quinnscommentary

 

The reality and expectations of claim denial and review may be wide apart.

The health care reform law adds these requirements:

Insured plans will have to satisfy external review requirements mandated by the state, which will be binding, or by the Secretary, but only if the state doesn’t have procedures 

Self-funded group health plans must implement an external review process in accordance minimum standards to be created by the Secretary of HHS

The above is effective the first plan year after six months following enactment of the law, generally January 1, for most plans.

Self-funded plans routinely use independent medical evaluations to settle many disputed claims when it comes to medical necessity or clinical questions.  We won’t know the full impact of all this on cost, or administrative complexity until regulations are issued but there is a good bet it will mean more cost and work for employers.

In my experience insurance companies do create problems at times.  A customer service representative gives out wrong information, or incorrectly approves or denies a pre-certification.  Perhaps the administrator drops the ball and it takes far too long for a decision to be made. Maybe a claim is denied and it turns out the physician used the wrong code causing the denial of what was a legitimate eligible service.  It happens, errors are made because like all organizations including government, insurance companies are made up of people and let’s face it, on occasion people do dumb things.

But there is another side of the story.

The Wall Street Journal today contains an article about the provision of the new health care reform law that prohibits insurance companies from denying coverage to children with a pre-existing conditions, a rare occurrence by the way.  There was a picture of a women and her daughter who was denied coverage by a Blue Shield plan.  The child has multiple sclerosis and was denied payment for a drug that costs $1,000 a month.  Pretty bad stuff, right?  After all why do you have insurance anyway?

However, it turns out that the drug in question has not been approved by the FDA for use by children.  Now who is right?

For over forty five years I listened to employee complaints and heard claim appeals and in all that time I learned one thing.  Never accept what you hear on face value especially when it involves a health care claim.  People are prone to leaving out bits of the story, outright lying, or basing their case on the perceptions that (1) the doctor is always right and (2) their insurance should pay for anything and everything.

I once had the wife of an employee tell me she was going to hold me responsible for the death of her children because our plan did not cover vaccinations for Lyme Disease.  Her children were eight and ten, but the vaccine even if we did cover it could not be given to children under thirteen.  Besides, it cost $60.00 hardly a financial hardship, especially if you felt your child was at risk.  When I pointed that out, she said, ” You expect me to pay for it?”

I recall the case of a child who was being treated for months on end with IV medication for Lyme Disease, treatment after treatment did no good we were told and the plan should keep paying the $3,000 per treatment.  We sent the case out for an independent medical review and the report came back indicating there was no clinical evidence that the child actually had Lyme Disease.  The was an additional comment to the effect that what they were doing to this child bordered on child abuse.

Time after time when we obtained an independent medical review there would be questions as to the legitimacy of the treatment or the diagnosis.  Serious back surgery was denied because there were no indications it was necessary, but the patient wanted it anyway.  Many claims were related to high fees. The patient went to a non-participating doctor which generally means the fee is going to be high, the plan paid it’s normal liability based on reasonable and customary allowances and the patient wanted more paid when the doctor billed for thousands of dollars above the 90% range of other doctors for the same service.

One employee filed a claim appeal and later legal action because the plan denied a procedure to reverse a voluntary vasectomy.  All this despite the fact the plan clearly stated that this service was not covered and the employee admitted he knew that before having the procedure.  One can only wonder why the fully voluntary original vasectomy was a covered expense. The insurer who administered this plan was not acting as an insurance company because this was a self-insured plan and yet the perception would be that Blue Shield was denying claims to save money.

The point is don’t believe every horror story you see on television or read in the paper, there is always more to the story.  In addition, don’t expect much to change under the new law because the assumption that health insurance plans randomly and frequently deny claims in violation of legitimate criteria is false.  In addition, there will be an ongoing need for valid claim review because if there is not, health care costs will become even more unaffordable as benefits are expanded to millions more Americans.

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Contained within health care reform legislation is something called the CLASS act, a program similar to long-term care insurance that provides assistance in the home for seniors unable to perform the normal functions of daily living.  The program is voluntary and about ten million seniors are expected to sign up over the next decade.  Monthly premiums have been bandied about from $65.00 per month to $123.  Once you enroll in the program, you have a five-year waiting period before collecting benefits.  This delay in benefit payments is one of the controversial aspects of deficit reduction because Congress claimed $70 billion from this program to offset health care reform despite the fact that the $70 billion will eventually have to pay the accumulated claims.  The Congressional Budget Office has predicted that eventually this program will add to the deficit and already it is being projected that the program will cost more than estimated. Democrats claim the premiums will always be self-sustaining which means of course that premiums will rise as the participation and utilization rise.  Let’s hope the premiums never get to the level of “unaffordable.”   Surely, I jest.

