Tag: THCB Marketplace

Health “reform”: Lest we forget…

6a00d8341c909d53ef0105371fd47b970b-320wi There’s been a lot of hand-wringing and b.s. discussed about the comparatively minor health reform that’s snaking its way through Congress. And when I say comparatively minor I mean it. Mostly because there’s lots this legislation doesn’t do.

1) There’s no significant reform of how we pay for health care—even though Orszag, Obama et al want it, and maybe Rockerfeller will inject the “MedPAC as Federal Health Board” into the end result….but I doubt it.

2) There’s no significant change in how we raise money for health care. Employment-based insurance stays as it is. Medicare and Medicaid basically stay as they are. Even if there are NO revenue sources for extending care to the uninsured, it’s still only a roughly a 5% increase in the cost of health care. If you hadn’t noticed we get that increase every year anyway! (By the way CBO actually scores the economics as being significantly better than that).

3) There’s no significant tax increase. Well the apologists say so, but the proposed tax increase on very high earners is trivial compared to how well they’ve done in the last twenty years. The chart below shows the share of overall earnings since the 1980s.

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Why Congress Should Consider Bob Laszewski’s Health Care Affordability Model

ALP_H_BK_0010 Over the last few months, I have become increasingly disheartened over the prospects for meaningful health care reform.

First, the process is terribly conflicted, and it shows. In the first quarter of 2009, the Center for Responsive Politics reported that the health care industry contributed $128 million to Congress. Now that the tide has turned, this has gone mostly to Democrats who, as it turns out, are just as receptive as their Republican predecessors.

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No Country for Old Men

As we enter summer, the health reform process is moving into its Newtonian phase: irresistible forces meeting immovable objects.   In both health cost and access, the trend is not our friend.  There is ample evidence not only of intolerable inequities, but also intolerable waste and inappropriate use of expensive clinical tools.  President Obama embodies the need for change. He has assembled a very talented and politically savvy crew of helpers.  He confronts the sternest test of any Presidency, fixing a poorly tuned and fragmented health system that is, by itself, larger than either the French or British economy.

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A Costly Wrinkle in the Merged Market


One of the more controversial elements of health care reform in Massachusetts is the so-called “merged market.”  In most states, individual health insurance is bought and sold under one set of rules, and small group insurance (for firms with either 1-50 employees or 2-50 employees) is sold under another set of rules.

It used to be that way in Massachusetts, too, before health care reform.

Individual insurance was guaranteed at the point of sale and the point of renewal, but the products were limited by state law, the price was based on the total medical expenses of the individual enrollees who bought individual coverage, and individual purchasers either couldn’t purchase coverage for pre-existing conditions or had to wait six months once they purchased insurance to access coverage.

The final rule was designed to make sure that people who had open access to health coverage wouldn’t simply buy it when they knew they were going to need it, and then drop it after their procedure was completed and paid for.  Insurance is, after all, insurance.  It’s all about shared risk.  When it works, the healthy subsidize the sick.  If there’s no incentive to buy health insurance when one is healthy, that reduces the size of the population that’s willing to pay premiums without requiring services, and increases the total cost of the coverage.

Under health care reform, the Commonwealth of Massachusetts merged the individual market with the small group market – creating what is commonly referred to as the “merged market.”  I’ve written about this before. As a result of the merger, the premiums paid by small businesses went up, and individual prices went down – because the medical expenses of small employers, on average, were much lower than the medical expenses of individuals.  That’s due – in large part – to the fact that in Massachusetts, small businesses, their employees and their families had much lower medical expenses than individuals and their families.  It’s as simple as that.  Estimates vary, but my cut is that individual premiums went down by about 25%, and small group premiums went up by 2-3% to pay for the merger.

The outcome of a merged market would be different in different states, depending on the rules for individual policies and small group policies prior to and after reform.  ‘Nuff said about that.

Now here’s the costly wrinkle.  When the merger occurred, the state told the health plans in Massachusetts that we could no longer apply a pre-ex exclusion or waiting period to individual purchasers unless we applied it to all purchasers in the merged market (including all small businesses).  No one was willing to impose such a condition across the entire merged market – primarily because it would be unfair to small businesses to impose such a requirement.  In the end, we all hoped that the new state requirement on individuals to have health insurance – or pay a tax penalty – would encourage healthy individuals to purchase insurance every year, and offset this now wide open front door for individual coverage.

Long story short, I don’t think it’s working.  A few months ago, brokers started posting comments on this blog site that implied that people – and some brokers and employers – were gaming that wide open front door – purchasing health insurance for a few months at a time, using a lot of services, and then dropping their coverage.  The penalty for not having coverage isn’t all that steep – about $900 – and while a few months of coverage might cost $2-3,000 in premiums – that’s peanuts compared to the cost of many medical services, which can run into thousands of dollars in a matter of days.

After about the fifth broker comment, I asked our finance people to check and see if individuals purchasing insurance from us either directly or through the state’s Connector web site were buying for a few months at a time, and using a lot of services.  The results were astonishing.  Between April of 2008 and March of 2009, about 40% of the people who purchased individual insurance from Harvard Pilgrim stayed covered by us for less than 5 months.  Even more amazing, they incurred, on average, about $2,400 per person in monthly medical expenses – roughly 600% higher than what we would have expected.  It wouldn’t surprise me if other health plans have the same problem.

This is a problem.  It is raising the prices paid by individuals and small businesses who are doing the right thing by purchasing twelve months of health insurance, and it’s turning the whole notion of shared responsibility on its ear.  It’s also created a new way for people who don’t want to play by the rules to avoid them.  The state needs to reconsider its policy to eliminate waiting periods and/or pre-ex exemptions for individuals purchasing health insurance in the merged market.  That would be the simplest and easiest way to protect individuals and small businesses who are playing by the rules – and limit the very costly impact of this wrinkle in health care reform.

