Everybody Ready for Some Rate Shock?

Published July 1, 2013

Consumer Power Report #379

Today’s Wall Street Journal has one of the best updates I’ve seen on the impending rate shocks across the country.

Several big provisions in the law taking effect in six months affect rates for the estimated 20% of Americans who don’t have coverage through an employer, Medicare or Medicaid. Plans must be available to consumers regardless of their health and must cover certain items such as hospitalization, maternity care and prescription drugs. The exchanges are set to open Oct. 1 selling plans effective Jan. 1.

A review of rates proposed by carriers in eight states shows the likely boundaries for the least-expensive and most costly plans on the exchanges. The lower boundary is particularly important because the government wants to attract healthy people to the exchanges, and they may choose to pay a penalty and take the risk of going without coverage if they believe they can’t get an acceptable deal

For a 40-year-old single nonsmoker–in the middle of the age range eligible for exchanges–a “bronze” plan covering about 60% of medical costs will be available for about $200 a month in most places, the proposals show.

Though less generous than “silver” and “gold” plans on the exchanges, a bronze plan would still include fuller benefits than many policies available on the individual market today.

The challenge for the law is that healthy 40-year-olds can typically get coverage for less today, especially if they are willing to accept fewer benefits or take on more costs themselves. Supporters of the law say tighter regulation on insurance practices gives consumers more protection and is worth the extra cost, but they have to persuade people who don’t have an immediate need for health care of that. If only sick people buy into the new insurance pools, prices could shoot up.

Bob Laszewski, a Virginia health-care consultant and former insurance executive, said the new offerings were likely to anger people who had preferred lower-cost products that were no longer available.

“If a person in 2013 has a choice of buying a Chevrolet or a Cadillac health plan, and in 2014, they can only buy a Cadillac … are they going to be upset? I think the answer is, yes,” he said.

Virginia is one of the eight states examined by the Journal and offers a fairly typical picture.

In Richmond, a 40-year-old male nonsmoker logging on to the eHealthInsurance comparison-shopping website today would see a plan that costs $63 a month from Anthem, a unit of WellPoint Inc. That plan has a $5,000 deductible and covers half of medical costs.

By comparison, the least-expensive plan on the exchange for a 40-year-old nonsmoker in Richmond, also from Anthem, will likely cost $193 a month, according to filings submitted by carriers.

Chris Jacobs responds at The Foundry:

Liberals may argue that even though premiums may triple for some Americans, these individuals will be getting “better” insurance. But that’s not what then-Senator Obama promised–he said premiums would go down under his plan by $2,500 per family per year. Moreover, the Congressional Budget Office noted in 2009, well before the law passed, that premiums would go up in part because Obamacare forces individuals to buy more costly health insurance policies:

“Average premiums would be 27 percent to 30 percent higher because a greater amount of coverage would be obtained. In particular, the average insurance policy in this market [i.e., on exchanges] would cover a substantially larger share of enrollees’ costs for health care (on average) and a slightly wider range of benefits. Those expansions would reflect both the minimum level of coverage (and related requirements) specified in the proposal and people’s decisions to purchase more extensive coverage in response to the structure of subsidies.”

As much as the left is prepared to move the goalposts on this issue, the American people remain most concerned about the costs of premiums. Failure to address this problem is Obamacare’s Achilles heel, and it represents the primary reason that those who have discussed repealing the law continue to do so. Will Americans react vociferously to these rate increases? That depends on how much they connect it to the president’s law – and if opponents have any say in it, they will.

— Benjamin Domenech



The latest from Pennsylvania:

The state Senate Sunday night approved a bill to potentially expand Medicaid eligibility to hundreds of thousands of Pennsylvanians.

The bill cleared the Senate by a 40–10 vote, indicating strong bipartisan support.

The language, embedded in a yearly bill filled with updates to the state’s Welfare Code, now moves to the state House of Representatives, where its fate was unclear.

But Senate Republican and Democratic leaders say they negotiated it with input from Gov. Tom Corbett’s office, and wrote certain conditions into it to make it more amenable to Republicans who may otherwise oppose it.

At a Sunday night press conference, however, Corbett was keeping his powder dry, saying he wouldn’t take a position on the bill until he had a chance to review it.

Ultimately, the governor’s office would need to submit a plan that wins federal approval for the expansion. The bill requires Corbett to submit a plan by Oct. 1 in an effort to compel expanded Medicaid eligibility in Pennsylvania by July 1, 2014.

Earlier this week, House Republicans lined up against the expansion of Medicaid.

But State Sen. Pat Vance, a Cumberland County Republican, emphasized provisions in the bill that would cut down on waste and fraud.

“While we welcome the opportunity to receive additional funding to provide coverage for those in need, we must ensure that we have the resources available for those already being served,” Vance, chairwoman of the Senate Public Health and Welfare Committee, said in a statement Friday night.

