TIME GOES BY | GRAY MATTERS: Wiggling Out of Health Care Reform

by Saul Friedman

Surprise! Surprise! The nation’s health insurance companies, while paying their executives handsomely, are trying every trick in their lobbyists’ books to wiggle out of some of the most important cost-savings and patient care provisions of the health care reforms.

One obvious reason can be found in the compensation paid in the last year to the CEOs of some of the top insurance companies as reported by Modern Health Care:

• Stephen Hemsley, UnitedHealth Group, $106.6 million
• H. Edward Hanway, Cigna, a retirement package worth $110.9 million
• His successor, David Cordani, $26 million for his first year
• Michael McCallister, Humana, $14 million
• Ronald Williams, Aetna, $13.6 million
• Allen Wise, Coventry, $10.2 million
• Angela Braly, Wellpoint, $10.1 million

All have sought steep increases in their premiums while enjoying healthier profits thanks to the health reforms which, among other things, requires that people obtain health insurance much of which will be subsidized by government.

Aside from satisfying our prurient interest about these outrageous salaries, there is a reason these compensation amounts are important; they may be counted as contributing to the quality of care, which helps the companies make a mockery of the new health reforms and the amount and quality of patient care they are supposed to deliver.

Their multi-million dollar salaries, bonuses, retirement packages and stock option dollars, in other words, come out of the premium money a large portion of which they are supposed to devote to patient care.

But here’s the ultimate in chutzpah: A spokesman for Wellpoint told the Los Angeles Times that the compensation reflects their effort to improve care and hit corporate goals, including profits. Yet the record of the insurance companies reflects their chiseling on patient care, not only through premium increases, but by arbitrarily droppng or refusing coverage for potentially expensive patients - a practice that eventually is supposed to be banned.

At issue are the requirements of Section 2718 of the Patient Protection and Affordable Care Act - that is, smaller insurance companies must spend 80 percent of the premiums on patient care; the larger companies, like those cited above, must spend 85 percent.

This is known as the Medical Loss Ratio (MLR). Some advocates say that a 15 to 20 percent margin is too generous, especially given the salaries of company executives. Yet the companies are trying to chip away at the MLR requirement, deducting more and more from the 80-85 percent, by labeling even more than the salaries as “medical expenses.”

The battle by the insurance companies over Section 2718 and the MLR took place recently at a meeting of the National Association of Insurance Commissioners, which has been charged by the law with reviewing and developing regulations that will be proposed by Kathleen Sibelius, the Secretary of Health and Human Services, who is supposed to oversee the implementation of the law.

Senator Jay Rockefeller, D-WV, who helped write the MLR into the law, said,

“I hope as the NAIC continues to meet...they will remember that the purpose of this law was to make sure Americans’ health insurance premiums are spent on actual care – not obscene CEO salaries and industry profits.”

Some of the best work monitoring the NAIC proceedings in Seattle was done by Ellen R. Shaffer, co-director of the California based EQUAL Health Network. In August she told Sibelius, in a detailed letter, that

“we are concerned that the standards” under consideration by the NAIC “include an edit that would allow the insurance industry to count marketing campaigns...in conjunction with state and local public health departments [including sales and brokers’ commission] as medical expenses.”
Thus, a company’s self-serving publicity advertising for “health awareness” campaigns would count as “activities that improve health care quality,” she wrote, “rather than the administrative expenses they are.

“The insurance industry has stated its intention to game the system by raising premiums to make up for any constraints imposed by the new law,” she added. And she noted that Rockefeller’ Senate Commerce Committee had “documented that Wellpoint has already ‘reclassified’ more than $500 million dollars of administrative expenses as medical expenses.”

The health reforms give the insurance companies exemptions for certain insurance company taxes in calculating the MLR, which lowers their income. But Shaffer asked the NAIC and Sibelius to “discourage efforts by insurance companies to create and benefit from insubstantial programs that masquerade as clinical treatments.”

Judy Dugan, of Consumer Watchdog, reported from the NAIC meeting that despite the intent of Congress to limit the taxes the insurance companies may claim as part of patient care, lobbyists and lawyers argued to allow industry to deduct “every tax on every part of their business when they’re calculating how much they spend on actual health care.”

The companies even argued to deduct taxes on investments from their premium revenues.
The NAIC came to a unanimous agreement, which some advocates hailed as a victory for consumers. But Don McCanne, of Physicians for a National health Program said,

“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 purpose.”

