Wednesday, December 15, 2010

The Democrats Had Better Hope the Supreme Court Overturns the Individual Mandate Before the Middle Class Understands How Bad It Is For Them

This post first appeared as a column at Kaiser Health NewsIs The Individual Mandate Really A Lynchpin In The New Health Law?If the Supreme Court does rule the individual mandate unconstitutional will it really bring down the whole law?I don't see it.First, the individual mandate isn't even close to what it has been made to be -- a provision that would protect the integrity of the health insurance

Thursday, December 9, 2010

Back to the Future—Biggest Health Plans Reported to be Building Their Own Political Coalition

I had a real sense of déjà vu this morning reading Bara Vaida’s story in Kaiser Health News:Five of the nation's largest health insurance companies are taking a key step toward building their own inside-the-Beltway coalition to influence implementation of the new health law and congressional efforts to change it. The companies – Aetna, Cigna, Humana, UnitedHealthcare and Wellpoint – are shopping

Monday, December 6, 2010

What Would Happen If You Were To Pass a Big Health Care Bill Without Bipartisan Support?

During the recent health care debate I heard many people on both sides of the debate worry out loud about passing a heath care bill that did not enjoy broad support.I guess this question is no longer a theoretical one.December will be a big month when it comes to seeing some of the fallout accruing from the very partisan passage of the Patient Protection and Affordable Care Act.First, the White

Friday, December 3, 2010

"Care and Cost"

Good friends David Kibbe and Brian Klepper have finally started their own blog--aimed at becoming a forum for many contributors to the health care debate.I suggest you add, "Care and Cost"––"Health Care Conversations About Hard Choices and Emerging Solutions" to your bookmarks.

Sunday, November 28, 2010

"Don't Litigate, Innovate." How To Implement A Fully Funded Alternative To The New Health Care Overhaul -- And It's Already In The Law

This post of mine first appeared at Kaiser Health News last week.What if a Republican governor and a Republican legislature had the ability to implement their version of health insurance reform and the federal government would have to pay for it? It's a great idea. And I'm thrilled to say that a bi-partisan bill has already been introduced in the Senate by Ron Wyden, D-Ore., and Scott Brown,

Tuesday, November 23, 2010

Will it Be the Bond Market That Finally Forces Serious Health Care Financing Change?

When will the Congress and the White House finally make the hard decisions in order come to grips with the federal deficit problem?When will we finally deal with real health care reform and get the entitlements, and with them the private health care cost issue, under control?My focus on trying to answer those questions has always centered on what's going on in the health insurance market: When

Monday, November 22, 2010

The 300 Page MLR Rules—About as Valuable as Taking Your Shoes Off at the Airport

This whole medical loss ratio (MLR) provision in the new health care law is a fool’s errand. When it comes to controlling health care costs it is about as productive as taking your shoes off at the airport is valuable at improving air travel security.Without a doubt, the new health care law does far too little toward making health care costs affordable. And, marginal health insurance carriers

Sunday, November 21, 2010

Health Care—Tell Us the Truth Before You Tell Us Why You Are Right

This is post of mine that appeared last week at Kaiser Health News.Just after the election, I saw an exchange between CNN’s Anderson Cooper and the head of the Tea Party House Republican caucus, Michele Bachmann. Cooper tried to pin Bachmann down on just exactly what “specific spending cuts” she would make to get federal spending under control. When he suggested that Medicare was going to need

Wednesday, November 17, 2010

Amid Widespread Opposition, Some Find Light

While many surveys shows the country divided on the benefits, or failings, of health reform, the Consumer Perceptions of Health Reform Survey from Deloitte Center for Health Solutions found that 38% of U.S. adults said they are “not at all” knowledgeable about the Patient Protection and Affordable Care Act (ACA). Despite this lack of knowledge, most of the Deloitte respondents felt that the ACA will have a positive impact on the country. For example, 59% believe the ACA will increase access to affordable health insurance for the uninsured, 49% believe it will encourage consumers to live healthier lives, 45% said it will reduce overall health care costs, and 45% said it will reduce the cost of prescription drugs.

And a segment this morning on National Public Radio's Morning Edition reported on a study that found that the number of small firms with 10 or fewer workers buying health insurance rose by 14%, bouyed by the ACA-provided tax credit for these firms to buy health insurance. Still, the National Federation of Independent Business is fighting the ACA.

You think maybe the ACA has some helpful provisions to like?

Monday, November 15, 2010

More MIddle Income, Ailing Workers Are Uninsured

Recent results of the National Health Interview Survey reported by the Centers for Disease Control and Prevention (CDC) help to debunk major health care myths about health care coverage. These myths hold that only the poor, and young, healthy people are uninsured and that the young, healthy folks choose to not have health insurance.

Hear this: “Uninsurance of young and middle-class adults increased by 4 million people from 2008 to the first quarter of 2010,” reported Thomas Frieden, the CDC director, on November 10 in the CDC’s most recent Vital Signs monthly report. The Vital Signs report collected data from more than 90,000 interviews done through the National Health Interview Survey conducted in January through March 2010, just before the passage of the Patient Protection and Affordable Care Act.

