A million Floridians will now be eligible for Medicaid––the Obama administration is happy about that.
Republican Rick Scott gets to do it his way––in an almost entirely private market.
This from today’s Tampa Bay Times:
His [Scott’s] endorsement of the expansion came hours after the federal government agreed to grant Florida a conditional waiver to privatize Medicaid statewide for the state’s more than 3 million current recipients, more than half of which are children or people under age 21.
Scott has agreed to only a three year trial expansion and the legislature must vote in favor of it––not a certainty. And, the Obama administration is taking some big risks––a five county trial of Scott’s privatization program has had lots of problems.
In prior posts I have said that Republican governors, so adamantly opposed to “Obamacare,” ought to go to Washington and negotiate a deal on Medicaid expansion. If they believe they can manage Medicaid better than the traditional federal route, which is what they claim every time they demand block grants, then they should put a deal on the table. Ultimately, the feds will pay 90% of costs and the state will pay 10% of the cost of the expansion. The Republican governors don’t believe they can save 10% if given more flexibility?
Last week, I reported on my informal survey of health insurance companies and their estimate for how much rates will rise on account of the Affordable Care Act (“Obamacare”).
Today, there are press reports quoting the CEO of Aetna with their estimate. The Aetna estimate is worse than mine.
Health insurance premiums may as much as double for some small businesses and individual buyers in the U.S. when the Affordable Care Act’s major provisions start in 2014, Aetna Inc. (AET)’s chief executive officer said.
While subsidies in the law will shield some people, other consumers who make too much for assistance are in for “premium rate shock,” Mark Bertolini, who runs the third-biggest U.S. health-insurance company, told analysts yesterday at a conference in New York. The prospect has spurred discussion of having Congress delay or phase in parts of the law, he said.
“We’ve shared it all with the people in Washington and I think it’s a big concern,” the CEO said. “We’re going to see some markets go up as much as as 100 percent.”
What will health insurance cost in 2014?
Will the new health insurance exchanges be ready on time or will the law have to be delayed?
There Will Be Sticker Shock!
First, get ready for some startling rate increases in the individual and small group health insurance marketplace due to the changes the law dictates.In a November 2009 report, the CBO estimated that premiums in the individual market would increase 10% to 13% on account of the health insurance requirements in the ACA. In the under 50 employee small group market, the CBO estimated that premiums would increase by 1% to a decrease of just 2% compared to what they would have been without the ACA. All of these differences in premium would be before income based federal subsidies are applied to anyone’s premiums.
In recent weeks, the Obama administration issued a series of proposed regulations for the health insurance market. Since then, I conducted an informal survey of a number of insurers with substantial individual and small group business. None of the people I talked to are academics or work for a think tank. None of them are in the spin business inside the Beltway. Every one of them has the responsibility for coming up with the correct rates their companies will have to charge.
Hold onto your hat.
On average, expect a 30% to 40% increase in the baseline cost of individual health insurance to account for the new premium taxes, reinsurance costs, benefit mandate increases, and underwriting reforms. Those increases can come in the form of outright price increases or bigger deductibles and co-pays.
The Obama administration just released another set of regulations, the “Draft Notice of Benefit and Payment Parameters for 2014.”
Among many other things in the 373 pages, they have announced their proposed assessments to cover the cost of running the federal exchange.
In order for the feds to administer the new insurance exchanges, they have proposed a fee of 3.5% of premium on each insurance policy sold in the exchanges (page 224).
This from the Kaiser Foundation 2011 “Primer” on Medicare:
“The costs of administering the Medicare program have remained low over the years––less than 2% of program expenditures.”
Many times over the years I have heard from advocates of a single-payer Canadian-style health plan that Medicare proves the federal government can do it cheaper than the private sector and should therefore take it all over.
So much for the notion that the feds are the model of insurance efficiency.
Under the new health care law’s Minimum Loss Ratio (MLR) provisions, insurance companies are limited to no more than 20% of premiums for expenses in the small group and individual markets.
The Affordable Care Act (“Obamacare”) is now settled law.
It will be implemented. It will also have to be changed but not until after it is implemented and the required changes becomes obvious and unavoidable. We can all debate what those things will be (cost containment is on top of my list) but it doesn’t matter what we think will happen––time will tell.
There are and will be more lawsuits.
I wouldn’t waste a lot of time worrying about those. Anyone in the market will do better spending their time getting ready.
But, when will the Affordable Care Act (ACA) be implemented?
So far, only about 15 states say they want to implement health insurance exchanges. Some of those may not make the October 1, 2013 kick-off date.
Maybe now that it is clear the law will go forward, some of the conservative states who have said they would not build one will get into high gear rather than have the Obama administration do it for them. But they may not have enough time to be ready in less than eleven months.
The Obama administration says they will be ready on time with federal exchanges. But they have not been at all transparent about just what they have so far done and can get done in the eleven short months that remain.
Starting today, the big question is can the Obama administration really be ready or will the October 1 insurance exchange launch date have to be pushed back, at least in some states?
It’s time for some post-election transparency and honesty from the administration.
Private health insurance exchanges will save employers money but not make health insurance cheaper.
Because private health insurance will save employers money, they will grow.
Will Private Insurance Exchanges Reduce Health Insurance Costs?
There’s lots of buzz these days about private insurance exchanges. The idea is to give employees more choice in purchasing their own individual coverage from a big menu of insurance companies and plan alternatives, and as a result, create more robust competition and thereby help control costs.
