Congress’s Dubious Obamacare Exemption

Published August 5, 2013

Consumer Power Report #384

Technically, the issues with Congressional staff subsidies within the health insurance exchange market is a special consideration under the law’s requirements, so it’s not exactly a waiver – but either way, the Obama Administration has engaged in another exemption from the law for a powerful and connected group:

Lawmakers and staff can breathe easy – their health care tab is not going to soar next year. The Office of Personnel Management, under heavy pressure from Capitol Hill, will issue a ruling that says the government can continue to make a contribution to the health care premiums of members of Congress and their aides, according to several Hill sources.

Just Wednesday, POLITICO reported that President Barack Obama told Democratic senators that he was personally involved in finding a solution. The problem was rooted in the original text of the Affordable Care Act. Sen. Chuck Grassley (R-Iowa) inserted a provision which said members of Congress and their aides must be covered by plans “created” by the law or “offered through an exchange.” Until now, OPM had not said if the Federal Employee Health Benefits Program could contribute premium payments toward plans on the exchange. If payments stopped, lawmakers and aides would have faced thousands of dollars in additional premium payments each year. Under the old system, the government contributed nearly 75 percent of premium payments.

Obama’s involvement in solving this impasse was unusual, to say the least. But it came after serious griping from both sides of the aisle about the potential of a “brain drain.” The fear, as told by sources in both parties, was that aides would head for more lucrative jobs, spooked by the potential for spiking health premiums.

Peter Suderman questions whether this is even legal – but when has that stopped the White House before?

This week, the Office of Personnel Management (OPM), which administers federal employee health benefits, is expected to issue a rule stating that legislators and their staffers will still have to buy through the exchanges – but will be allowed to use the employer contribution toward plans purchased on the exchanges. It’s not clear how this will work: Will staffers simply get the cash value of the employer contribution? Or will OPM put the money toward the exchange premium?

But the bigger question is whether it’s legal at all. As Robert Moffit, Edmund Haislmaier, and Joseph Morris note in a report released last week, OPM is only allowed to authorize payments to plans with which it has contracted through a specified negotiation process. It has no stated authority to pay the government’s share toward other plans – like, for example, plans bought through Obamacare’s multiple exchanges. In addition, the authors note that the standards and requirements for exchange plans are different than the standards for OPM-contracted plans. The exchange plans are not technically qualified to be offered through the FEHBP. You can’t mix and match the two – and you can’t fund exchange plans with money meant to pay for FEHBP coverage.

Nor is it clear that OPM can easily allow a widespread employee cashout of benefits. That’s the sort of thing that usually requires legislation.

As a matter of building a populist argument, the administration has now effectively exempted employers and Congress from following the letter of the law. No wonder Yuval Levin and James Capretta say that this makes the individual mandate ripe for repeal or delay. The argument almost makes itself – but it will have to be made the centerpiece of the strategy of Obamacare opponents in the fall to have any staying power.

— Benjamin Domenech



An increasing figure:

The number of doctors who opted out of Medicare last year, while a small proportion of the nation’s health professionals, nearly tripled from three years earlier, according to the Centers for Medicare and Medicaid Services, the government agency that administers the program. Other doctors are limiting the number of Medicare patients they treat even if they don’t formally opt out of the system.

Even fewer doctors say they are accepting new Medicaid patients, and the number who don’t participate in private insurance contracts, while smaller, is growing–just as millions of Americans are poised to gain access to such coverage under the new health law next year. All told, health experts say the number of doctors going “off-grid” isn’t enough to undermine the Affordable Care Act, but they say some Americans may have difficulty finding doctors who will take their new benefits or face long waits for appointments with those who do.

CMS said 9,539 physicians who had accepted Medicare opted out of the program in 2012, up from 3,700 in 2009. That compares with 685,000 doctors who were enrolled as participating physicians in Medicare last year, according to CMS, which has never released annual opt-out figures before.

Meanwhile, the proportion of family doctors who accepted new Medicare patients last year, 81%, was down from 83% in 2010, according to a survey by the American Academy of Family Physicians of 800 members. The same study found that 4% of family physicians are now in cash-only or concierge practices, where patients pay a monthly or yearly fee for special access to doctors, up from 3% in 2010.

A study in the journal Health Affairs this month found that 33% of primary-care physicians didn’t accept new Medicaid patients in 2010-2011.

The pullback in Medicare acceptance is being felt in certain quarters. Joe Baker, president of the Medicare Rights Center, said his patient-advocacy group has had an increase in calls from seniors who can’t find doctors willing to treat them – mainly from affluent urban and suburban areas where many patients can pay out of pocket if their doctor doesn’t accept Medicare. “In most places, doctors can’t pick and choose because Medicare is the biggest game in town, or the only game in town,” he said.