“While expanding healthcare coverage to as many people as possible is a worthwhile goal, we need flexibility in order to do so without breaking the bank,” Vance said.

The Senate bill conditions the expansion on a state plan with employment and job search requirements, cost-sharing by enrollees and maximized use of private insurance plans instead of the traditional Medicaid plan. It also would revoke an expansion if the federal government backtracks on its pledge to pay for nearly all the cost to enroll adults up to 138 percent of the federal poverty level, or about $15,000 for one person.

SOURCE: Penn Live


Arizona Gov. Jan Brewer’s end-of-session interview:

The decision by Gov. Jan Brewer to push through Medicaid expansion in the recently ended legislative session over the objections of most members of her own party left the GOP in Arizona deeply divided.

But she said Wednesday that none of that is her fault. Instead, the governor said she was simply doing the will of the voters.

And if there is a schism, it’s not her fault.

“I don’t think I’ve left the party fractured at all,” she told Capitol Media Services in a post-session interview. “What I’ve been able to do and what I’ve been able to accomplish over the last five years is doing the right thing for the people of Arizona.”

And that, Brewer insisted, includes taking advantage of the Affordable Care Act – Obamacare in the parlance of its foes – to leverage $1.6 billion in federal dollars for just $240 million in state costs borne by hospitals.

Whether Brewer really is doing what Arizonans wants remains to be seen.

Medicare expansion first has to survive a threatened referendum. But Brewer sidestepped questions of whether voters deserve the final word on the expansion.

“I do not believe the voters will get the opportunity to vote on it, so it’s not a question I need to go further on,” the governor said. “I don’t think it’s referable.”

That’s based on Brewer’s contention that constitutional provisions allowing voters to veto state laws do not apply to matters involving the budget. And the Medicaid expansion plan, including both expanding eligibility and the hospital tax to pay for it, are part of the budget.

Anyway, she said, voters don’t need a direct voice on this.

“They elected us to make those kind of policies,” Brewer said. “And that’s what we have done.”

But the referendum may not be the only way for voters to express their views of Brewer on the 2014 ballot. The governor also said she remains convinced that, despite a constitutional provision, she can run that for what would be a third term.

“I have not made up my decision,” she said.

SOURCE: East Valley Tribune


The legal battle isn’t over.

Perhaps the best known challenges are those to the health-care law’s requirement that most employers health plans cover contraceptives for all employees. Some businesses had petitioned for an exemption from this regulation, but the Obama administration did not grant it. So, they turned to the federal court system. Thirty-one private companies have filed lawsuits challenging this part of the law, according to the National Women’s Law Center.

Where they stand: Twenty-one companies have received injunctive relief as the court continues to work through a decision [on] the merits of these cases, which typically challenge the contraceptive mandate as a violation of religious freedom. Seven courts, though, have refused requests for injunctions. Only one district court, located [in] St. Louis, has ruled on the merits of such a challenge. It dismissed the case, which is now on appeal to the Eight Circuit Court. Hobby Lobby scored a victory Thursday, when an appeals court reversed a lower court’s decision against the private company, and ordered the judges to consider an injunction.

The Cato Institute’s Michael Cannon and Case Western Reserve University’s Jonathan Adler have spearheaded the argument behind lawsuits that challenge the constitutionality of delivering premium tax credits through the federally-facilitated exchange. These suits contend that, as written, the law only allows exchanges “established by a state” to administer these subsidies. If the federal government set up the exchange (as it has done in most states), then it would not have the authority to administer a crucial part of the Affordable Care Act.

Where they stand: Two lawsuits have been filed on this issue so far. In Pruitt v. Sebelius, Oklahoma Attorney General Scott Pruitt has argued that its unconstitutional to provide premium tax credits to the residents of his state. A separate case, Halbig v. Sebelius, makes a similar argument in a D.C. court. The plaintiffs there are represented by Michael Carvin, the same lawyer who co-argued the Supreme Court case against the health law. Both cases are still at the district court level, with no rulings yet on merits.

On the former case, HHS’s recent rulemaking shows the administration isn’t budging at all.

SOURCE: Washington Post


From Phil Klein, several reasons Obamacare won’t work:

One of the central aims of Obamacare is to make sure that older and sicker Americans (particularly those with pre-existing conditions who are currently denied coverage) can obtain health insurance at an affordable price. Achieving this goal will require attracting younger and healthier individuals into the insurance market, giving insurers a cushion so they can offset the higher cost of covering sicker individuals.