But I think private insurance exchanges will have just the opposite effect on the price of large employer health insurance plans.
First, private insurance exchanges will increase the insurance program expense factor for any large employer plan using them. A large self-insured plan may operate on an expense factor in single digits (maybe 90% of premiums go for claims and 10% of premiums for insurance company overhead). Individual products operate on an expense factor of as much as 20% and small group plans as much as 15%. Moving away from self-insurance and to an individual choice platform will increase the expense factor leaving the employee less money for benefits.
Second, employers currently save a lot of money in a self-insured plan because self-insurance gives the employer more flexibility. For example, a self-insured plan doesn’t have to comply with state benefit mandates. There is widespread agreement that self-insurance flexibility saves employers lots of money and that is why almost 100% of large employers do it. That savings would end, or be reduced, if the employer eliminated its self-insured plan and instead offered a much more complex individual choice platform in an insurance exchange, leaving less money for benefits.
Proponents of private insurance exchanges argue that by pitting many health plans against each other and giving employees these choices we will have a more robust market which will drive health insurance prices down. But it’s dog eat dog out there now in the group health insurance business. Ask a business owner or benefits manager how they market their health insurance and they will tell you they have their consultant or broker regularly get bids from a number of insurers to improve their plan. Most small employers do it every year.
Let’s take a look at Mitt Romney’s Health Care plan using his own outline (“Mitt’s Plan”) on his website.
Romney’s approach to health care reform summarized:
- “Kill Obamacare” – There seems to be no chance Romney would try to fix the Affordable Care Act––he would repeal all of it.
- No new federal health insurance reform law – There is no indication from his policy outline that he would try to replace the health care reform law for those under age-65 (“Obamacare”) with a new federal law–his emphasis would be on making it easier for the states to tackle the issue as he did in Massachusetts.
- Small incremental steps – His approach for health insurance reform for those under age-65 relies on relatively small incremental market ideas when compared to the Democrats big Affordable Care Act–tort reform, association purchasing pools, insurance portability, more information technology, greater tax deductibility of insurance, purchasing insurance across state lines, more HSA flexibility.
- Getting the federal government out of the Medicaid program – He would fundamentally change Medicaid by putting the states entirely in control of it and capping the annual federal contribution–“block-granting.”
- Big changes for Medicare – Romney offers a fundamental reform for Medicare beginning for those who retire in ten years by creating a more robust private Medicare market and giving seniors a defined contribution premium support to pay for it.
Republican Vice Presidential pick Paul Ryan isn’t the only one Democrats are piling on this week. The knives have come out for Senator Ron Wyden, the Oregon Democrat.
I guess that isn’t a surprise. If Ron Wyden is right on Medicare then so are Paul Ryan and Mitt Romney.
The fundamental problem here is that the Democrats have decided that their best path to victory in the November elections is to say that the Republicans want to destroy Medicare as we know it and that the Democrats can preserve it.
The truth is that no one can preserve Medicare as we know it. There isn’t a prayer that your father’s Medicare will be around in 10 years. There is a legitimate policy debate going on about the direction we will have to go with it.
There is just plain going to be less money to spend on senior health care than there would have been if we let the program continue on its present unsustainable track. Health care providers and patients are going to have less money.
The question is who will control that money.
What would individual health insurance cost if the court strikes the mandate down and still requires insurers to cover everyone?
With the Supreme Court justices sounding like they might strike the mandate down, this is a question I’ve been getting a lot lately.
I have pointed to New Jersey as a real life example of what can happen when insurance reforms take place but there is no incentive for consumers to buy it until the day they need it.
In 1992, New Jersey passed health insurance reform that required insurance carriers to either offer individual health insurance on a guaranteed issue basis or pay an assessment to carriers that did. Other elements of the legislation were:
- Guaranteed coverage and renewability for all eligible people regardless of their health status. A pre-existing condition exclusion does allow insurers to limit coverage during the first 12 months (a limitation which is not contained in the Affordable Care Act).
- Guaranteed renewal of policies, provided (1) the insured does not become eligible for coverage under a group plan; (2) premiums are paid in a timely fashion; and (3) no fraud is committed by the insured.
- Community rating of the premiums, with variation allowed only for family status (single, adult plus child, husband and wife, and family). (The Affordable Care Act allows rate variations of up to three times from young to old.)
- Standardized insurance plans, referred to as Plans A, B, C, and D (indemnity options) and a single HMO plan.
I call your attention to Ezra Klein’s column in the Washington Post this morning.
In it he cites data that has been out there for a long time but Ezra puts some perspective on it that never occurred to me before.
Examining the Kaiser Family Foundation brief, “Health Care Spending in the United States and Selected OECD Countries” he points out, “Our government spends more [as a percentage of GDP] on health care than the governments of Japan, Australia, Norway, the United Kingdom, Spain, Italy, Canada, or Switzerland.”
The data would seem to indicate that even our single payer government-run American health care programs, Medicare and Medicaid, cost way more than similar health plans in these nations.
The argument is often made that we should adopt a single payer—or perhaps a “public option”—health plan in the United States in order to control costs and cover everyone. But it would appear that even those programs in America are way too expensive when compared to similar programs in other industrialized nations.
As for the Republican market-based approach, Klein also points out that those programs have been ineffective at cost control. House Republican Paul Ryan often cites the Medicare Part D drug benefit as proof his proposals to privatize Medicare would work better than what we have. But as Klein points out, Part D premiums have risen 57% since 2006 and the program is on track to see nearly 10% growth in annual costs over the next decade.Continue reading…