Now, we await Sibelius and the regulations and more lobbying from the insurance companies, which, according to Bloomberg News, are shifting their financial support to help Republicans who voted against the reforms.

In the meantime, there’s some good news from the health care reforms – “Promoting Prevention Through the Affordable Care Act” – which is the subject of a paper written for a recent issue of The New England Journal of Medicine by Sibelius and public health physician Dr. Howard K. Koh, assistant secretary for health. I know, everyone talks about prevention, but few have taken it seriously, until now.
As the paper says,

“The Act provides individuals with improved access to prevention services...For example new private health plans and insurance policies beginning on or after September 23, are required to cover a range of recommended prevention services at no cost.”

These may include vaccinations, screening for colon, breast and cervical cancer and for men, prostate cancer. These are the same prevention services available to Medicare beneficiaries, except as of January 1, there will be no cost for Medicare patients and for the privately insured.

As you may have read, the new health care reforms include, as of September 23, coverage with no cost sharing of tobacco-use counseling and evidence-based tobacco-cessation interventions as well as risk, alcohol-misuse counseling, depression screening and immunizations, along with obesity screening for adults and children.

In 2014, states will be forbidden from excusing from Medicaid coverage, drugs to help people quit smoking.
Alas, 45 million Americans still smoke, including 5.5 million on Medicare. They are high risk for the lung cancer that is killing a good friend. She quit, but too late.

For more information on preventive health and the Affordable Care Act, see the Health and Policy Reform section of The New England Journal of Medicine.

Write to saulfriedman@comcast.net
TIME GOES BY | GRAY MATTERS: Wiggling Out of Health Care Reform

WellPoint’s Argument for 39% Rate Hike: Adverse Selection - Health Blog - WSJ

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By Jacob Goldstein

News that Anthem Blue Cross is raising premiums 39% for some people in California comes at a convenient time for Democrats looking to regain a little health-care-overhaul momentum.

So it’s no surprise that HHS Secretary Kathleen Sebelius sent a letter calling on the company to justify the rate increase. After WellPoint, Anthem’s parent company, responded with this letter, Sebelius released a skeptical statement that cited WellPoint’s fourth-quarter earnings of $2.7 billion.

The rate increase applies only to policies for people in the individual market. WellPoint’s letter says that, in the troubled economy, many people are choosing to go without health insurance. And many of those who are keeping their insurance are buying cheaper policies that offer less coverage.

The people who do tend to hold onto good insurance plans are those who need them most — people who are already sick. Of course, when you have healthy people bailing out of insurance plans and sick people hanging on, the average health-care cost per person in the plan is going to go way up — and that’s going to be reflected in rising premiums.
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Individual insurance rates soar in 4 states - washingtonpost.com

By LINDA A. JOHNSON - The Associated Press

Consumers in at least four states who buy their own health insurance are getting hit with premium increases of 15 percent or more - and people in other states could see the same thing.
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Finance Bill’s Fine Print May Cause Sticker Shock For Some Consumers - Kaiser Health News

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By Julie Appleby, KHN Staff Writer

Proponents of the Senate Finance Committee’s health care bill say the legislation will limit the amount that lower- and middle-income people must pay for health insurance to a maximum of 12 percent of their incomes.

But there’s a catch: The fine print shows that, over time, the premium costs could rise well beyond those caps. That’s because the cost of coverage would shift from a percentage of income to a percentage of the premium, no matter how high the premiums go.
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Lawmakers Struggle With How Age Should Influence Insurance Premiums - Kaiser Health News

Rules for setting health insurance premiums for older people vary by state, but congressional committees looking at reform agree that older people should pay higher premiums. The question is how much more.
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Fight Erupts Over Health Insurance Rates For Businesses Employing More Women - Kaiser Health News

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Kaiser Health News staff writer Jenny Gold reports on issues related to using gender to set rates for large businesses. "Insurers say women under the age of 55 cost more to cover because they use more health services, and not just for maternal and infant care. But Bettinazzi, the president and CEO of Visiting Nurse Association of Indiana County, believes there's something inherently wrong in charging her company more because it hires a lot of women"
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Provision Under Consideration for Merged Senate Health Bill Would Harm Needy Families: — Center on Budget and Policy Priorities

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By January Angeles and Judith Solomon

It Will Cut Subsidies to the Near-Poor to Help Fund Larger Subsidies for Families Farther Up the Income Scale

A family of three earning $27,465 a year before taxes — that is, at 150 percent of the poverty line — would have to pay $1,318 a year for health coverage under a proposal that Senate negotiators are considering for a merged health reform bill that they would bring to the Senate floor. This is more than such a family would pay under either the Senate Finance Committee health bill or the bill that the Senate Health, Labor, Education, and Pensions (HELP) Committee approved, and represents a large amount for families that often have difficulty paying the rent and utilities and putting food on the table.