According to Mr. Frieden, “Half of those who are uninsured are non-poor and there’s a serious impact on access to needed health care. Specifically, among adults age 18 to 64, the proportion who had no insurance for at least part of the prior year increased from 46 million to 49.9 million to be exact, 4 million more from 2008 to the first quarter of 2010.” Mr. Frieden also noted that the number of individuals who have been without health insurance coverage for more than 12 months also increased substantially from 27.5 million in 2008 to 30.4 million in the first quarter of 2010, an increase of 3 million in chronically uninsured adults.

Mr. Frieden noted that “half of the uninsured are over the poverty level, and one in three adults under 65 in the middle income range (defined here between $44,000 and $65,000 a year for a family of four [who] were uninsured at some point in the year).” Furthermore, “about more than two out of five individuals who are uninsured at some point during the past year had one or more chronic diseases and this is based on just a partial list of chronic diseases. So the actual number may be higher than that.” The CDC reported that 15 million uninsured had one of three conditions: high blood pressure, diabetes, or asthma. The uninsured with asthma were five times more likely than insured individuals not to get needed care, and the uninsured with diabetes and hypertension were are six times more likely to not get needed care.

Since most people get their health insurance through their own or family members' employers, these results are not surprising given these tough economic times with high unemployment. Will the provisions of the Affordable Care Act help people get the care they need? We shall see.

Friday, November 12, 2010

No health insurance rebates yet, despite lower healthcare volumes

Wait ‘til next year!! This is a chant that we Chicago Cubs fans are often heard to say, sometimes as soon as May or June of each year. However, people with health insurance may be soon be saying the same thing, too.

You see, under the new health reform law, starting in 2011, health insurers must meet certain minimum “medical loss ratios,” which essentially require insurers to spend at least 80 percent (for individual and small group plans) or 85 percent (for large group plans) of the premiums they collect on actual medical care. If they don’t meet these rules, insurers have to send rebates to their customers. This rule applies to insurers offering both group and individual coverage and takes effect starting in 2011.

Now, you might be saying, “but my insurance premiums go up every year, how could this be?” Well, it’s like this.

In tough economic times, such as these, more than a few people tend to put off elective surgeries and otherwise skimp on their healthcare expenses. What this amounts to is what one analyst calls a “broad-based slowdown in health care volumes.” Fewer doctors’ visits, fewer lab tests, and fewer elective surgeries should mean fewer health insurance claims and, ultimately, reduced healthcare premiums, right? Alas, health insurance premiums are expected to increase by about 9 to 12 percent for 2011 but, down the road, some experts suggest that this could change if healthcare claims continue to remain flat.

Don't count your savings yet. Other factors could play a role in determining whether you get a rebate. Not to mention that deciding exactly what should count towards the minimum medical loss ratios has been a bone of contention, though recently, after much debate, the National Association of Insurance Commissioners (NAIC) sent its medical loss recommendations to the HHS.

Perhaps a “wait and see” approach is best but hey, it could happen.

For more information. For a comprehensive analysis of the Patient Protection and Affordable Care Act, and additional information on health reform and other developments in employee benefits, just click here.

Thursday, November 11, 2010

Shame on AARP For Their Response to the Deficit Commission Co-Chairs' Report

The Co-Chairs of the President’s Deficit Reduction Commission are out with their preliminary recommendations.They’ve done a great job—they’ve offended about everyone!But we have a nearly impossible but unsustainable challenge in front of us if we are ever going to crawl out of this deep hole.It is not so much what is on their list as what this list tells us about just how fundamental the changes

Wednesday, November 10, 2010

How will employers respond to health reform?

The $64,000 question of health reform is this: What will employers do in response to health reform changes? Will they continue to offer health benefits to their employees or will they drop health insurance as an employee benefit altogether? Thanks to a new survey by benefits consultant, Mercer, we have a better idea of what will likely happen once the state-run health insurance exchanges become operational in 2014 when employers can opt out by paying a penalty.

Not likely to abandon plan sponsor role. When Mercer asked employers how likely they will be to get out of the business of providing health coverage to their employees, for most employers, the answer is “not likely.”  Survey responses varied by employer size, with larger employers most committed to their health plan sponsor role. In fact, Mercer says, only 3 percent of the largest employers (10,000+ employees) say that they’re likely to terminate their health plans and let employees seek coverage through insurance exchanges and only 6 percent of employers with 500+ employees say the same thing.

Why? “Employers are reluctant to lose control over a key employee benefit” suggests Mercer’s Tracy Watts.  After considering “the penalty, the loss of tax savings and grossing up employee income so they can purchase comparable coverage through an exchange, for many employers dropping coverage may not equate to savings,” she suggests.

On the other hand, small employers, who have less purchasing power and are more vulnerable to large rate increases, are far more likely to terminate their health plans in response to health reform, with about one-fifth saying that they’re likely to do so. However, Mercer’s Beth Umland cites the experience in Massachusetts, where exchanges have been operating for 3 years, as evidence that small employers may not leave the health plan sponsor market, despite the low penalties under the Massachusetts “play or pay” rules.

