Consumer Power Report #199

Published October 27, 2009

Roy Ramthun and I did a couple of events in Virginia in the past week. About 250 people attended, mostly small business owners with a few insurance brokers. We were there to lay out the evidence for consumer-driven health care.

I expected most of the attendees would have a lot of questions about the health reform debate in Washington. Boy, was I wrong about that. They had little interest in all that. They wanted to know what they could do in their companies right now to make their benefits more rational and effective. They wanted data and information so they could make some decisions for the new plan year starting in January.

What a refreshing change. These folks didn’t want spin, they wanted facts — “actionable intelligence,” if you will. It underscores that life goes on independent of all the posturing and hot air coming out of Washington.



The Miami Herald reports that Blue Cross Blue Shield of Florida has decided to use only an HSA program for all its 5,000 employees. The article says, “The Jacksonville-based insurer’s leaders have become firmly convinced that an HSA plan makes sense because it requires workers to make their healthcare decisions — and rewards those with healthy behaviors.”

It adds that this year about three-quarters of employees have opted for the HSA on a voluntary basis, so it is not much of shock to switch and only three or four employees have raised concerns. The company assesses premium contributions on a sliding scale, so lower-income workers pay much less than the higher-income managers.

SOURCE: Miami Herald

Business Insurance reports that General Motors is also using a full replacement HSA for its white-collar retirees. Jerry Geisel writes, “the annual deductible will be $2,500 for individual coverage and $5,000 for family coverage. The maximum annual out-of-pocket expense will be $3,500 for individuals and $7,000 for families.” The company is working with Bank of America as the default HSA administrator, though retirees are free to use any administrator they prefer.

SOURCE: Business Insurance

Forbes adds a cautionary note for people with HSAs. Ashley Hawkins writes, “At last count 8 million participants had $10 billion in HSAs. That figure will rise to $71 billion within five years, figures Eric Remjeske, president of Devenir Group, a Minneapolis consultant to HSA plans. He forecasts that a seventh of the dollars will be in balances large enough that the HSA operator can offer mutual funds as an investment option. A typical plan has $2,000 as the minimum for that feature. But he warns that some administrators are charging excessive administrative fees for investment funds that can eat away at the balances.”

She cites United’s Optum Bank, which switched from the Vanguard Fund to funds like Munder and Thornberg. The service charges tripled when that happened. The article goes on to discuss the pros and cons of these fees, but she clearly prefers Vanguard over other investment managers.

SOURCE: Forbes

And writing in Colin Hanna asks, “If President Obama is serious about ‘bending the cost curve’ on health care, as he says, then why is he trying to kill health savings accounts, one of the few proven methods of controlling health-care costs?”

He cites some of the recent studies showing that HSAs do indeed, “bend the cost curve,” and says, “Despite these cost benefits, the future of HSAs is in jeopardy. All of the health-care bills making their way through Congress require minimum benefits in excess of the low premium, high-deductible plans associated with HSAs.”

He cites a number of people who are thrilled with their HSA experience and concludes, “If Obama is interested in cutting health-care costs and increasing patient choices, and if he wants to show that he means it when he says that he is open to Republican ideas, he should embrace the effort to expand the availability of HSAs. They save money for employers and employees alike.”



There were two big losers on the failure of the SGR fix to get even a majority for cloture this week: Harry Reid and the AMA.

Reid came out looking like an idiot by saying he was fooled by the AMA into thinking they could deliver 27 Republican votes for the measure. Excuse me? The Majority Leader of the Greatest Deliberative Body in the Universe can’t count votes? He relies on a special-interest group to do it for him? It wasn’t like the vote was close. Thirteen Democrats joined all 40 Republicans in voting against it. This is the guy Obama is relying on to move the biggest piece of legislation ever considered by Congress? And he can’t tell the difference between having 60 votes and having only 47?

