Consumer Power Report #376
A few months back, the Obama administration took flak for initial plans to delay part of Obamacare’s small-business exchange.
The idea, floated in regulations last month, wouldn’t put off the Small Business Health Options Program, or SHOP, altogether. Small businesses could still buy coverage for their employees on the new exchanges. What would be put off a year was an employee choice component: Rather than have each worker pick a plan, the employer would pick one insurance provider for everyone.
Those were preliminary regulations that got 40 comments from interested parties, some of whom urged the White House to rethink its decision and allow for employee choice in the first year of the exchanges’ operation.
On Friday, Health and Human Services issued its final regulation, and the delay still stands, with federal officials noting worries about getting the choice function ready to launch in less than six months.
“We have serious concerns that issuers would not be operationally ready to offer [health plans] through the SHOP if we implemented employee choice for 2014,” they write in the final regulation.
The final regulation is essentially the final word; it means that in 2014 many small businesses will need to choose one insurance plan for their employees, rather than leave the decision to workers.
This is only part of the story of the hassle small businesses will experience when it comes to shifting to the SHOP exchange. It remains an open question generally how much competition we’ll actually see in the exchanges. For now, the feds are essentially going to use the bandage of allowing a small group to come into the SHOP exchange and sign up for a plan selected by the employer. But what will the effects be for such employers and their employees? It’s still clear as mush.:
Other business owners say costs could go down if the exchanges yield cheaper rates for individual plans, leading some workers to drop their employer-funded plans altogether.
“If I insure fewer people, my benefit costs go down,” says 41-year-old Kurt Gabrick, who runs a software-consulting firm in Tucson, Ariz., with eight full-time employees. Mr. Gabrick says he currently pays half of his employees’ health-insurance costs – or a total of about $4,000 a month–as part of a small group plan, he says.
Still, other businesses are planning to renew their current plans later this year – before they become due – so they can take their time to evaluate the exchanges. To accommodate them, many insurers are offering the option of renewing plans in December, a month before the law kicks in, says Brian Hassan, founder of BayPoint Benefits, a San Francisco-based health-insurance consulting firm for startups and small firms.
As the Wall Street Journal notes, Maryland’s exchange for small businesses won’t open until January, and Washington state’s is delayed as well. For small businesses that can’t turn on a dime and have to make a decision about how to cover their employees, this lack of predictability is going to lead to all sorts of problems. But of course, I’m sure the folks at HHS understand that.
— Benjamin Domenech
IN THIS ISSUE:
The numbers from Cali are better than expected … but that’s not saying a lot.
There’s just one catch: California isn’t comparing next year’s individual insurance rates to what individuals pay now. They’re comparing it to what small businesses pay now.
Conservative critics have been jumping on that difference, saying it’s not an apples-to-apples comparison. In fact, California is comparing the new rates to “a completely different type of insurance product, that bears no relevance to the actual costs that actual Californians face when they shop for coverage today,” commentator Avik Roy wrote in a Forbes blog post.
But it’s not just conservatives who say the comparison is misleading – other analysts are raising questions about it, too.
Micah Weinberg, a senior policy adviser at the Bay Area Council, a public policy group backed by the business community, says California’s overall trend is good and “shows that state-based reform is possible.” But he also says the decision to compare rates to the small-business market, rather than the current individual market, “may have been too clever by half.”
Lee, however, says the current individual health policies aren’t the right comparison, because some of them are skimpier than they’ll have to be under Obamacare. The health care law sets up “guardrails” for the kinds of benefits individual policies will have to cover, he said, and they’re closer to the level of benefits many small businesses get now.
Weinberg says that’s true – some current individual policies have “crappy coverage,” including ones that require people to pay as much as half of the costs of the medical services. But that’s still the comparison most people are going to use, he says, when they’re deciding whether Obamacare made their rates go up.
“I just don’t want us to set up the unrealistic expectation … that everyone is going to be better off,” Weinberg said. “Change is coming, and it’s going to be vastly less expensive for most people and more expensive for some people.”
Getting people to sign up for what they don’t need:
The success of the healthcare law “depends on reaching everyone who is uninsured, but particularly young people who may feel like they don’t need insurance,” said Larry Levitt, a senior vice president at the Kaiser Family Foundation. Convincing them to spend money on insurance, he said, will be a “marketing challenge.”
Getting young adults on board will require changing cultural norms, Levitt said. “For kids in their 20s … following convention isn’t their first instinct,” he said.
The federal law allows young adults to stay on their parents’ policies until they are 26. About 425,000 people in California have taken advantage of the new benefit, officials say, leading to savings for them and their families when they go to the emergency room.
Still, more than 2 million Californians ages 19 to 34 are uninsured, according to the UCLA Center for Health Policy Research.
Beginning in 2014, nearly everyone will be required to have insurance or face a fine – $95 or 1% of their household income in the first year. Many young adults who are not covered through work or their parents may be eligible for Medicaid or the new state-based insurance market places known as exchanges.