Early Retiree Reinsurance

Another aspect of health care reform is a $5 billion reinsurance program for early retirees.  Under this program an employer can be reimbursed for certain health care expenses if those payments are used to lower costs for the retiree health benefits plan.  Already we are hearing that the $5 billion may not be enough money (not sure how one comes to that conclusion since this is a windfall designed to keep employers in the health care game for early retirees).  At least one member of Congress has indicated they will monitor the program and evaluate the need for more money.   Perhaps they can extend the five-year wait on the long-term care insurance to seven years and get more money from Peter to pay Paul.

These early hints simply emphasize what those of us who are critical of this version of reform have been saying.  The costs are understated or unknown and unfunded and most important Congress will never be able to keep hands off and not adjust the costs even higher during the next ten years. Both of the above examples are new entitlements, one for all Americans and one for corporations with direct transfer to Americans age 55 to 65.  

Find somewhere else to put that thing, and don’t raise my taxes while you are at it

People do not want a high voltage power line running through their backyard even if it means more reliable and cheaper electricity and they do not want to lose a new entitlement even if it means more debt and higher obligations and taxes for their children and grandchildren.

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I’m reading an op- ed in the New York Times, The Fight Is Over, the Myths Remain By BRENDAN NYHAN.  He talks about the myths of end of life counseling, free care for immigrants and subsidized abortion.  Indeed these are myths that have circulated about the health care reform legislation just signed into law. However, they are the insignificant myths.  The real myths are the ones that came with the legislation and which will form the basis for not only disappointment, but deep fiscal concerns.

Here are some of the real myths:

• We have reformed health care
• We have made health care affordable
• If you like the plan you have, you can keep it
• The legislation will reduce the deficit
• The legislation will lower the cost curve for health care
• Health insurance companies are the cause of rising health insurance premiums 

Some of you reading this will say, ha, more sour grapes from someone opposed to health care reform.  Not so, I was never opposed to health care system reform.  But the reality is that we have not done that, we have not even addressed some of the very basic problems that left unaddressed will sink the desirable goal of health insurance for all Americans. To solve our problems, we must be able to afford the solution lest we create another larger problem.  Sadly, that is exactly what we have done.  Think of it this way, you have a credit card that is out of control and you want to get out from under the debt so you pay off that card by transferring the balance to a new card…problem solved.

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In recent years, employers have embraced the idea of dependent audits in an attempt to ferret out ineligible dependent children from health benefit plans. Most plans cover dependent children to age 19 and age 23 or 25 if the child is dependent and a full-time student.  Under the new health care law, that is all out the window and hundreds of thousands, perhaps millions of adult children are now eligible to be enrolled in their parents health plan.  In fact, in many cases there will be a strong incentive for the child to remain on the parents plan. 

It does not matter if the child is a dependent, if the child is attending college or even if the child is married.  The only exception for group plans is if the child is eligible to enroll in another employer’s coverage (but only for plan years beginning before January, 2014).  The Senate bill required the child to be unmarried but the reconciliation bill removes that language.  The law also contemplates employer contributions because there is a clear statement that such contributions will be included as income to the child unless he or she is a dependent of the employee.  However, it appears that the intent for this employer contribution not to be imputed income and changes are being made in the Reconciliation legislation. Generally speaking, the intent was to cover these children just as any younger child is covered under the employer plan.

For group health plans this change can be significant as new children come under plan coverage.  Employers who recently audited such coverage may be required to notify their employees that dropped children can be reinstated as of January 1, 2011.  In order to avoid what may be a financial hardship for workers employers may want to consider initiating this process in advance of 2011.  In addition, this will change the scope of COBRA as previously COBRA beneficiaries are returned to the active group.

These provisions are effective for plan years that begin after six months from enactment of the law – January 1, 2011 for most employer plans. 

As usual, all sections of the legislation will be subject to new regulations and employers can expect millions of pages of those over the next several years. 

Senate Bill 

‘‘SEC. 2714. EXTENSION OF DEPENDENT COVERAGE. 

(a) IN GENERAL.—A group health plan and a health insurance issuer offering group or individual health insurance coverage that provides dependent coverage of children shall continue to make such coverage available for an adult child (who is not married) until the child turns 26 years of age. Nothing in this section shall require a health plan or a health insurance issuer described in the preceding sentence to make coverage available for a child of a child receiving dependent coverage.

Reconcilation Act

‘‘(ii) ADULT DEPENDENT COVERAGE.—For plan years beginning before January 1, 2014, the provisions of section 2714 of the Public Health Service Act (as added by this subtitle) shall apply in the case of an adult dependent with respect to a grandfathered health plan that is a group health plan only if such dependent is not eligible to enroll in an eligible employer-sponsored health plan (as defined in section 5000A(f)(2) of the Internal Revenue Code of 1986) other than such grandfathered health plan.’’. 