SOURCE: Wall Street Journal


Public employees will be dumped:

Cities including New York and Boston, and school districts from Westchester County, N.Y., to Orange County, Calif., are warning unions that if they cannot figure out how to rein in health care costs now, the price when the tax goes into effect will be steep, threatening raises and even jobs.

“Every municipality with a generous health care plan is doing the math on this,” said J. D. Piro, a health care lawyer at a human resources consultancy, Aon Hewitt.

But some prominent liberals express frustration at seeing the tax used against unions in negotiations.

“I think it was misguided all along,” Robert B. Reich, the former labor secretary, said in an e-mail. When the law was being written, he said, he worried that the tax was “a blunt instrument that could too easily become a bargaining chit for cutting back benefits of workers.”

“Apparently, that’s what it’s become,” Mr. Reich, who is a professor of public policy at the University of California, Berkeley, said.

Under the tax, plans that cost above a certain threshold in 2018 – $10,200 annually for individual plans and $27,500 for family plans, with slightly higher cutoffs for retirees and those in high-risk professions like law enforcement – will be taxed at 40 percent of their costs in excess of the limit. (The thresholds will rise with inflation after 2018.)

State and local governments across the country tend to offer more expensive health plans than private businesses do, and workers often accept smaller wage increases to retain their benefits. Because of this, state and local government employees are expected to be disproportionately represented among those whose plans will be subject to the tax.

SOURCE: New York Times


From Josh Archambault:

Until now, the conventional wisdom has been that the federal law is a carbon copy of former Governor Romney’s 2006 state health-care law. However, the Commonwealth’s legislature has already passed three separate bills to iron out the conflicts between the two laws; the latest has over 100 sections and makes more than a dozen major changes to state law.

Because of the major differences between the two laws, the Obama administration has granted Massachusetts two highly questionable multi-year delays in implementing the new regulations in order to delay sizable premium spikes.

Some features of the current Massachusetts law would be prohibited by the ACA. Massachusetts permits insurers to offer discounts to, for example, someone who works in a low-risk industry or participates in a wellness program. The federal law, on the other hand, requires premiums to be based on a single set of factors: family composition, the ages of covered members, tobacco usage, and geographical location. According to state officials, this will cause premiums to rollercoaster, resulting in “extreme premium increases” for many, and a decline for others.

A Pioneer Institute analysis found that 60 percent of small businesses in Massachusetts will experience a rate hike – for some the increase will be over 98 percent – due to this one regulatory change. These same employers are already bracing for the law’s 18 new taxes.

Once Bay State officials had identified the adverse impacts of the ACA, they requested additional flexibility or a waiver. The Department of Health and Human Services responded by granting a two-year delay to phase out the prohibited rating factors. This is an extraordinary action, given that HHS itself acknowledges that the ACA doesn’t include a provision for granting such a delay.

SOURCE: National Review


Math is hard.

Aetna Inc pulled out of Maryland’s health insurance exchange being created under President Barack Obama’s healthcare reform law after the state pressed it to lower its proposed rates by up to 29 percent.

Under the law, often called Obamacare, each U.S. state will have an online exchange where Americans will be able to buy insurance plans, starting on October 1. The government is counting on about 7 million people to enroll next year for this insurance, many of whom will qualify for subsidies.

The success of the exchanges, as well as the expansion of the government’s Medicaid program for the poor, are key elements in the political battle between Republicans and Democrats. State officials say the price of the new insurance plans will help determine whether enough people sign up.

In an August 1 letter sent to the Maryland Department of Insurance, Aetna said the state’s requirement for rate reductions off its proposed prices would lead it to operate at a loss. The rate reductions include products from Aetna and Coventry Health Care, which it bought this spring.

“Unfortunately, we believe the modifications to the rates filed by Aetna and Coventry would not allow us to collect enough premiums to cover the cost of the plans, including the medical network and service expectations of our customers,” Aetna said in the letter to insurance commissioner Therese Goldsmith.

According to online documents, Aetna had requested an average monthly premium of $394 a month for one of its plans and the agency had approved an average rate of $281 per month.

Aetna Chief Executive Officer Mark Bertolini said earlier this week during a conference call to announce financial results that it was closely looking at its plans for the exchanges since buying Coventry.

Like most other large U.S. insurers, Aetna has taken a cautious approach to the new products which must include a broader set of benefits and be sold to all people regardless of their health.