The problem is that because the law limits how much premiums can vary by age or health status, younger Americans will end up paying much higher rates than they would today. And that’s for young Americans who are currently insured. Maintaining the existing pool of young Americans will not be sufficient for Obamacare to function – insurers will need to pull in millions of young Americans who have decided to go uninsured under the current system. And young Americans who go uninsured effectively pay $0 a month in premiums. So, if they aren’t purchasing insurance under the current system, why would they choose to purchase insurance once Obamacare kicks in, when it promises to drive rates even higher? California, which has been touted by Obamacare supporters as a model adopter of the law, recently announced that the cheapest plan for a 26-year-old will be nearly $2,000 per year. Supporters of the law tout the subsidies that will help individuals purchase insurance, but a 26-year-old would not receive subsidies to purchase insurance if he or she earns $32,000 or more.

The administration hopes that the law’s requirement that individuals purchase health insurance or pay a penalty will compel young and healthy Americans to purchase insurance. But in the first year, the penalty will be just $95 (or a percentage of taxable income). If an insufficient number of young and healthy Americans sign up, it would mean that insurers would have to raise rates, which would then prompt even more young and healthy people to drop coverage, triggering another round of premium hikes. This scenario, known in the health care industry as the “death spiral,” could eviscerate the nation’s health insurance market.

And on the cost controls:

To help pay for Obamacare, lawmakers wrung out savings from Medicare by adjusting payment rates to medical providers such as hospitals and nursing facilities, predicting it would encourage them to operate more efficiently. However, it’s unclear whether the cost-cutting measures will prove sustainable, particularly for smaller, regional hospitals.

Paul Spitalnic, the acting chief actuary of the Centers for Medicare and Medicaid Services, warned last month that if fully implemented, the Medicare cuts would slash payments to some providers so severely that they’d be losing money by agreeing to accept Medicare patients. Spitalnic predicted that, “Congress would have to intervene to prevent the withdrawal of providers from the Medicare market and the severe problems with beneficiary access to care that would result.”

The problem is that if the Medicare cuts aren’t put into effect, Obamacare could actually add $6.2 trillion to the nation’s long-term deficit instead of reducing it slightly, according to a recent analysis by the Government Accountability Office.

SOURCE: Washington Examiner


Schadenfreude, anyone?

Three letters have been giving the payroll-services industry fits for several months now: ACA. That’s the semi-acronym for the Patient Protection and Affordable Care Act, better known as Obamacare, and it’s up to the payroll industry – which cuts checks to production workers and offers related financial services to TV and film studios – to help educate its clients on the rules before a good portion of the law kicks in Jan. 1.

“It’s a morass of regulations and requirements, and everyone’s trying to figure out what their exposure is,” says Eric Belcher, president and CEO of Cast & Crew Entertainment Services. Adds Mark Goldstein, CEO of Entertainment Partners, which has held 16 seminars to help studios understand ACA: “It’s going to be a very big deal.”

Determining the exact nature of the new laws has been difficult, given that many ACA terms have yet to be worked out. Hollywood productions, for instance, might find it irksome simply trying to categorize employees as full- or part-time, seasonal or variable, and it’s important that they get the classifications right lest they face hefty fines. “ACA is thousands of pages, and it wasn’t written with this industry in mind,” says Belcher.

One of the unintended consequences, say some industry insiders, is that it could lead to productions running to foreign countries, given that ACA doesn’t apply to U.S. citizens working abroad. Some also say the number of production days in the U.S. are likely to be cut due to ACA because there’s a 90-day waiting period before productions must either pay a penalty or offer health insurance to full-time workers. That rule provides big incentives for a production to wrap in less than three months. While big-budget movies and season-long TV shows might not have such a luxury, smaller films or TV pilots could easily rush their schedules to make sure they come in at under 90 days.

But like much about ACA, the 90-day rule is subject to interpretation, says Daniel Cox, controller of payroll-services company PES Payroll. “Historically, if an employer had a 90-day wait period,” says Cox, “the benefits would kick in on the first day of the fourth full month of employment. Thus, that 90-day wait period was, in reality, as long as 119 days. The ACA is unclear on this. Does 90 days mean 90 days? If so, it really means 60 days.”

In order to dial down the frustration level, the major payroll-services companies are hiring outside tax, legal and benefits consultants – Cast & Crew has engaged Henehan Co., for example – and are setting meetings with production clients. Payroll firm Entertainment Partners has authored a 39-page report that includes 81 frequently asked questions. FAQ No. 7, for example, contains the seven steps to determine whether or not a production employs 50 full-time workers, which would trigger an “employer mandate” for health coverage. In a nutshell, if you’ve got about 40 employees who work 130 hours a month and an additional 20 who work 65 hours monthly, you’re probably subject to the mandate.

Payroll can represent as much as 45 percent of a production’s cost, and payroll-services companies are still crunching the numbers to figure out how much ACA could add to the budget of a typical production. While the administrative costs might rise a bit for the payroll companies, the costs of extra health coverage or penalties fall to the production companies. Nonunion productions might be hit hardest because workers aren’t already covered, but even union shoots typically employ many nonunion workers who might need health coverage under ACA.

SOURCE: Hollywood Reporter