Health reform’s cost impacts. Cost, of course, plays a key role in determining whether an employee will continue to offer health insurance to its employees. Though costs have been rising by about 6 percent for each of the past 5 years, Mercer suggests that “PPACA will generally increase cost, although the impact will vary from one employer to the next depending on their employee demographics and current benefit program design, as well as the health care markets in which they operate.” For most, Mercer believes, health reform provisions taking effect in 2011 will increase costs by 2 percent or less.

Cadillac plan tax is key concern. The excise cost on high-cost plans (the so-called “Cadillac plans”) is the health reform legislation rule that most concerns employers, Mercer says. When asked about their most likely response to the excise tax, about a fourth of employers (23%) with 50+ employees say that they’ll do whatever is necessary to bring their costs below the threshold amounts. An additional 37 percent of employers say they will attempt to bring the cost below the threshold amounts, but acknowledge that this might not be possible. Only 3 percent say they will take no special steps to bring cost below the threshold amounts, and the rest (37%) predict their plans won’t ever hit the cost threshold.

Interestingly, assuming current costs and 6 percent annual cost increases, Mercer found that, if employers make no plan design changes, 39% of employers with 50+ employees can expect to trigger the excise tax on Cadillac plans in 2018, the year the tax becomes effective. Seems like a lot, doesn’t it? But, as Mercer’s Watts points out, “it’s important to keep in mind that this new tax is still eight years out and a lot could change between now and then,” who added that “given how often ERISA, tax, Medicare and Medicaid rules are modified, there’s a good chance that the excise tax that takes effect in 2018 won’t be exactly the same as the sketch we’re working from today.”

For a comprehensive analysis of the Patient Protection and Affordable Care Act, including the full text of the law and additional information on health reform and other recent developments in employee benefits, just click here.

Monday, November 8, 2010

Health Care and the 2010 Mid-Term Elections--the Only Thing Now Certain is the Uncertainty

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Election’s over, what’s next for health reform?

Now that the mid-term elections are over, many people are wondering what’ll happen with recently-enacted health reform legislation. The Republicans have been talking about trying to “repeal and replace” or attempting to defund the law. However, starting in 2011, they control the House but not the U.S. Senate or the presidency.

After the election, Prresident Obama has suggested that he would be open to tweaking the legislation. He cites the 1099 provision in the law as something that “appears to be too burdensome for small businesses” and is an example of something that should be looked at. Likely new House Speaker, Rep. John Boehner (R-OH) pledged “we have to do everything we can to try to repeal this bill and replace it with common-sense reforms that'll bring down the cost of health insurance.”

Of course, no one can really tell what the future holds but here's a sampling of what some experts think about the future of health reform.

A benefits consultant’s view. From a leading employee benefits consultant, Towers Watson, there’s this:

“The results of the 2010 midterm elections have important implications for health care reform implementation. Repealing the health care reform law was a popular promise on the campaign trail, but repeal — and even significant change — is unlikely while President Obama wields the veto pen. Nevertheless, health care reform will remain a leading issue for the new Congress, creating an uncertain environment for employers as they plan for implementation of the law’s major provisions in 2014.”

Towers Watson also suggests that, while repealing health care reform is not likely, the law will remain in the spotlight. “Expect the new Republican majority in the House to increase oversight of the regulatory and implementation process, attempt to deny the funding needed to implement and enforce the law, and work to increase opposition to the law leading into the 2012 elections.”

A former health insurance industry insider’s view. Wendell Potter, a health insurance industry insider who helped plan the industry’s public relations/public policy strategies, is doubtful that health reform legislation will be repealed, according to an interview in Newsweek. Among other things, Potter says that “despite all the attacks on `Obamacare,’ the new law props up the employer-based system that insurers and large corporations benefit from so greatly.”

An economist’s view. According to the Incidental Economist blog, it’s doubtful that health reform will be repealed, pointing out that “there’s a big difference between campaigning and legislating.” In 2012, they say, the “slogan on healthcare is `Repeal and Replace!’ but that’s not a plausible bill because it won’t satisfy the interest groups. Nor can it pass.”

Now what? As we at Health Reform Talk said so often during the legislative process, only time will tell what the future will bring. Let’s just wait and see.

For more information. For a comprehensive analysis of the Patient Protection and Affordable Care Act, and additional information on health reform and other developments in employee benefits, just click here.

Friday, November 5, 2010

Feds Battle For Hearts And Minds

Feds Battle For Hearts And Minds

The federal government continues the battle for the hearts and minds of health care consumers in a new report stressing Medicare savings due to the Patient Protection and Affordable Care Act.

Average Medicare beneficiary savings in traditional (fee for service) Medicare will be approximately $3,500 over the next ten years because of changes made by the Patient Protection and Affordable Care Act (ACA), according to a report released on Nov. 4 by the Department of Health and Human Services. Beneficiaries who have high prescription drug spending will save much more – as much as $12,300 over the next 10 years. In comparison, Medicare beneficiaries with low drug costs will save an average of $2,400 over 10 years.

(HHS previously released a statement by Don Berwick, administrator of the Centers for Medicare and Medicaid Services, that beneficiaries in the Medicare Advantage program would have an average reduction in cost of 1% for 2011.)