But the biggest loser was the American Medical Association. Everyone in Washington is laughing at its pathetic attempts to be a cagey player. The association was remarkably tone deaf to try to push this through with absolutely no concern for the biggest issue on Congressional minds: the soaring budget deficit. Plus, it spent a lot of money on national television advertising with no measurable results.

This is only the latest in a series of fumbles. The AMA came out in full-throated support of HR 3200 even before it knew what was in the bill. No one ever does that. You issue a statement of optimistic congratulations and promise to work with Congress to make the bill even better before it comes to a floor vote. That way you retain some room to maneuver as the process goes along.

An AMA insider told me that the Washington office has said, “you have to work with the folks who won the election.” Well, yes you do. But that doesn’t mean you change your principles and policies with every election. Doing that leaves you with no credibility whatsoever. No one will trust you if you constantly blow with the electoral winds.

This is true for all organizations, but even more so for an organization of physicians. Trust is the most important asset a doctor has. Patients need to know that doctors will not just tell them what they want to hear, but will tell the truth no matter how painful it might be. The AMA has a sacred duty to tell Congress what it believes is true, regardless of who is in office. It should be telling Democrats and Republicans the exact same thing. Anything less is patronizing and demeaning.

Once trust is lost, it is almost impossible to regain. We are witnessing a tragedy here. The once-proud “Voice of Medicine” has become a political prostitute.

SOURCE: The Hill; New York Times; Politico


No group is quite in the middle as much as the insurance industry. We reported last time on reports from AHIP and the Blue Cross Blue Shield Association that requiring open enrollment and some form of community rating would substantially raise the cost of coverage without a strict requirement that the young and healthy also purchase coverage. This was an unremarkable finding and certainly true.

But the industry was reviled by the administration for daring to say so. The administration called the reports flawed, distorted, and self-serving, mostly because they did not consider the value of subsidies offered by the federal government. But subsidies do not reduce the underlying price of the coverage being subsidized. The cost of the coverage still rises, and so must the cost of the subsidies. Plus many people will not be subsidized and must still pay the full amount.

AHIP President Karen Ignagni tried to explain this in an op-ed in the Washington Post. She wrote, “A relentless public relations campaign has attacked the messengers — our association, America’s Health Insurance Plans (AHIP), and PricewaterhouseCoopers — as a way of discrediting the findings that major provisions in the Senate Finance Committee proposal will have the unintended effect of increasing the cost of health-care coverage.”

Ignagni quotes President Obama himself as agreeing with the report’s conclusion that, “unless everybody does their part, many of the insurance reforms we seek — especially requiring insurance companies to cover preexisting conditions — just can’t be achieved. And that’s why under my plan, individuals will be required to carry basic health insurance.” She goes on to say that her members are not the bad guys — they really, really, really want to have health reform. Really.

Of course, Ms. Ignagni is foolish if she thinks that being reasonable and accommodating will score her any points. The administration needs a foil to fight against. It needs a bad guy. The docs and the drug companies have ducked this time, so the insurers are it. Now Chuck Schumer wants to punish them for the audacity of issuing an analysis, an “inconvenient truth” as it were. So he has jumped on the antitrust bandwagon.

This is a curious little effort. In 1946 Congress enacted McCarran-Ferguson., which restored to the states the role of being the sole regulators of insurance after a Supreme Court decision put that in doubt. It applied to all insurance, not just health. As entities regulated by the states they were exempt from most federal antitrust law, much as regulated utilities are. But they were still subject to state antitrust and other regulations.

The benefits of McCarran-Ferguson always have been questionable, and as state regulations pile up many large insurers have begun to wonder if they would be better off with one national regulator instead of 50 separate ones. Some P&C carriers have been warming up to the idea of federal regulation, or at least an alternative federal charter like the banks have. Legislation has been introduced in both the House and Senate to repeal or severely modify McCarran-Ferguson.

It has never been clear what effect any of this would have on health insurance. Congress already has carved out exceptions to McCarran-Ferguson with ERISA, COBRA, HIPAA, and other federal laws. And all of the current proposals would directly affect health insurers’ underwriting, marketing, and rating practices. What is left for the states to regulate? Solvency, maybe.

