut in physician payments will not happen and all is right with the world.  In many ways CMS has little discretion in administering Medicare because most provisions are set by law, but that is the point.   Setting something as massive as Medicare on automatic pilot is not the best way to administer such a program.  It replaces prudent budget decisions with political decisions.

Obamacare regulations and hidden costs

27 Dec
Senate Passes Insurance Industry Aid Bill

Money, money everywhere

By now we all know that the Affordable Care Act contains thousands of pages of new legislation mostly unread by those who enacted the law. It also contains about 1500 references to discretion to be exercised by the Secretary of Health and Human Services. Since enactment, various government departments have issued a flood of regulations, including in some cases changing provisions of the law (although for the better).

Medicare has initiated scores of pilot programs designed to change the way Medicare operates, pays for services and the way health care is practiced. Rules for employers are in process and of course, the biggy will be the rules operating the health insurance exchanges beginning in 2014. That’s a lot of rules and regulations for a lot of people to comply with.

On December 27, 2011 the Wall Street Journal published an editorial about regulations and this section caught my eye.

Then there’s the Affordable Care Act. Christopher Conover and Jerry Ellig of the Mercatus Center at George Mason University, in a trio of forthcoming papers, systematically examine every rule issued to date to create the new health-care entitlement. They conclude that “the federal government used a fast-track process of regulatory analysis that failed to comply with its own standards, and produced poorly substantiated claims about the ACA’s benefits and costs”—including an upward bias for benefits, a downward bias for costs, and numerous material omissions. Little wonder for a law that contains the phrase “the Secretary shall” 1,563 times. The Mercatus Center evaluates all major rules that cost over $100 million a year on a composite score of a dozen regulatory best practices. The Health and Human Services Department’s highest-scoring ObamaCare rules came in at 25 out of 60 points, the lowest at 13. These are not merely bad grades. They are relative Fs on the regulatory curve—about 35% to 40% lower than the averages for the other rules that the executive branch put out in 2008 and 2009. The ObamaCare rules score lower than other HHS rules in 2009.

You can think what you like about the ACA, but the fact remains it is a complex law and growing more so each day. It is not at all clear that the benefits outweigh the costs nor do we know the true costs, especially those hidden in employer and other entity compliance. The bottom line is that for good or bad the ACA is only the start of what must be done to manage health care costs in America.

We can only hope that first expanding coverage and enhancing benefits does not make the real task impossible to achieve.

The empty promise – “if you like the health benefits you have, you can keep them.” Annual enrollment for 2012 and the loss of grandfathering under the Patient Protection Affordable Care Act

17 Aug

Tell me it isn't' so

During the health care reform debate the point was repeatedly made that workers who liked their benefits would not lose them, they could keep the benefits they had. Somebody should have checked with employers first before making that promise.

While it is true that the Affordable Care Act does grandfather existing plans and thus exempts them from some requirements of the law, such as providing preventive services without deductibles or co-payments applied, there is a catch. Employers can maintain their grandfathered status only if they do not make changes to their plan.

Here are changes that will cause a plan to lose its grandfathered status:

Elimination of a Particular Benefit

Increase in Coinsurance

Increase in Deductible or Out-of-Pocket Maximum ((by more than medical inflation plus 15%, as measured from 3/23/10)

Increase in Copayment: (by more than greater of: (1) $5 (adjusted for medical inflation), or (2) medical inflation plus 15%, as measured from
3/23/10)

Decrease in Employer Contribution (if an employer decreases its contribution rate toward the cost of coverage by more than 5 percent below the contribution rate on March 23, 2010)

Changes in Annual Limits

- No Previous Limits: (if the plan imposes a new overall annual limit on the dollar value of benefits that did not exist before the law).
- Previous Lifetime Limits: (if there is new overall annual limit that is less than the value of an existing lifetime limit)
- Previous Annual Limits: (if the existing annual limit is decreased)

Here is the dilemma employer’s face; either they maintain grandfathering to avoid additional costs because of benefit mandates under the law or attempt to manage costs and make changes to the plan design and/or cost sharing. As we approach the 2011 open enrollment period, employees will quickly find out what decision employers have made. The choice is not hard.

 Making benefit changes such as raising deductibles or the percentage of premiums paid by the employee will save more money than the additional cost of the new mandates (at least until HHS expands the mandate). It’s the old give with one hand and take with the other. Nobody should be surprised at this outcome.

When the “promises” were made that you could keep the plan you like, the regulations had not been written that eventually mitigated the value of grandfathering, essentially making it impossible for employer and other plan sponsors to maintain the grandfathering status.

When you receive your open enrollment material to make benefit selections for 2012 do not be surprised if the plan you like has disappeared or changed substantially. You see, the “affordable” part of the Patient Protection Affordable Care Act is still missing.