The analysis on traditional Medicare, released by the HHS Office of the Assistant Secretary for Planning and Evaluation (ASPE), shows that the ACA helps lower costs for those on Medicare by slowing the growth of cost-sharing in Medicare. Closing the Part D coverage gap known as the “donut hole” will produce the greatest cost savings. Already, more than 1.8 million seniors and people with disabilities who have reached the donut hole in 2010 received a one-time $250 rebate check, and checks will continue to be distributed to those who enter the donut hole this year, according to the report. Next year, people in the donut hole will receive 50% discounts on covered brand name Part D prescription drugs. Also starting next year, seniors and people with disabilities on Medicare will have access to a number of recommended preventive services and annual wellness visits at no additional cost. 

Although all seniors and people with disabilities in Medicare are likely to see savings, the savings will be greatest for those with costly medical conditions or high prescription drug costs, according to the report. Total savings per beneficiary enrolled in traditional Medicare are estimated to be $86 in 2011, rising to $649 in 2020. For a beneficiary with spending in the donut hole, estimated savings increase from $553 in 2011 to $2,217 in 2020.

According to HHS Secretary Kathleen Sebelius, “The Affordable Care Act makes Medicare stronger and reduces the burden of health care costs on some of our most vulnerable citizens. The law improves benefits for seniors and people with beneficiaries who rely on Medicare and ensures that Medicare will be there for current and future generations by extending the life of the Medicare Trust Fund. These benefits and savings are only possible with the continued implementation of the Affordable Care Act.”

The entire HHS report is available here.

For a comprehensive analysis of the Patient Protection and Affordable Care Act, including the full text of the law and additional information on health reform and other recent developments in employee benefits, just click here.

The estimate saving for years 2010 through 2020 are as follows according to the HHS report:


Table 1. Estimated Affordable Care Act Annual Savings
per FFS Medicare Beneficiary

Beneficiaries Not Reaching the Donut Hole
Beneficiaries Reaching the Donut Hole
All Fee For Service Beneficiaries

Wednesday, November 3, 2010

Early Retiree Reinsurance Program Chugging Along

Despite the well-publicized discontent with health reform among employers, those few companies that continue to sponsor pre-65 retiree health care plans have moved quickly to cash in on the Early Retiree Reinsurance Program established by the Patient Protection and Affordable Care Act.

The Department of Health and Human Services (HHS) on October 28 released a list of additional employers and unions accepted into the EERP. Nearly 700 additional large and small businesses, state and local governments, educational institutions, nonprofit organizations, and unions have been accepted into the program i the last month, which reimburses employers for a portion of the cost of health benefits for early retirees' and their families. This brings the total number of organizations participating in the program to nearly 3,600 (click here for earlier accounts of ERRP’s popularity).

In 2009, only 28% of all employers with 500 or more employees even offered retiree health care to pre-65 retirees, so the numbers in the program are even more impressive.

A total of $5 billion has been allocated to ERRP, and when that money is exhausted, so is ERRP.  A complete list of approved applicants and other information is available here.

In addition, HHS has just published a revised application for the ERRP, along with corresponding revised instructions for completing the application. HHS also published a revised "Dos and Don'ts" document for completing and submitting the revised application.

HHS notes the following for those who already have completed an application, those who are in the process of completion, and those who will not finish until after November 9:

  • Sponsors that have already submitted an application, using a version that was appropriate as of the date of submission, should not submit another application for the plan referenced in that submitted application.

  • Sponsors that have started to complete the most recent prior version of the application that had been posted on the ERRP website on Aug. 9, 2010 (see News, Aug. 12, 2010, HHS Provides Relief For Incomplete Applications To The Early Retiree Reinsurance Program), but have not yet submitted the application, may submit that version of the application if postmarked by Tuesday, Nov. 9, 2010. A sponsor completing that version of the application should also use the most recent prior versions of the application instructions (posted August 24, 2010) and "Dos and Don'ts" (posted August 9, 2010). Sponsors can contact HHS' ERRP Center if they need copies of those two documents.

  • Sponsors submitting an application postmarked after Tuesday, November 9, 2010, must use the revised versions of the application, application instructions, and "Dos and Don'ts", all of which were posted on November 2, 2010.

The revised application, application instructions, and "Dos and Don'ts" are posted on the How to Apply for the Program page on the ERRP website.

For a comprehensive analysis of the Patient Protection and Affordable Care Act, including the full text of the law and additional information on health reform and other recent developments in employee benefits, just click here.

Monday, November 1, 2010

FAQs Increasingly Important In Health Reform Implementation

Grandfathered health plans under the Patient Protection and Affordable Care Act (ACA) can comply with the required disclosure requirement if they include the model disclosure language whenever a summary of the benefits under the plan is provided to participants and beneficiaries, according to the most recent questions and answers released by the Department of Labor’s Employee Benefit Security Administration.

This is the fourth in a series of frequently asked questions (FAQs) released by EBSA in order to “answer questions from stakeholders with a view to helping people understand the new law and benefit from it” (see Part I, Part II, Part III, and Part IV). EBSA and other agencies increasingly are turning to FAQs and other non-regulatory releases to provide guidance that helps employers and individuals comply with federal laws and regulations (see here, for example).