But somehow members of Congress seem to think that repealing the federal antitrust exemptions would punish the health insurers. It escapes me how. But I’m not sure Congress really knows what it is doing. Most companies that sell health insurance are in fact, life and health carriers. That is their corporate structure. They are distinct from property and casualty insurers (which sell auto, homeowners, business liability, and the like.) I’m not sure how you break out the regulation of health insurance companies from life insurance companies, since they are usually the same company.

But getting rid of state regulations would open the door to the interstate purchase of insurance, which is a key Republican proposal. So maybe this would end up being a very good thing.

SOURCE: Ignagni’s Op-Ed; Associated Press on White House reaction to antitrust move; Insurance Networking News on McCarran-Ferguson repeal; Huffington Post, mostly on market concentration; News Review on history of McCarran-Ferguson; Scott Harrington in the Wall Street Journal



Gallup/USA Today released a new survey that should be very sobering to Congressional Democrats. It finds that a near majority (49 percent) of the public think the cost of their own health care will get worse if any of the current bills are passed, while fewer than half that number (22 percent) think it will get better.

Not only do most people think their costs will go up, but they also believe the quality of care will go down (39 percent to 19 percent) and that their own health care coverage will get worse (37 percent to 20 percent). As a consequence, a mere 25 percent of the population supports enacting the current legislation, compared to 36 percent opposed and 39 percent undecided.

Gallup tries its best to spin these results by saying that “less than a majority” oppose the legislation. The survey, by the way, was of “all adults,” not of “likely voters” as in the Rasmussen surveys. The “likely voter” surveys are typically even more negative than this, and that is what politicians focus on.

SOURCE: Gallup; New York Times write-up


Rasmussen reports 49 percent of likely voters think “doing nothing” is better than passing any of the current bills, while 39 percent disagree. Interestingly, of “unaffiliated” voters (neither Republican nor Democrat), a whopping 62 percent say it would be better to do nothing.

SOURCE: Rasmussen

Galen Institute

The Galen Institute also released a new survey. It found 71 percent oppose a mandate on individuals to buy insurance, even with a penalty of only $750 a year. It also found 68 percent oppose reducing Medicare benefits to pay for health reform, 58 percent oppose taxing middle-income households to pay for health reforms, and 71 percent are concerned their current coverage would change under the reforms before Congress.

SOURCE: Galen Institute

Kaiser Family Foundation

Oddly counter to all this is a monthly tracking survey from the Kaiser Family Foundation that reports 55 percent of the public “want health reform now” and 53 percent think “the country will be better off with reform.” Yet digging deeper into the survey results shows a more nuanced picture.

When asked what Congress should do, only 49 percent say continue to work on passing it, 22 percent say they should focus on something more limited, and 26 percent say they should save it for some other time. So, people are split 49 percent to 48 percent on passing the current proposals. Curious that KFF didn’t highlight that.

The survey also finds public opinion changes dramatically depending on the caveats. Initially people support an individual mandate by 66 percent to 31 percent, but when told some people would have to buy coverage they find too expensive, 73 percent of supporters switch to opposition. Similarly, when told insurers could still deny coverage to the sick without a mandate 71 percent of opponents switch to supporters of the mandate.

The press release announcing the survey also says, “About half of the public believes that if reform passes, help for the uninsured and changes in insurance market rules would arrive within the first year, years ahead of the timetables contemplated in the legislation. Roughly half (49 percent) of Americans think that if reform passes, the uninsured will start getting financial help within the next year. In reality, such help generally would not arrive until 2013. Similarly, 51 percent of the public thinks that, should reform pass, health insurance companies would have to begin accepting customers with pre-existing health problems within the next year, a timetable not envisioned under any of the leading reform bills.”

A lot of folks may be in for a rude awakening.

SOURCE: Kaiser Family Foundation