On Friday, Aetna spokeswoman Cynthia Michener said the decision to withdraw from the individual market in Maryland included both new plans proposed for the exchange and new products for the individual market. Aetna and Coventry combined insure 13,000 individual members in Maryland and 620,000 individuals nationwide.

“This is not a step we take lightly,” she said.

SOURCE: Reuters


Not a good sign.

After a scheduling snafu over the start time, a few people showed up and left before it actually started. Just one volunteer stayed to help work the phone bank for the health law, and the event’s organizer bolted after 20 minutes – although he was bound for another Obamacare event, a house party.

The poor turnout here in Centreville wasn’t necessarily indicative of what’s happening across the country at other OFA events Sunday afternoon and evening, which coincide with President Barack Obama’s birthday. OFA sent out pictures of bigger and more enthusiastic turnout elsewhere, including some events in places like Ohio, Florida and Missouri where volunteer enthusiasm will be needed to overcome state government resistance to implementation. Most of the events were intentionally small-scale – house parties, leafleting near a beach or a farmer’s market, not big rallies.

But in some ways, this suburban community 20 miles from Washington, D.C., captures the national ambivalence about the health law. Centreville is perched on the edge of two congressional districts, a red one represented by Rep. Frank Wolf – an ardent Republican opponent of Obamacare – and a blue one by Rep. Gerry Connolly, one of the health law’s Democratic champions.

SOURCE: Politico


Only going up:

Customers in the key swing state can expect to pay 41 percent more on average for individual health insurance coverage next year because of Obamacare, according to projections released by the state’s Republican insurance commissioner Thursday.

While Obamacare-friendlier states like New York have reported major rate reductions as a result of the health care law, Ohio insurance commissioner Mary Taylor says Obamacare’s mandated benefits and rating rules are driving up the cost of insurance in a state with historically lighter regulation.

“The bottom line is the [Affordable Care Act] is driving up premiums across the country,” said Taylor, who’s also the state’s lieutenant governor.

More on the announcement here.

SOURCE: Politico


Greg Scandlen on how the latest report from the Institutes of Medicine dramatically undermines the accepted wisdom of the Dartmouth Health Atlas.

According to Kaiser Health News the Institute of Medicine (IOM) recently released a report that contradicts the long-standing claims of the Dartmouth Health Atlas that variations in Medicare spending are attributable mostly to the greed of doctors. The context of the report was to inform policymakers on the wisdom (or lack thereof) of proposals to pay providers more in low-cost areas and pay less in high-cost areas. The $8.5 million report found that local variations in Medicare spending do not correlate with variations in non-Medicare spending.

This finding is unsurprising. In fact, NCPA Scholars Andrew Rettenmaier and Thomas Savings came to precisely the same conclusion in a report published four years ago (surely for a whole lot less money). … IOM also found that in Medicare the variation in costs is mostly “due to spending in post-acute services such as nursing facilities, home health care and long-term-care hospitals,” while “In the commercial market, by contrast, higher prices negotiated by hospitals, doctors and other medical providers were the key factor in regional variations.” This finding completely undermines Dartmouth’s contention that it is greedy doctors who cause Medicare variations… I have to conclude that health care researchers really don’t care very much about people. They are much more comfortable doing a simplistic regression analysis than actually looking at the human dimensions of health care. It makes me cringe that such people will influence the future of our health care system.

Here’s more on what happens when you reveal the price of health care.

SOURCE: National Center for Policy Analysis


From the American Action Forum:

The American Action Forum (@AAF) today released a Primer on Medicaid Per Capita Caps. The Primer offers an explanation and definition of the caps, an examination of a cap versus a block grant in Medicaid, and how the cap fits into the larger picture of the Affordable Care Act.

There are a variety of proposals for reforming the Medicaid program, one of which is per-capita caps on annual spending. Having a per-capita cap on the entitlement program would limit the federal government’s financial liability by capping federal funding, on a per beneficiary basis. Per capita caps would leave the state financially responsible for any additional costs above and beyond the cap, ideally giving state Medicaid offices the incentive to ensure beneficiaries are receiving preventative care, cost-effective medical services and sufficient chronic care management in order to reduce hospitalizations.

SOURCE: American Action Forum

Additional Links of Note:

How Obamacare hurts special needs children.

Georgia Insurance Rates set to spike under Obamacare.

South Carolina expects higher premium costs as well.

Republicans plot strategy on Obamacare fight for the fall.

Is Delaying Obamacare more feasible than defunding it?

Democratic Governors concerned about implementation.

Walgreens and CVS stand to benefit from Obamacare.

Expect to see more growth in medical tourism in the future.