In “FAQs About the Affordable Care Act Implementation, Part IV,” this question is posed, “Must a grandfathered health plan provide the disclosure statement every time it sends out a communication, such as an EOB (explanation of benefits), to a participant or beneficiary?”

EBSA notes that “many plans distribute summary plan descriptions upon initial eligibility to receive benefits under the plan or coverage, during an open enrollment period, or upon other opportunities to enroll in, renew, or change coverage. While it is not necessary to include the disclosure statement with each plan or issuer communication to participants and beneficiaries (such as an explanation of benefits), the Departments encourage plan sponsors and issuers to identify other communications in which disclosure of grandfather status would be appropriate and consistent with the goal of providing participants and beneficiaries information necessary to understand and make informed choices regarding health coverage.”  In other words, ongoing communication may not be required but certainly is encouraged.

The EBSA release also confirms that certain plans that offer nonessential benefits under the ACA may impose lifetime limits in these plans. According to EBSA, the following type of plan, which imposes a per-child lifetime dollar limit on benefits provided under such plans, does not violate the lifetime limit prohibition:

  • operated before enactment of the Affordable Care Act ),

  • reimburses expenses for special treatment and therapy of eligible employees’ children with physical, mental, or developmental disabilities,

  • operated separately from the employer’s primary medical plans,

  • employees who are otherwise eligible may participate in the plan without participating in those primary medical plans.

More guidance in the form of FAQs can be expected on grandfathered plans, nonessential benefits, and other aspects of the ACA.

For a comprehensive analysis of the Patient Protection and Affordable Care Act, including the full text of the law and additional information on health reform and other developments in employee benefits, just click here.

Friday, October 29, 2010

Treasury Official Discusses Employer Coverage Obligations Under Health Reform Rules

Children’s coverage and retroactive rescissions were among the health reform topics discussed by Kevin Knopf, attorney-advisor, Treasury Office of Benefits Tax Counsel, at the American Bar Association’s 21st Annual National Institute on Health and Welfare Benefit Plans in Washington, D.C. on October 25. Knopf elaborated on the official guidance issued on those requirements under the Patient Protection and Affordable Care Act.

Children’s Coverage

The ACA requires that employers providing health insurance coverage to an employee’s dependent child must continue to do so until the child reaches age 27. Knopf acknowledged that, while they prevent an insurer from defining “child,” the regulations do not themselves provide a definition of “child” for purposes of the health care reform package. He said that this was not a mistake: rather than provide a hard-and-fast definition, the IRS instead provided a safe harbor for taxpayers who rely upon the definition of “child” in IRC Sec. 152.

Despite this flexible interpretation of the law, Knopf reported that the Treasury continues to receive questions concerning step- and foster children. He stated that both of these children would fall within the Code Sec. 152 safe harbor.

However, when the parent-child relationship terminates, the IRS will no longer consider the child to belong to the insured individual and the insurer is no longer to continue coverage, Knopf explained. As an example, he pointed to a situation where an insured has a stepchild, but subsequently divorces the spouse and no longer carries on a relationship with the child.

Knopf also observed that the regulations prevent insurers from varying the terms of health coverage based on the age of the dependent child. He pointed out that an insurer could only charge additional fees for covering an adult child if it charged those fees for all children, and he indicated that the IRS is continuing to review this rule.

Retroactive Rescission

Knopf also explained that the ACA imposes new strict standards on when a health insurer may retroactively revoke an individual’s coverage. He noted that these restrictions arose because, while individuals could theoretically obtain retroactive health insurance coverage in the event of revocation, they cannot practically do so. He explained that the new law only allows retroactive rescission based on very few circumstances.

Knopf also recognized, however, that the restrictions are not airtight. He noted that an insured individual’s fraud or intentional misstatement of material fact could still justify the insurer’s retroactive revocation.

Additionally, the IRS’s answer to a frequently asked question describes a situation in which an employee terminates employment, he or she fails to pay any insurance premiums, and the employer delays terminating their health insurance coverage. The IRS will not consider the employer to have a restricted rescission where it retroactively eliminated the employee’s coverage back to the date of termination, if the delay is because of administrative delay.

Knopf reported that retroactive rescission of health care coverage may be limited for both medical and nonmedical reasons. This includes errors committed by the plan, mistakenly granting nonqualified employees health care coverage. He pointed to an example in the regulations where an employer provides health insurance coverage for full-time employees, but not for part-time employees. When an employee switches from full-time to part-time, but the plan mistakenly continues coverage, the regulations explain that the employer may prospectively, but not retroactively cancel the employee’s coverage.

For a comprehensive analysis of the Patient Protection and Affordable Care Act, and additional information on health reform and other developments in employee benefits, just click here.

Wednesday, October 27, 2010

Human Resource Officers Anticipate Health Reform Will Lead To Higher Costs

The potential for increased cost-shifting to private payers, the health insurance exchanges operating effectively in all states by 2014, and the elimination or revision of the tax on high cost plans are the issues of greatest concern about the new health reform law of chief human resources officers (CHROs) at large firms. Furthermore, nearly all (96%) of the more than 250 CHROs the HRPolicy Association surveyed in September 2010 believed that the Patient Protection and Affordable Care Act (ACA) will raise their companies' costs: 56% of these expect an increase of 5% or less; 27% expect a 6% to 10% increase; and 19% anticipate increases of more than 10%.