This $1,318 premium charge, which would represent 4.8 percent of the family’s income, is nearly five times the $275 that the family would pay under the Senate HELP bill and $82 more than the $1,236 it would pay under the Finance bill.
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Senate GOP to raise cost concerns - Live Pulse - POLITICO.com

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Senate Republicans tomorrow will begin to pound on the theme that Democratic health plans will raise premiums even as Americans cite rising health costs as a key concern.

The GOP will echo a similar point made in the past few weeks by several insurance company sponsorsed studies.
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Age Rating Under Comprehensive Health Care Reform: : Implications for Coverage, Costs, and Household Financial Burdens

The text below is an excerpt from the complete document.

Abstract

Congressional proposals health care reform proposals have differed in the premium rating rules that would be applied to non-elderly adults. Some have proposed allowing premiums for the older adults to be as much as 5 times as high as those for younger adults (5:1 rating), while others would limit the highest premiums to be twice that of the lowest (2:1 rating). This analysis uses the Health Insurance Policy Simulation Model (HIPSM) to compare the financial implications of the premium rating choice (5:1, 2:1, and 1:1) for households of different ages, incomes, and sizes.

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Employers shifting more health costs to workers ... American Medical News

Employers still offering health insurance to workers are, in many cases, planning to raise out-of-pocket costs for their employees in 2010. However, those same employers are holding on to programs meant to keep workers healthy.

In its annual survey of employers gearing up for benefits open enrollment, consulting firm Watson Wyatt found about four in 10 companies planned to raise co-pays, coinsurance or deductible for workers, passing on more of the cost of benefits to them.

That's a continuation of a long-running trend, said Tom Billet, senior consultant with Watson Wyatt.
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Health Reform Subsidy Calculator -- Premium Assistance for Coverage in Exchanges/Gateways

The Kaiser Family Foundation has created an interactive calculator which helps to illustrate what people might be responsible for paying in premiums and how much financial help they might receive from the government receiving coverage through an exchange or gateway under the health reform plans now under consideration by the key Congressional committees. Building on the Foundation’s ongoing work examining issues in health reform, the online calculator approximates premiums and subsidies for those who purchase coverage on their own through an exchange or gateway because they don’t get health insurance through their employers, Medicare or Medicaid. The tool starts with specific provisions regarding the premiums and subsidies provided for people who purchase insurance through an exchange or gateway included in legislation from key Congressional committees: the plans approved by the House Ways and Means and House Education and Labor Committees; somewhat different approach approved by the House Energy and Commerce Committee; the plan approved by the Senate Health, Education, Labor and Pensions Committee; and the modified Chairman’s Mark proposal taken up this week by the Senate Finance Committee. The calculator also provides users with the ability to create their own subsidy schedule by changing assumptions to show the effect of different policy choices, such as the extent to which premiums are permitted to vary by age, the income eligibility levels for premium subsidies, and what percentage of income people are required to pay. The calculator is the latest resource available on the Foundation’s health reform gateway page which also features interactive online tool allowing users to compare major health reform bills, an issue brief explaining the role of government subsidies in health reform and a column from Kaiser Foundation president Drew Altman on how subsidy levels could affect the debate.

