Don’t Fear a World Without Obamacare

Published November 5, 2012

Consumer Power Report #349

Over the past month, I’ve received more than a dozen emails that go something like this: “I’m a conservative, but my friend who has cancer [or some other serious disease] says she’s worried about losing Obamacare’s protection for pre-existing conditions. Should I be worried about her if Obamacare goes away?”

In the interests of explaining this issue, let’s start with a better understanding of what insurers can and can’t do for most Americans. Insurers are already barred from denying coverage to you over pre-existing conditions if you haven’t been uninsured for more than six months after being diagnosed or recommended treatment. That’s been true since 1996, when the HIPAA law passed, for all insurance subsidized by an employer or obtained through a group plan. In other words, it’s true for most people, though the increase in stagnant unemployment over the past four years hasn’t improved things and has sent many people onto Medicaid when they could no longer afford COBRA.

But what if your friend isn’t covered by employer-provided insurance, Medicaid, or Medicare? This is where pre-existing conditions become a real and very costly problem. There is a very small but growing portion of the country, about 14 to 15 million people, who buy their insurance individually. This insurance is generally more expensive, because it’s not subsidized by the generous tax preference for employer-based coverage. So sick working-age Americans who can’t access an employer-sponsored plan, make too much money to qualify for Medicaid, but can’t afford to buy insurance in the individual market because of their health conditions face a considerable challenge.

For this smaller population, Obama’s solution is to mandate that insurers can’t count pre-existing conditions against you. However, this creates a major incentive for insurers to avoid covering sick people. They will make their plans less attractive to the sick in terms of what they cover in order to avoid having to raise their premiums for everyone to cover this high-risk population. This is not a long-term solution for people with pre-existing conditions – it just doubles down on the mandate approach and won’t do anything to stop premiums from going up for everyone.

The alternative is a more fundamental reform of the tax treatment of health insurance, making sure employers and individuals both have access to the same subsidy level for purchasing insurance. In this scenario, your insurance will go with you from job to job, so the vast majority of people will never have the coverage interruption that would cause a pre-existing condition issue. For people who are currently sick and cannot find coverage, they would redouble the federal investment in high-risk pools – state-level insurance pools that operate as non-profits.

Here’s a good description of how these high-risk pools function from National Affairs:

People who try to get insurance and are denied, or who receive only unaffordable coverage offers, may apply to participate in the high-risk pool program; the program’s administrators then determine each applicant’s eligibility. Common eligibility criteria in the states include one or more of the following: having been rejected for coverage, based on health reasons, by private insurers; having been refused coverage except at rates exceeding the subsidized premium offered in the high-risk pool; having received private coverage offers, but only with restrictive riders or pre-existing condition limitations; the existence of particular medical conditions (like HIV/AIDS, cancer, or diabetes) presumed to result in rejection by health insurers; or being a dependent of a person eligible for high-risk pool coverage. The pools also often cover people who, having maintained continuous coverage under HIPAA rules, need to find new insurance arrangements in the individual market. Because everyone in the pool has, by definition, a high-risk profile, average claim costs are necessarily quite high. But eligible individuals’ premiums are capped at various levels above standard rates; beyond those caps, premium payments are fully subsidized from various public revenue sources. The idea is that people will pay only the premiums they can afford, and the difference between those payments and the real cost of insurance will be made up by taxpayers.

Your sick friend would be much better off in a climate where there is no huge incentive for insurers to avoid sick people, where premiums are not rising as they continue to do under Obamacare, and where there is a strong support mechanism for people who are rejected for coverage, and her original insurer follows her from job to job, never requiring her to change doctors or providers during the course of her care. That will never exist under Obamacare.

— Benjamin Domenech



Get ready for the maelstrom:

The once-steady stream of regulations and rules from the Obama administration – instructions for insurance companies, hospitals and states on how to put the law in place – has slowed to a trickle in recent months in an attempt to avoid controversies before the election. Many states, too, have done little public work to avoid making the law an election issue for state officials on the ballot.

But work has been going on behind the scenes – both in the Department of Health and Human Services and at the state level. As soon as Wednesday, the gears and levers of government bureaucracy are likely to start moving at full speed again.

HHS is expected to begin to release the backlog of regulations. And the states will quickly face a Nov. 16 deadline to tell the Obama administration whether they’ll implement a health insurance exchange – a key part of the law about where consumers will purchase health insurance after 2014.

If Obama wins, that work is likely to continue through the early years of his second term. Democrats will want the law put in place as quickly as possible. They face a late 2013 deadline to have the exchanges ready to go.

And if Romney wins, the need to get the rules out may become even more urgent for Democrats. Any rules or regulations that are not final by Nov. 22 – 60 days before Romney would be sworn in – can be easily put on hold on Jan. 20.

That means the Obama administration would have a huge incentive to have as much of the health law as possible in “final” rule form within two weeks of a Romney victory. Rules and regulations that aren’t final can be more easily changed than those that are.

Susan Dudley, director of the regulatory studies center at The George Washington University and a former administrator of the Office of Information and Regulatory Affairs under President George W. Bush, said the past several presidents have put a stop to as much as they possibly could on Inauguration Day.

“At noon on Jan. 20, one of the first memos out of the chief of staff’s office will be, ‘No regulations get sent to the Federal Register until our appointees look at them,'” Dudley said.

Few significant regulations relating to the health law have come out in recent months. And HHS Secretary Kathleen Sebelius has held fewer news conferences on the law than she did in the first two years after the law passed.

