Most people are getting their health insurance through their employer. That has been changing slowly, but with healthcare reform, many more people will be left to select their own plans without the pre-selection and help from their employer. What used to be a choice among 3-5 plans is soon to become a selection from dozens of health insurance companies each offering a dozen plans to choose from. And selecting an insurance plan is not like getting car insurance; family makeup, prior health issues, future healthcare needs, and affordability – they all matter. In other words, it’s very personal.
As in other insurance industries, there will be a number of options to help consumers, such as agents and brokers. Cost is one of the most important criteria, but the problem of predicting the impact of plan choices on out-of-pocket costs is much harder, since selecting a plan is such a personal choice. Our needs and therefore expenses also change over time, as we go through different life stages.
As in many industries, there is a lot of data one can harness to help with these decisions. One benefit we see emerging is the availability of personal power tools (similar to financial planning tools) that allow for detailed modeling of an individual or family’s situation. These tools predict likely health care needs and allow one to compare the detailed expenses given different insurance plans. Starting a family? Entering your fifties, with its slew of clinically advised exams? Dealing with the ups and downs of a chronic condition? Those factors can all be taken into account to provide detailed plan options and price comparisons to help choose the optimal health plan.
The following article, forthcoming in U. Penn. L. Rev., pinpoints the strongest arguments for and against federal power under the Commerce Clause to mandate the purchase of health insurance: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1747189
Among the key points I make in defense of this federal law are:
1. The “commerce” in question is simply health insurance, and not the non-purchase of insurance as challengers have framed it. Because “regulate” clearly allows both prohibitions and mandates of behavior, mandating purchase is lexically just as valid an application of the clause as is prohibiting purchase or mandating the sale of insurance.
2. Although existing precedent might allow a line to be drawn between economic activity and inactivity, there is no reason in principle or theory why such a line should be drawn in order to preserve state sovereignty. Purchase mandates, after all, are as rare under state law as under federal law.
The OIG released an advisory opinion at the end of last month OK’ing a hospital’s proposal to provide insurance pre-authorization srevices free of charge to patients and physicians. This is an issue that has long vexed folks in the imaging world. Clearly, this is a free service provided to referral sources (to the extent they are obligated by contract with third party payors to obtain the pre-authorization before referring a patient for an MRI, for example), so why is the OIG OK with it? In the opinion, the OIG blesses the arrangement for four reasons:
- The arrangement doesn’t target specific referring docs, so the pre-authorization service will be provided for patients of docs who are contractually bound to handle it themselves, as well as for patients of those who aren’t, and thus the risk of using the arrangement to reward referrals is low
- The hospital will not pay the docs under the arrangement and will not guarantee to docs that the pre-authorizations will be forthcoming (the OIG also notes — not sure why — that the hospital will collect and pass on only such personal health information as may be necessary to secure a finding of medical necessity for the pre-authorization)
- The hospital staff will be transparent with payors and referring docs, and will have little influence on steering volume, because they get involved only after the hospital has been selected (other situations are distinguished, e.g., where referral seekers provide referral sources with staff like discharge planners)
- The hospital has an interest in being paid for its services, and thus in ensuring that the pre-authorization process is conducted properly, thus “lower[ing] the risk that the … [a]rrangement is a stalking horse for illicit payments to [the hospital’s] referral sources”
Well, the reasoning here doesn’t really cut it, as far as I’m concerned. Referring docs and their staffs hate having to deal with the pre-authorization process, and if a hospital takes on that headache, that’s a real benefit (remuneration, in the language of the anti-kickback statute). If there are two hospitals in town, and — all other things being equal — one provides pre-authorization services and the other doesn’t, guess where all the docs will refer their patients? It doesn’t really matter that the service is provided to all docs, for all payors. It is still clearly an inducement. If, on the other hand, all hospitals take on this added cost of doing business, then nobody gains a competitive advantage. Finally, to the e xtent physician networks are more and more tightly tied to particular hospital systems (whether through employment or other relationships, post health reform), the potential for steering volume is negligible at best.
Bottom line: I agree with the outcome, but not the reasoning.
David Harlow writes at HealthBlawg:David Harlow’s Health Care Law Blog, a nationally-recognized health care law and policy blog. He is an attorney and lectures extensively on health law topics to attorneys and to health care providers. Prior to entering private practice, he served as Deputy General Counsel of the Massachusetts Department of Public Health.
This is the first in a series of posts that will try to pierce the myths and reveal the facts about the reform legislation. This first post focuses on the impact that reform will have on the private insurance industry–and on the industry’s customers.
MYTH # 1: Health Care Reform represents a “boon” for private insurers.
FACT It is true that, beginning in 2014, virtually all Americans will be required to buy insurance, or pay a fine. But while insurers will pick up a boatload of new customers, many will be refugees who have been battered by a health care system that rationed care according to ability to pay. Think of the boat as a life raft. These could be very expensive customers.