In response to increased costs, 64% of the CHROs predicted that their companies would split costs with their employees and retirees, and 19% said they would pass on the costs to their employees.

In addition, CHROs believed that a much greater number of employees than Congress anticipated will obtain health coverage though the new state exchanges, and receive the federal subsidy, than will remain in their employers' plans. The trend will be away from employer-sponsored coverage over the next ten years --about one-third (34%) of the CHROs said their company was likely to provide employer-sponsored coverage in 2020, while one-fifth (19%) said not likely, but nearly half (47%) were not sure. This will end up costing the federal governmdnt far more than planned, the CHROs predicted.

Employers want true health reform, not repeal of the new law, the CHROs said --56% see the need for major "adjustments" to the ACA, but only 3% are in favor of outright repeal with no further attempts at reform. In addition, members support the delivery systems and payment reform projects of the ACA. The CHROs feel that the ACA does not bend down the cost curve because health coverage is expanded without taking steps to change the way care is delivered.

The report further found that "Association members believe another attempt at reform is inevitable, and they are ready to work with Congress on future iterations to ensure that health reform will lead to a sustainable, high quality health care system providing coverage for all Americans while promoting the competitiveness of U.S. employers."

For more information, visit

For a comprehensive analysis of the Patient Protection and Affordable Care Act, and additional information on health reform and other developments in employee benefits, just click here.

Monday, October 25, 2010

NAIC Sends Medical Loss Ratio Recommendations To HHS

On October 21, the National Association of Insurance Commissioners (NAIC) voted to adopt a model regulation containing the definitions and methodologies for calculating medical loss ratios as required by the Patient Protection and Affordable Care Act (ACA).

In a prepared statement, Kathleen Sebelius, HHS Secretary, said regulations based on the model would be published quickly: "The next step is for the HHS to issue a medical loss ratio regulation that will provide clear guidance to stakeholders in the coming weeks.

"We will work quickly to promulgate this regulation, using the NAIC recommendations as a basis, because we believe these new policies will help ensure not only cost savings but higher quality care for consumers. We look forward to working closely with NAIC throughout the process."


On October 14, the NAIC Health Insurance and Managed Care Committee approved a draft regulation, and that draft "passed with only technical amendments" on October 21, according to NAIC.

The ACA required the NAIC, by Dec. 31, 2010, to establish uniform definitions and standardized methodologies for calculating medical loss ratios (Public Health Service Act Sec. 2718). Under the regulation, the "numerator used to determine the medical loss ratio for the plan year is calculated as incurred claims plus any expenses to improve quality." The denominator is calculated as earned premiums less federal and state taxes and licensing or regulatory fees. Thus, the more expenses used for improving quality the higher the loss ratio and the easier it will be to meet minimum standards.

Under the ACA, starting in 2011, a minimum loss ratio of 80% is prescribed for insurance sold to individuals and small employer plans, and a minimum of 85% is required for large-plans (plans with 101 or more employees).

Attempts to limit the amount of insurance sales commissions in the denominator were unsuccessful; for now, these commissions would be included in administrative expenses and will go toward reducing the medical loss ratio. The NAIC reportedly has created a subgroup to work with the HHS to determine the exact relationship between commissions and the medical loss ratio.

The October 14 model regulation also included "credibility adjustments" for small insurers, which would allow as much as an 8.3% addition to the medical loss ratio for insurers with between 1,000 and 2,499 lives. The adjustment would be reduced for larger insurers and would be eliminated for insurers with 75,000 or more lives.

Quality Improvement Expenses

The NAIC October 14 model defined quality improvement expenses as follows:

"Quality improvement expenses are expenses, other than those billed or allocated by a provider for care delivery (i.e., clinical or claims costs), for all plan activities that are designed to improve health care quality and increase the likelihood of desired health outcomes in ways that are capable of being objectively measured and of producing verifiable results and achievements."

NAIC also stated that quality improvement expenses "should be grounded in evidence-based medicine, widely accepted best clinical practices, or criteria issued by recognized professional medical societies, accreditation bodies, government agencies, or other nationally recognized health care quality organizations. They should not be designed primarily to control or contain cost, although they may have cost reducing or cost neutral benefits as long as the primary focus is to improve quality."

Quality improvement activities should be designed to achieve the following goals:

  • improve health outcomes;
  • prevent hospital readmissions;
  • improve patient safety and reduce medical errors, lower infection, and mortality rates;
  • increase wellness and promote health activities; or
  • enhance the use of health care data to improve quality, transparency, and outcomes.