That’s all the more reason that David Merritt, managing director at Leavitt Partners, is expecting a “torrent of regulations” after Election Day.

“I think it’s common knowledge they slow-walked a lot of these. You will see that torrent,” Merritt said. “Will there be enough time for them to become final rules [before a potential Romney inauguration]? Some, probably. Others, probably not. So much is up in the air.”

One of the most important regulations not yet issued is the potentially controversial one to specify what health insurance policies must cover. And final rules have not been issued on other significant pieces of the law, such as those governing the health insurance exchanges, the individual mandate and how to define “full-time” and “part-time” employees in regard to employer penalties.

SOURCE: Politico


Little clarity on federal exchange:

The Obama administration is relying heavily on outside contractors to implement a core component of healthcare reform as it races to set up a federal health insurance marketplace before 2014.

The fast-approaching deadline gives the administration little time to scrutinize private-sector partners for conflicts of interest.

The purchase of one of these contractors, Quality Software Services, Inc. (QSSI), by UnitedHealth Group, a major healthcare conglomerate, has sparked concerns about a potentially uneven playing field.

QSSI, a Maryland-based contractor, in January won a large contract to build a federal data services hub to help run the complex federal health insurance exchange. It will be working with several other contractors, including CGI Federal, Inc., to create the technological architecture for the exchange.

The quiet nature of the transaction, which was not disclosed to the Securities and Exchange Commission (SEC), has fueled suspicion among industry insiders that UnitedHealth Group may be gaining an advantage for its subsidiary, UnitedHealthcare.

UnitedHealth Group’s acquisition has caught the attention of Sen. Orrin Hatch (R-Utah), the ranking member on the Senate Finance Committee. He has expressed alarm over what he calls a lack of transparency in setting up a national insurance marketplace covering more than 30 states.

SOURCE: The Hill


Missouri’s vote could be a major factor:

Opponents to the federal health law were also responsible for Missouri’s Proposition E, “Prohibiting a State-Based Health Benefits Exchange.” The target is the law’s requirement that by 2014, each state have an online marketplace where individuals and small businesses can buy health insurance plans – plans that meet certain criteria and are more easily comparable. These health insurance exchanges can be run by either the state or the federal government.

An exchange does not exist in Missouri. Yet. And if it’s up to Missouri’s House Majority Leader Tim Jones, it never will. “We know that the citizens of the state of Missouri do not want the federal health care law, the Obamacare law, or anything related to it,” Jones, a Republican, said on the final day of session in May.

State Sen. Rob Schaaf, a Republican from St. Joseph who sponsored this latest ballot measure, says a health exchange, not the entire health law, is his main issue. “A health insurance exchange is a major policy decision, and it should require the input of the legislature,” says Schaaf.

Andrea Routh, director of the consumer group the Missouri Health Advocacy Alliance, believes the state should run the exchange, and worries that time is short to do so. “It can really work well for families if we do it right. But doing it right takes some work and planning and time,” Routh said.

SOURCE: Kaiser Health News


Another side effect of government mandates:

Several restaurants, hotels and retailers have started or are preparing to limit schedules of hourly workers to below 30 hours a week. That is the threshold at which large employers in 2014 would have to offer workers a minimum level of insurance or pay a penalty starting at $2,000 for each worker.

The shift is one of the first significant steps by employers to avoid requirements under the health-care law, and whether the trend continues hinges on Tuesday’s election results. Republican presidential nominee Mitt Romney has pledged to overturn the Affordable Care Act, although he would face obstacles doing so. President Barack Obama is set to push ahead with implementing the 2010 law if he is re-elected.

Pillar Hotels & Resorts this summer began to focus more on hiring part-time workers among its 5,500 employees, after the Supreme Court upheld the health-care overhaul, said Chief Executive Chris Russell. The company has 210 franchise hotels, under the Sheraton, Fairfield Inns, Hampton Inns and Holiday Inns brands.

“The tendency is to say, ‘Let me fill this position with a 40-hour-a-week employee.'” Mr. Russell said. “I think we have to think differently.”

Pillar offers health insurance to employees who work 32 hours a week or more, but only half take it, and Mr. Russell wants to limit his exposure to rising health-care costs. He said he planned to pursue new segments of the population, such as senior citizens, to find workers willing to accept part-time employment. He described the shift as a “cultural change” toward hiring more part-timers and not a prohibition against hiring full-timers.

SOURCE: Wall Street Journal


This bears watching should Obama win re-election:

While the ramifications of the suit pending in the U.S. District Court in Muskogee, Okla., are huge, the challenge brought last month has gotten little attention …

What is clear is that the outcome of the lawsuit could be crucial for the future of the health care reform law, observers said.

If premium subsidies are not available in federally established exchanges, “No one would go to those exchanges. The whole structure created by the health care reform law starts to fall apart,” said Gretchen Young, senior vice president-health policy at the ERISA Industry Committee in Washington.

“The health care reform law would become a meaningless law,” added Chantel Sheaks, a principal with Buck Consultants L.L.C. in Washington.

More from Michael Cannon here.

SOURCE: Business Insurance


An interesting decision in the Colorado governor’s latest budget request:

The current request does not include estimates related to the expansions of Medicaid pursuant to Federal health reform. We believe that sufficient uncertainty regarding important policy guidance exists at the current time. We expect more precise guidance in the coming months and will communicate this new information to you as soon as is practicable.

It’ll be worth seeing what he intends as of Wednesday.