Click Here for Calculator

Passed House: HR 3631 Medicare Premium Fairness Act

Passed House 406-18, 8 not voting with Bipartisan support.
Roll Call

Medicare Part B Premiums, Deductibles For 2009

The standard Medicare Part B monthly premium will be $96.40 in 2009, the same as the Part B premium for 2008. This is the first year since 2000 that there was no increase in the standard premium over the prior year. The 2009 Part B premium of $96.40 is the same as the amount projected in the 2008 Medicare Trustees Report issued in March. This monthly premium paid by beneficiaries enrolled in 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 approximately one-fourth of the average cost of Part B services incurred by beneficiaries aged 65 and over. The remaining Part B costs are financed by Federal general revenues. The income to the program from premiums and general revenues are paid into the Part B account of the Supplementary Medical Insurance trust fund, and Part B expenditures are drawn from this account. Normally, the Part B premium increases at the same rate as average Part B expenditures from year to year. A number of factors explain why the premium can be kept level for 2009. Growth is expected in 2009 for most areas of the Medicare Part B program, including growth in the cost and use of physician and outpatient hospital care, home health services, physician-administered drugs, ambulatory surgical center services, durable medical equipment, independent lab and physician’s office lab services, as well as growth in the Medicare Advantage program. In most years, this would result in the need for an increase in the Part B premium and general revenue financing. The effect of higher expected Part B costs in 2009, however, is offset by a substantial reduction in the premium “margin” needed to maintain an adequate contingency reserve in the Part B trust fund account. If needed, a portion of the Part B premium can be used to adjust the account’s asset level so that it can make up any shortfall in financing due to higher-than-expected expenditures. Due to legislative changes that increased Part B spending for a year after the financing had been determined for that year,[1]the assets in the Part B account of the Supplementary Medical Insurance trust fund were below the level considered adequate for the four years 2003-2006. Consequently, Part B premiums and general revenue financing in recent years have been set at somewhat higher levels than would otherwise have been required in order to restore the contingency reserve to an appropriate level. By the end of 2008, the assets in the Part B account of the SMI trust fund are expected to be somewhat above an adequate level. For 2008, the financing goal was for the difference between Part B assets and liabilities at the end of the year to represent about 20 percent of the following year’s expenditures; the actual percentage is currently estimated to be 24 percent. This level is the result of (1) the planned increases in the contingency margin built into the Part B premium for several years, including 2008, and (2) the restoration of the Part B account assets for certain Part A hospice benefits that were inadvertently drawn from the Part B account. (This latter adjustment resulted in an increase in Part B assets of $9.3 billion as of June 30, 2008.) Because of the more-than-adequate asset level expected at the end of 2008, no increase is needed in the Part B premium to maintain an adequate asset level for 2009, and the margin included in prior years for this purpose can be eliminated. If actual Part B expenditures are higher than estimated when the program financing is set, the Part B assets will be drawn down to make up the shortfall. The formula specified in current law will result in a reduction in physician fees of approximately 20 percent in 2010 and is projected to cause additional reductions in subsequent years. For each year from 2003 through 2009, Congress has acted to prevent physician fee reductions from occurring. In recognition of the strong possibility of increases in Part B expenditures that would result from similar legislative intervention to override the decreases in physician fees in 2010 or later years, it is appropriate to maintain a somewhat larger Part B contingency reserve than would otherwise be necessary. The asset level projected for the end of 2009 (equivalent to a reserve ratio of 25 percent of 2010 expenditures) is adequate to temporarily accommodate this contingency. Such legislation, however, would raise the future cost of Part B compared to current law and would necessitate additional increases in the premium and general revenue financing after 2009. As noted, from year to year the monthly Part B premium and general revenue financing are adjusted to match increases in program costs and to maintain an appropriate contingency reserve in the trust fund. When assets exceed a normal, adequate level, the premium increase for the following year can be somewhat lower than would otherwise be necessary. Since the enactment of Medicare, there have been five prior years for which no Part B premium increase was required because the contingency reserve was more than adequate. As required in the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, beginning in 2007 the Part B premium a beneficiary pays each month is based on his or her annual income. Specifically, if a beneficiary’s “modified adjusted gross income” is greater than the legislated threshold amounts ($85,000 in 2009 for a beneficiary filing an individual income tax return or married and filing a separate return, and $170,000 for a beneficiary filing a joint tax return) the beneficiary is responsible for a larger portion of the estimated total cost of Part B benefit coverage. In addition to the standard 25 percent premium, such beneficiaries now have to pay an income-related monthly adjustment amount. These income-related Part B premiums have been phased-in over three years, beginning in 2007. 2009 is the first year in which affected Part B enrollees will pay the full amount of the income-related premiums. About 5 percent of current Part B enrollees are expected to be subject to the higher premium amounts Monthly Premium Fact Sheet Part B Deductible The Part B deductible was increased to $110 in 2005 and, as a result of the Medicare Modernization Act, is currently indexed to the annual percentage increase in the Part B actuarial rate for aged beneficiaries. In 2009, the Part B deductible will be $135, the same as it was in 2008.