(b) CLARIFICATION REGARDING DEPENDENT COVERAGE.—Section 2714(a) of the Public Health Service Act, as added by section 1001(5) of the Patient Protection and Affordable Care Act, is amended by striking ‘‘(who is not married)’’.

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I guess it makes us feel good to say we have expanded coverage to all Americans, we have taken the insurance companies to task, we are making health insurance (but not health care) more “affordable, (that is, we are subsidizing coverage for some Americans)” and the wealthy and corporations pay for most of these changes. However, none of that changes the facts.

Let me first say what did not happen on the night of March 21.

The most important thing that did not happen was that we did not address the problem of rising health care costs (or much else in the delivery and payment systems). These costs are likely to continue to escalate at 8% or more a year and perhaps higher once the expanded coverage goes into effect. We also did not lower the deficit.

You wanted change, you got it!

One key assumption in the CBO calculations is that provider payments under Medicare are reduced by $250 billion dollars over the next ten years as contained in the Senate bill. That includes a 21% reduction in physician payments. The White House has already indicated it will not let this happen and in the past Congress has routinely stopped similar cuts. If the cuts do occur, there is a good chance that many physicians will no longer accept Medicare patients. This becomes more feasible because of the expanded number of insured Americans promised beginning in 2014. If the cut in payments does not occur, then this legislation easily increases the deficit.

Money is cut from Medicare Advantage Plans to keep insurance companies in line and curb excess profits. However, nobody told the eleven million Medicare beneficiaries enrolled in these plans what those cuts will mean to them. The Congressional Budget Office estimates that the changes in Medicare Advantage Plans will cause a decrease in the number of enrolled Americans. The CBO is projecting  that Medicare Advantage enrollment under the new law will decrease to 8.9 million by 2019 versus the 2009 level of 10.6 million. The Medicare Advantage program was expected to grow to 13.9 million by 2019. So much for “if you like the plan you have you can keep it.” Think of it this way, the government puts tariffs on many products from China and Wal-Mart customers are baffled. Everything is connected.

There is an approximate $10 billion a year to implement all the changes including the establishment of over one hundred new government agencies of various sizes. This amount is not even part of the CBO calculation. In addition, there is an assumption of a $70 billion revenue amount from the new long-term care premiums for a new government run insurance that workers will be automatically enrolled in upon hire. While premiums begin when the coverage starts (costing each worker about $65 per month), benefits cannot be claimed for five years. Therefore, rather than use the premiums to pay the eventual claims under the program, they are counted as assumed revenue. This is like a company claiming pension trust earnings as revenue and ignoring the accumulated pension obligations. If an insurance company did this with premiums it would be accused of abuse and end up in court.

Many other things happened whose ultimate impact is years away. For example, more very low income people will be covered by Medicaid, lower middle income Americans (families earning up to $88,000 a year) will be entitled to government subsidies on the cost of their coverage (but they will be shocked when they see their cost for the coverage they are required to purchase). The impact of going from an income of $88,000 with subsidized coverage to an income of $89,000 without subsidized benefits means many Americans will go backward before they can go forward in net income growth.

Employers who provide prescription drug coverage to their retirees will now be taxed on the rebate they receive for continuing such coverage and not requiring these retirees to enroll in Part D.  This taxation also changes accounting and will cause major income issues for these companies.  The result is that millions of retirees may lose their company coverage and thus see their individual out of pocket costs rise.

This legislation will present an entirely new set of challenges. Americans are likely to be surprised when they learn all the details of what is in this massive legislation, the true cost, who will pay and perhaps most important, how “affordable” is defined.

 

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Now that it is a done deal, what do you expect from health care reform? What do you think will be the real impact on you personally?

Let’s have your comments, let’s take a practical look at real life.

 

The press is filled with the estimated savings from the health care reform reconciliation legislation.  Proponents are touting the deficit reduction aspects of the bill.  In short, you are hearing all the good stuff and not the reality.

The CBO by all accounts is a very reputable group of professionals who are constrained by the reality of what they are given to evaluate.  For example, they must assume that every aspect of the legislation will be enacted as written even if a provision is eight years into the future and left untouched by future Congresses.  That possibility is close to zero as history shows us repeatedly.

There is a great deal of uncertainty in these estimates.

You should read exactly what the Director of the CBO says about all this on his Blog. 

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Here is part of a message I just received from BarackObama.com

“Richard —

Today, we can extend coverage to millions. We can end insurance-company abuses forever. We can finally give Americans control over their own health care.”

Remember these promises and consider how this massive legislation will give you more control over your health care.

And, if you think that insurance company “abuses” are what ails the health care system, watch what happens as these so-called abuses impact your premiums.

Hopefully, coverage will be extended to more Americans sometime in the future, but you should also hope that between now and then something happens to truly manage health care costs for all Americans because we are launching a massive new entitlement that will quickly consume more and more of declining national resources.