Op-Ed: A Social Democrat Weighs in on a Government Health Plan

David hansen 09

I was born into a Berkeley family of Social Democrats—my father studied Swedish economic  policies—then I trained in social-democratic Economics in Scandinavia, before cutting my career teeth in a Norwegian Labor Party think tank. I thereby personify the threat trumpeted by Republicans: the sinister spread of Social Democracy.

So I am cheering wildly for establishing a federally owned health plan, right? Wrong.

Not that I’m particular opposed, either: It’s just not a big deal. Either way, new government-run plan or not, there won’t be much impact on our nation’s enormous health care problems.  Our health care dilemmas—high costs, poor access, and mediocre outcomes–stem from much more fundamental issues than who sits on the board of yet another insurance plan.

These include the perverse incentive structures for key decision makers in the industry, including insurers, providers and patients. Insurers earn money by serving the well rather than the ill who need their assistance most, providers don’t become rich by managing care over time but by medically over-treating the critically sick, and consumers are incented to both stay out of the insurance pool until they’re sick and to seek medical help late.Continue reading…


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Calendar: Project HealthDesign

The Robert Wood Johnson Foundation (RWJF) has announced a new call for
proposals for Project HealthDesign: Rethinking the Power and Potential
of Personal Health Records, a $10-million national program to stimulate
innovations in personal health information technology.  Project
HealthDesign will host the second of its informational web seminars for
potential applicants on
May 7th.  For more information and to register:

Community: SharpBrains Releases 2009 Market Report

SharpBrains is pleased to announce the release of The State of the Brain Fitness Software Market 2009 report, their second annual comprehensive market analysis of the US market for computerized cognitive assessment and training tools.  Designed for decision-makers at healthcare, insurance, research, public policy, investment and technology organizations this report contains important information concerning developments in the brain fitness and cognitive health space.

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Will CIGNA Remake The Health Plan Marketplace?

ALP_H_BK_0010America’s health plans are floundering. If their job has been to provide the nation’s mainstream families
with access to affordable care (let’s leave quality out of it for the moment), they have failed miserably, though they were very profitable along the way, at least until Q1 2008. In 2008, the Milliman Medical Index – an estimate of the total cost for health coverage premium and out-of-pocket costs for a family of four – was $15,609. Now it is almost certainly above $17,000, more than the total income of more than one-third of American households.

To many health plan execs, these are simply market dynamics that must be accommodated through new product and service designs. I just attended a health plan conference where the overarching themes were the transition away from group to individual coverage, and the use of incentives and touch points like texting, email, and ergonomic Web interfaces to cultivate member competency, loyalty and retention.

There are important steps forward but, to me, the discussion tiptoed
around the more glaring problem – costs this high have exhausted many
purchasers’ ability to pay, and are rapidly shrinking health plans’ commercial market and profitability.

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A Sticky Solution to a Sticky Problem

“Don’t pull the knot tight,” the philosopher Ludwig Wittgenstein once warned, “before being sure you have got hold of the right end.” Those who hope to sort out the tangle of health care spending would do well to heed his advice.

Clearly, there’s been no lack of solutions put forward since the Clintons first put health care atop the national agenda more than a decade ago. But with health care spending still rising at twice the rate of inflation, few have made any real and lasting impact.

Employers (who still pay the lion’s share of health insurance premiums here in the U.S.) know, of course, that keeping employees from getting sick in the first place—and minimizing the severity and duration of their illness when they do—is the first step in reducing this unwelcome “growth sector” of our economy. They understand, for the most part, that healthier employees equal not only lower healthcare costs but reduced absenteeism and greater productivity for the economy as a whole.

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Is the Healthcare Economy Rightsizing?

Brian KlepperMore than at any time in recent memory, powerful forces are buffeting
the health care sector. We are in

the midst of profound upheaval,
driven by
market and policy responses to the industry's long-term 
We can already see evidence that the dysfunction of our traditional
health system is accelerating. It also seems clear that the center
cannot hold indefinitely.

Dog Eat Dog

It is useful to remember that the health care industry's
different stakeholders are adversaries. While they clearly share a
common understanding that a wholesale meltdown is possible, there is
little real motivation for collaboration and no unity. Independent of
role, the industry as a whole has been focused on, and extremely
effective at, securing dollars from purchasers: government, employers
and individuals. But each silo within the industry has been separately
focused on growing its own slice of the health care pie. In every
niche, there are courteous conceits –
access, appropriateness, efficiency and value – reserved
for the good manners of public relations. But these are meaningful in
practice only if they do not conflict with the professional's or the
firm's economic performance.

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A Broker’s Lament: We Brought This On Ourselves

A huge segment of the American population is simply far too strapped to ever afford the premiums and costs associated with health insurance/health care as it is structured today.

It isn't the employees of government (local, county, state or federal) who will demand immediate change. It isn't the employees of institutional companies (the Motorolas, GEs, Microsofts of the country) who will demand change. It isn't those on Medicare or Medicaid or the VA who will demand change. It isn't the wealthy. It isn't the poor. And, it isn't the vast majority of health insurance agents who work with large group clients (because, while that market is becoming ever more difficult and the work more taxing, they're still selling SOMETHING to these bigger businesses and government entities).

Why don't these people see what I'm seeing? Simply because, while they are feeling the effects of the rise in health care/health insurance costs and the downturn in the economy, most of these businesses and their employees and dependents (and the affluent) have yet to have a clue about how expensive things really are (or in the case of the rich, they can still afford their out-of-pocket expenses). The agents who market to large employers are still making lots of money (I know, I rub elbows with them at my local Health Underwriters meetings once a month).

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