Included Quality Improvement Activities

The NAIC listed the following as categories of activities that would "improve health outcomes" (and thus can be used as quality improvement expenses):

  • Patient centered intervention such as:
    • Making/verifying appointments;
    • Medication and care compliance initiatives;
    • Arranging and managing transitions from one setting to another (such as hospital discharge to home or to a rehabilitation center);
    • Programs to support shared decision making with patients, their families and the patient's representatives; and
    • Reminding insured of physician appointment, lab tests or other appropriate contact with specific providers;

  • Incorporating feedback from the insured to effectively monitor compliance;
  • Providing coaching or other support to encourage compliance with evidence based medicine;
  • Activities to identify and encourage evidence based medicine; and
  • Use of the medical homes model (ACA Sec. 1311).

Excluded From Quality Improvement

The NAIC also identified the following to be excluded as quality improvement expenses:

  • All retrospective and concurrent utilization review;
  • Fraud prevention activities;
  • The cost of developing and executing provider contracts and fees associated with establishing or managing a provider network;
  • Provider credentialing;
  • Marketing expenses;
  • Most accreditation fees; and
  • Costs associated with calculating and administering individual enrollee or employee incentives.

Reaction From AHIP

America's Health Insurance Plans (AHIP)president and CEO Karen Ignagni released the following statement on the NAIC-approved medical loss ratio proposal: "The current medical loss ratio proposal will reduce competition, disrupt coverage, and threaten patients' access to health plans' quality improvement services."

Earlier in October, AHIP sent aletter to the NAIC which included the following comments:

"On the central question of whether the medical loss ratio regulation will advance the health reform goals of improving access to insurance, minimizing disruption for consumers and employers, and improving quality of care, we are concerned that the current draft proposal will create unintended consequences and not achieve the expected goals."

"To promote access to a wide range of health plan choices for consumers and employers, the new medical loss ratio requirements should include adequate adjustments that take into account the statistical variability and credibility of small blocks of covered lives in an environment where extremely high cost, but low frequency claims (such as several complicated transplants or neonatology claims) can create major volatility.... NAIC can address these serious concerns by strengthening the credibility adjuster to avoid potential insolvencies and support competition.

"To ensure that individual patients receive the best care based on the latest available evidence, the NAIC's definition of 'activities that improve health care quality' should be structured to ensure that current and future patients have access to the most up-to-date and innovative support programs and tools that health plans are able to develop. Defining health care quality initiatives in a way that is too narrow or static will turn back the clock on progress and create new barriers to investment in the many activities that health plans have implemented to improve health care quality. More specifically, we want to highlight our recommendations for modifying the definition of health care quality initiatives to include fraud prevention and detection programs and the initial startup costs associated with implementing the new ICD-10 coding system."

For a comprehensive analysis of the Patient Protection and Affordable Care Act, and additional information on health reform and other developments in employee benefits, just click here.

Friday, October 22, 2010

Reform: majority continues to favor repeal; litigation continues

Though the first wave of its coverage provisions have been in effect since late September, the Affordable Care Act continues to be debated, both in the court of public opinion and in courts of law.

Approximately 55% of  "likely voters" surveyed on October 16 and 17 said that they favored a repeal of the Affordable Care Act, according to Rasmussen Reports. Since the passage of the ACA in March, support for repeal has ranged from a low of 53% to a high of 63%. Of the 40% who opposed repeal of the law, 30% said they "strongly oppose" repeal.

Party affiliation. Not surprisingly, support for the law is divided among party lines: Rasmussen found that 84% of Republicans and 57% of independents favor repeal, while 63% of Democrats oppose repeal.

Litigation continues. Even assuming that Republicans regain control of one or both Houses of Congress, garnering a veto-proof majority seems unlikely. However, court challenges to the law continue to move forward. Late last week, a Florida District Court allowed a constitutional challenge to the ACA to go to trial (State of Florida, et al. v. U.S. Department of Health and Human Services (No. 3:10-cv-91-RV/EMT). The challenge, brought by 20 states, contends in part that the individual mandate portion of the law violates the Commerce Clause. (Beginning in 2014, most individuals will be required to obtain health insurance or pay a penalty.)

As we discussed earlier this month, a federal court in Michigan has concluded that the individual mandate does not violate the Commerce Clause. It seems inevitable that the Supreme Court will ultimately decide the law's fate. In the meantime, of course, compliance efforts must continue--go here for help with that.

Wednesday, October 20, 2010

Health risk assessments: avoid family history

Did you include a health risk assessment (HRA) as part of your open enrollment planning for 2011?

If so, take note of a recently-released set of FAQs from EBSA. These question/answer sets detail what group health plans must do to comply with the Genetic Information Nondiscrimination Act.

GINA bars a plan from collecting genetic information (including family medical history) prior to or in connection with enrollment. Thus, under GINA, health plans must ensure that any health risk assessment (HRA) conducted prior to or in connection with enrollment does not collect genetic information, including family medical history.

Health plans are allowed to have employees complete an HRA, but must comply with two provisos. First, the genetic information that is obtained must not be used for underwriting purposes. Second, if it is reasonable to anticipate that the collection will result in the plan receiving health information, the plan must explicitly notify the person providing the information that genetic information should not be provided.

Wellness program rewards. For plans that give out wellness program awards, an HRA that requests family medical history may be used, says EBSA, but only if it is requested to be completed after enrollment, if it is in no way related to enrollment, and if there is no premium reduction or any other reward for its completion.