Related articles

The individual mandate struck down…again. Being happy about that has consequences

15 Aug

There is joy in some quarters, consternation is others. Another court has said that the individual mandate under the Affordable Care Act is unconstitutional. I am not an attorney and certainly not an expert on the Constitution, but this seems like a stretch to me. There are many mandates we all live under every day of our lives. However, whatever your point of view on this matter, what should we do as an alternative?

Keep in mind I am being quite selfish here and you should be as well. The people who choose not to carry health insurance cost you money, lots of money. They cost you in terms of paying for uncompensated care and because the better risks, those individuals with no or very low health care expenses, are not paying premiums and therefore your premiums are higher than they otherwise would be.

If you believe people have a right to not buy something they believe they don’t need, consider that health insurance is not like buying any other product or service. If you choose not to buy homeowners insurance and your house burns down, that’s your tough luck, you get to appear crying on the evening news. If you don’t buy health insurance and your child becomes very ill, you also get to cry, but in this case your child will receive health care and somebody else will pay for it. We have not reached the point where we leave people lying in the street to die. This is really about paying ones (dare I say it) “fair share.”

Families with  incomes under about $80,000 will be subsidized when purchasing health insurance through the new exchanges coming in 2014, but that does not make insurance affordable, it will still be expensive and that may cause many people to decide it is better to simply pay the penalty and forego insurance, but they are still not giving up health care when it is needed.

Americans who oppose all or portions of Obamacare – that includes me – better have a viable alternative and that means you cannot ignore the fact that many people will act in their own best interest at the expense of others.  The primary problem with health care is the cost, when we lose site of that we get it wrong.

Related articles

Challenging how medicine is practiced. Saving money, saving lives. Keep an open mind.

2 Mar

I recently posted an article entitled, Ten things you can (really) do to control health care costs. That is only part of the story. The real savings lie in how health care is provided while challenging conventional wisdom and financial incentives. An excellent article by a physician appears on The Healthcare Blog. Here is a summary of the key points. Check out the entire article.

Some of these suggestions may upset or even scare you. Most are counter to what you generally hear or have come to accept as normal practice.  However, you should approach this with an open mind. The scare tactics of the “death panels” crowd are not helpful or accurate.  It seems to me we all want the best medicine possible not just the most medicine possible.  Keep in mind that until we fix the system every part of health care in the U.S. is built around incentives to provide more services.  You won’t accept that from your auto mechanic or banker or anyone else selling you something, why accept it without question when it comes to health care?  Oh yes, some of the unnecessary care is simply CYA, another problem yet to be dealt with.

First and foremost this not just about saving billions of dollars, it is also about higher quality health care and less risk for patients.  These issues are what is most important to you.  Keep an eye on those words, “comparative effectiveness“ as you will be hearing them often in the future. PPACA contains new funding for such studies and the potential results from those studies form the basis for cost savings in the future (we hope).  I have added the bold in the following.

So, what can we in the USA do RIGHT NOW to begin to cut health care costs?

An alliance of informed patients and physicians can widely apply recently learned comparative effectiveness science to big ticket items, saving vast sums while improving quality of care.

Intensive medical therapy should be substituted for coronary artery bypass grafting (currently around 500,000 procedures annually) for many patients with established coronary artery disease, saving many billions of dollars annually.

The same for invasive angioplasty and stenting (currently around 1,000,000 procedures per year) saving tens of billions of dollars annually.

Most non-indicated PSA screening for prostate cancer should be stopped. Radical surgery as the usual treatment for most prostate cancers should cease since it causes more harm than good. Billions saved here.

Screening mammography in women under 50 who have no clinical indication should be stopped and for those over 50 sharply curtailed, since it now seems to lead to at least as much harm as good. More billions saved.

CAT scans and MRIs are impressive art forms and can be useful clinically. However, their use is unnecessary much of the time to guide correct therapeutic decisions. Such expensive diagnostic tests should not be paid for on a case by case basis but grouped along with other diagnostic tests, by some capitated or packaged method that is use-neutral. More billions saved.

We must stop paying huge sums to clinical oncologists and their institutions for administering chemotherapeutic false hope, along with real suffering from adverse effects, to patients with widespread metastatic cancer. More billions saved.

Death, which comes to us all, should be as dignified and free from pain and suffering as possible. We should stop paying physicians and institutions to prolong dying with false hope, bravado, and intensive therapy which only adds to their profit margin. Such behavior is almost unthinkable and yet is commonplace. More billions saved.