Moreover, between now and 2014, insurers will face some serious financial hits. These new rules will make our health care system fairer and more affordable But the rules also suggest that for-profit health insurance may not be a viable business unless insurers learn far more about what is best for patients.Continue reading…
I saw a patient today and looked back at a previous note, which said the following: “stressed out due to insurance.” It didn’t surprise me, and I didn’t find it funny; I see a lot of this. Too much. This kind of thing could be written on a lot of patients’ charts. I suspect the percentage of patients who are “stressed out due to insurance” is fairly high.
My very next patient started was a gentleman who has fairly good insurance who I had not seen for a long time. He was not taking his medications as directed, and when asked why he had not come in recently he replied, “I can’t afford to see you, doc. You’re expensive.”
Expensive? A $20 copay is expensive? Yes, to people who are on multiple medications, seeing multiple doctors, struggling with work, and perhaps not managing their money well, $20 can be a barrier to care. I may complain that the patients have cable TV, smoke, or eat at Taco Bell, but adding a regular $20 charge to an already large medical bill of $100, $200/month, or more is more than some people can stomach. I see a lot of this too.Continue reading…
Does it matter whether health insurance exchanges are state-level or national? I used to think that it wasn’t a major issue, but my opinion has changed.
During the health reform debate early in 2009, I thought that other exchange design issues were more important than whether they are organized at the state or national level. In my view, who is eligible to join (all small business employees or just those who receive subsidies?), whether the exchange is the exclusive market for individuals and small groups, and how the exchange will be protected from an adverse selection “death spiral” are critical design features and will determine whether the exchanges are successful.
It seemed to me that the arguments put forward by advocates of a national exchange were not compelling. The most common argument was that a national exchange was needed in order to gain sufficient size, which would supposedly give the exchange more bargaining power with health insurers. But I always thought that size was more important at the local level. Health insurers negotiate provider contracts locally, not nationally, and they gain leverage based on their size locally regardless of how big they are nationwide. In addition, the “bargaining power” argument is relevant only if the exchange is negotiating rates with insurers. In an “all comers” model, the exchange isn’t negotiating rates; it relies on healthy competition among insurers to drive down premiums.
On Monday, liberals sneered when insurers’ stocks rose, indicating that speculators thought ObamaCare (HR 3590) would be good for the big regional companies. But today several of the stocks are sinking, probably in response to University of Chicago Professor Richard A. Epstein’s op-ed piece in The Wall Street Journal, “Harry Reid turns insurance into a public utility; the health bill creates a massive cash crunch and then bankruptcies for many insurers.”
Here are charts for AET, CI, CVH, HS, HUM, UNH and WLP. Click on a chart for more information. The stocks that are sinking serve the individual and small group markets. Those that are rising are less invested in those markets, I think.
Now, the big companies might benefit from having smaller insurers that serve individuals and small employers bankrupted. But they would be crushed by new regulations and price controls that would not allow them to make profits. Nothing in the bill says insurers should be allowed to earn market returns. That means they’re as likely to go bankrupt as the smaller insurers.
Epstein’s impact graph:
The perils of the Reid bill are made evident in a recent Congressional Budget Office (CBO) report that focused on the bill’s rebate program, which holds that once an insurance company spends more than 10% of its revenues on administrative expenses, its customers are entitled to an indefinite statutory rebate determined by state regulatory authorities subject to oversight by the Secretary of Health and Human Services. Defining these administrative costs is a royal headache, but everyone agrees that they are heaviest in the small group and individual markets, where they typically range between 25% and 30%, without the new regulatory hassles.
Equally important, Epstein writes, the bill would turn insurers into heavily regulated utilities without giving them the right to make market rate returns on investments, which is unconstitutional.
That the bill appears unconstitutional may be good news for insurers, but think of the uncertainty that investors in insurers will face for years as the courts take their time deciding the case.
How will the Senate bill impact health insurance companies and their customers?
Even better, how will it impact a not-for-profit health plan–one with a reputation for being a “good guy” that continually wins the country’s top awards for member services and with historic profits of less than 1% of premium? And, one that is operating in Massachusetts–a market that has already been through much of this?
I will suggest that, in combination, these are three intriguing questions.
That is why I thought that the Harvard Pilgrim’s CEO’s recent post on their website was important. It is short, direct, and to the point. And, from everything I know, it is bang-on.
I love Atul Gawande’s writings on health care.
He has a rare talent for describing technical details of health care, insurance and finances in terms that most people can understand. His recent article in the New Yorker discussed the current health reform bills’ approach to curbing costs, using the agricultural industry as a potential model.
One of his basic points is similar to one I have made before. He describes two kinds of problems: “those which are amenable to a technical solution and those which are not. Universal health care coverage belongs to the first category . . . Problems of the second kind [referring to rising health care costs], by contrast, are never solved, exactly; they are managed.”
I would frame it somewhat differently. The two basic kinds of problems are those, which are amenable to a government solution, and those which are best addressed using decentralized market forces.