In the FAQ, EBSA suggests that plans use two separate HRAs: one that would collect genetic information, and one that would not. The first would have to be conducted after enrollment and could not be connected to any kind of reward program.

The FAQs are here. Go here for more answers on the rules governing genetic information and employee benefit plans.

Monday, October 18, 2010

EBRI: COBRA premium subsidy “take up” rate less than expected

Several surveys and studies released in 2010 have concluded that the COBRA participation—or “take-up” rate---increased when subsidized coverage was made available for those who lost their jobs between September 2008 and May 2010. However, the rate of improvement reported has varied widely. EBRI, using Census Bureau data, has now issued a study concluding that take up rates increased less than was expected when Congress enacted the subsidy as part of the 2009 stimulus law (EBRI Notes, October 2010,

Lower than expected. When the American Recovery and Reinvestment Act of 2009 was passed, the Congressional Budget Office anticipated that $14 billion in COBRA subsidies would be provided in 2009. This expenditure was expected to provide 7 million people with subsidized coverage. Instead, EBRI says that census data shows that the number of nonworking adults with coverage through a former employer increased from 5 million in December 2008 to 5.7 million in August 2009. (One caveat: full 2009 results for this census data won't be released until January 2011, so these numbers could change.)

Bad sign for heath reform? So, what are the implications of the lower-than-expected take-up rate? EBRI speculates that it may mean that even with a 65% subsidy, COBRA premiums are not affordable for many families. A need for COBRA usually goes hand in hand with a loss of income, after all.

EBRI also sees a connection between lower COBRA take up rates and the probability for success of the subsidies under the ACA, scheduled to become available in 2014. As with the COBRA subsidies, the ACA subsidies may not have as large an affect as predicted when health reform was passed. This in turn means that the rate of uninsured will not drop as much as predicted.

Want to learn more about COBRA benefits? Go here.

Friday, October 15, 2010

Insurance companies may charge more for sick kids

Parents who are thinking of looking for child-only health insurance coverage might want to pay especially close attention to insurers’ open enrollment periods, based on a recent news release from the Health and Human Services Department (HHS).

In the wake of health care reform, many insurance companies have dropped or are threatening to drop child-only policies, a move which drew fire from HHS Secretary Kathleen Sebelius on October 13, writing to the National Association of Insurance Commissioners, “Unfortunately, as we discussed, some insurers have decided to stop writing new business in the 'child-only' insurance market – reneging on a previous commitment made in a March letter to 'make pre-existing condition exclusions a thing of the past,'" adding, “… the decision of some health insurance companies to stop selling new polices for children is extremely disappointing.”

This latest move by the insurance industry has forced the Obama Administration to make yet another concession with regard to the PPACA. HHS is now stating that insurers may, until 2014, raise the cost of coverage for sick children, subject to state law, but only outside their open enrollment periods. As of 2014, higher rates based on a child’s health status will be completely prohibited.

What this means for parents of children with pre-existing conditions, is that, until 2014, it is important to sign their children up for insurance during a provider's open enrollment period. Otherwise, they will run the risk of paying substantially higher premiums.

Many insurers apparently expressed worries during a September 22 meeting with Sebelius and President Obama about the financial consequences of “adverse selection,” whereby parents would not insure their healthy children until they become sick, which would drive up insurance rates. Sebelius responded to these concerns by stating in her letter that “. . . we believe that there are options other than abandoning families who seek this coverage, as evidenced in states with similar laws already in place. In response to questions we have received, we have clarified that a range of practices related to “child-only” policies are not prohibited by the Affordable Care Act . . . “.

Those practices include allowing health insurance issuers to determine the number and length of open enrollment periods for children under 19 (as well as those for families and adults), consistent with state law, allowing rates to be adjusted for health status as permitted by state law until 2014, allowing insurance companies to impose a surcharge for dropping coverage and subsequently reapplying for it if permitted by state law, and allowing for the implementation of rules, consistent with state law, to help prevent employers from encouraging workers to enroll children in child-only policies instead of employer-sponsored insurance. It would seem that any real financial fears on the part of insurers would be addressed by these provisions.

The letter also pointed to state Children’s Health Insurance Program (CHIP) coverage and the Pre-Existing Condition Insurance Plan (PCIP) program, the latter having been created by the PPACA. Every state, said Sebelius, “. . . has coverage available to children without regard to pre-existing conditions through their Medicaid and CHIP programs; in most states, these programs are available to families with incomes below $88,000 (twice the poverty level).”

Some health insurers proposed accepting health applicants year-round and restricting the sale of policies to children with pre-existing conditions to an open enrollment period. In her letter, Sebelius characterized this approach as "legally infirm, and inconsistent with the language and intent of the Affordable Care Act," adding that it would be unlawful for states to allow insurance companies to deny coverage of children with pre-existing conditions outside the companies' open enrollment periods. So, the good news is that, if your child has a pre-existing condition, a health insurance provider that sells child-only policies must cover him or her, but the bad news is that, outside the open enrollment period, premium rates will probably be substantially higher.

For more information. For a comprehensive analysis of the Patient Protection and Affordable Care Act, and additional information on health reform and other developments in employee benefits, just click here.