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Your adult child may owe state income tax if you cover them under your health benefits and they are not dependent

6 Feb

Oh goody, just what I need

Under the PPACA, adult children may be covered under the parents health benefits plan (insurance) until age 26. The child does not have to be financially dependent on the parent, and can be married. Normally, such a situation would require that the value of these benefits be imputed income to the child. However, the IRS has made it clear that there is no imputed income when complying with this provision of PPACA.

That is not so with the various states that have an income tax. Some states will require imputed income; some may follow federal law and others such a New Jersey and New York have not made a decision at this point.

Individuals who have enrolled such children may receive a surprise at year-end when the child receives a tax statement with imputed income of several thousand dollars. The value of single coverage could easily be $5,000 to $6,000 and that would mean a tax bill based on the tax rate in their state.

You may want to seek clarification of how this will be handled in your state and by your employer if you are enrolled in a group health benefits plan.

When the chickens come home to roost-the cost of health care (and health insurance) is not going down…oops!

12 Sep

Let me at those insurance companies

I used to take public transportation to work, but I started to drive and guess what, my auto insurance increased to cover the additional risk.  My home is in a hurricane prone area, guess what, my deductible was increased and my premium was raised.  I started to smoke (not really) and when my life insurance company found out, they raised my rates. Such is life.      

My health benefits plan was told to cover children to age 26, report the value of my benefits on my W-2, cover many preventive services at 100%, cover people with existing medical conditions the same as everyone else and to implement new appeal procedures.  My premiums are going up an extra 5%…those bastards!      

Costs are controlled, costs are controlled

Congress added all the goodies in health care reform early on in the process so it could sell the idea to the American people, what they forgot (eh, eh) to sell was the fact that all this stuff costs money and one way or the other Americans are going to pay. Now, insurers are seeking premium increases to cover the additional costs and risk as a direct result of PPACA changes. There is a good article in the September 8 Wall Street Journal summarizing the state of the individual market.      

Here is my favorite quote from that article:      

“In Kansas, I don’t have a lot of authority to deny a rate increase, if it is justified,” said Kansas Insurance Commissioner Sandy Praeger.      

Should any regulator have the authority to deny a rate increase that is justified?      

Apparently, the White House thinks so:      

“I would have real deep concerns that the kinds of rate increases that you’re quoting… are justified,” said Nancy-Ann DeParle, the White House’s top health official. She said that for insurers, raising rates was “already their modus operandi before the bill” passed. “We believe consumers will see through this,” she said. About half of all states have the power to deny rate increases. Ms. DeParle pointed out that the law awards states $250 million to bolster their scrutiny of insurance-rate proposals, saying that will eventually curb premiums for people.     


You’re sure this is going to work, right?     

I think she is right, consumers will see through this, except the “this” may not be what she envisions. Additional scrutiny may curb premiums in some cases, but how are we curbing health care costs. The premiums we are talking about are for new individual and small group coverage that is subject to all the new requirements of PPACA.  If you think we are having fun now, wait until all the provisions of PPACA hit for retired employees with employer based coverage and for the 70 million Americans with self-insured coverage through large employers and the States? Those plans are now grandfathered from many of the costly new provisions, but to keep that status is more costly than making changes to manage health care benefits and thus many if not most of the grandfathered plans will lose that status in the next few years.  Retired employees will see their benefits cut as well as the changes to employer based prescription drug programs kick in.   

 
“There will be zero tolerance for this type of misinformation and unjustified rate increases.”    

Is all this a surprise? Not exactly, in November 2009 a report from the Congressional Budget Office told lawmakers:  

Nongroup Policies CBO and JCT estimate that the average premium per person covered (including dependents) for new nongroup policies would be about 10 percent to 13 percent higher in 2016 than the average premium for nongroup coverage in that same year under current law. About half of those enrollees would receive government subsidies that would reduce their costs well below the premiums that would be charged for such policies under current law.   

  

Amazingly, politicians saying something will work does not make it so. Now to cover its tracks the Administration is once again taking the insurance industry to task warning them that “unnecessary” premiums hikes will not be tolerated. Hey, I don’t think we should tolerate unnecessary increases in anything, but duh, that’s not the point. The fact is that we passed legislation that will cause health care costs to rise either by design or by the shifting of costs from some federal programs. No amount of political scapegoating is going to change that.  

 In the news: New law won’t curb health care costs in this decade.             Spike in health care costs.  

You can demonize health insurers all you want, you can classify underwriting procedures as abuses, but the fact remains that health care trend for the next year is still 9% plus the additional costs added by PPACA. Some costs are directly related to benefit provisions of PPACA other changes raise administrative costs for employers, third-party administrators and insurance companies and some is caused by the fight over loss ratios.   You can’t squeeze this health care balloon and keep it the same shape it was before and you can’t make health care affordable by “curbing premiums.”

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