Health officials worry that the fine, which increases over time, isn’t high enough to convince people to sign up for coverage. “The penalty itself will not convince a young person, or any other person,” said Oscar Hidalgo, a spokesman for Covered California, the state’s exchange. “Young people will need to understand the risks of not having health insurance.”
Osvaldo Lopez, 24, of El Sereno said he understands the risks because he plays soccer and worries about getting injured. But Lopez, a student who works part time, said he can’t afford it. After graduation, he hopes to get a law enforcement job that provides insurance so he won’t have to pay for his own.
Another student, Zach Gaul, 19, said he was thankful to still be covered under his parents’ plan, even though he has to pay them a portion of his paycheck for the coverage.
“I do reckless things all the time,” he said, listing recent activities: skateboarding, bike riding, drinking, racing cars, jumping off a waterfall. “If I get hurt, I’d like to be able to afford getting airlifted out.”
Covered California is developing media messages that are “a little edgier” and specifically target young adults, Hidalgo said. The state plans to use a financial security argument, telling young people that insurance can protect them from going broke if they are hospitalized after a car accident, a broken bone or an illness.
Last week, the state released its rates for health insurance under the exchange. While costs vary based on age and income, young adults with low or middle incomes are likely to receive substantial subsidies – for premiums, deductibles and co-pays. For example, a 21-year-old who earns about $16,000 would pay about $45 each month for the mid-level plan. State officials point out that costs could rise in subsequent years if not enough healthy people enroll.
In an effort to educate and enroll young adults across the state, Covered California also awarded millions of dollars in grants to the University of California, Cal State L.A. and the Los Angeles Unified School District.
SOURCE: Los Angeles Times
The president’s home state has difficulties:
ObamaCare implementation is tough going, even in the president’s old stomping ground: Springfield, Ill. The Illinois House, which is dominated by Democrats, passed the Medicaid expansion under the Affordable Care Act, but only by a whisker and after heavy lobbying of undecided Democrats.
Democratic leaders were so worried about the vote that they had to bring in Dick Durbin, the U.S. senator from the Land of Lincoln, to do some last-minute cajoling. The Democratic sponsor, state Rep. Sara Feigenholtz, labeled the bill “the cornerstone of our president’s agenda” and boasted that it will provide Medicaid coverage for 500,000 poor Illinois residents.
The measure eventually passed, 63–55. Every Republican voted “no” – an astounding result given the number of liberal Republicans in Springfield. Even more amazing, eight Democrats joined them in voting against the president’s signature “achievement.”
A major Republican argument was the poor quality of current Medicaid care. Why expand a bad system? The cost of the bill was also a factor because the state’s share of covering these new recipients rises over time. The state already can’t pay its bills. One observer in the gallery, Kristina Rasmussen of the Illinois Policy Institute, says, “the Democrats looked stricken after the vote even though they won.”
The bill might not have passed at all were it not for business support. The Illinois Chamber of Commerce, the Chicagoland Chamber and the retail lobby all endorsed the legislation, arguing that it would bring about $10 billion into the state from Washington. Hospital interests that have a big voice with state and local chambers expect to collect a big share of that largess.
SOURCE: Wall Street Journal
A new study from the New England Journal of Medicine:
The reform law’s young adult provision shifted $147 million in emergency room-related costs for young adults to insurers in only one year, a new study shows.
The study, published in the New England Journal of Medicine, estimated more than 22,000 emergency room visits in 2011 involved newly insured young adults. As a result, the provision allowing young adults to stay on their parents’ health plans until they’re 26 years old increased health insurance rates about 3 percent for young adults seeking emergency treatment.
“The change allowing young people to remain on their parents’ medical insurance is protecting young adults and their families from the significant financial risk posed by emergency medical care,” Andrew Mulcahy, the study’s lead author and health policy researcher at RAND, said Wednesday in a statement. “Hospitals are benefiting, too, because they are treating fewer uninsured young people for emergency ailments.”
What’s more, since the study only examined the most serious emergency cases, he added, “we probably underestimate the full financial benefits that the new rules have provided to young adults who need urgent medical care.”
Mulcahy clarified that the provision, which has led to more than 3 million young adults gaining health coverage, didn’t increase hospital visits among this group. It merely shifted the costs of paying for these visits to insurers. “The provision didn’t lead to more people going to the ER,” he told Health Day. “They would have gone without this provision, but they would have been uninsured.”
SOURCE: Fierce Health Payer
More pressure in Michigan:
Gov. Rick Snyder is redoubling his efforts to get lawmakers this month to approve expanding the Medicaid health insurance program for the poor before the Legislature recesses for the summer.
Snyder said Friday he has invited U.S. Health and Human Services Secretary Kathleen Sebelius to meet with Republican lawmakers to consider a House GOP proposal to put a four-year lifetime cap for able-bodied adults to be on Medicaid.
As state policymakers and business leaders departed Mackinac Island on Friday after the Detroit Regional Chamber’s annual three-day policy conference, Snyder said Medicaid expansion is a more pressing issue for the Legislature to address before its scheduled June 27 summer adjournment than raising new revenues for roads.
“I would say it has more urgency,” Snyder told reporters after wrapping up a policy conference that focused on education, immigration and Detroit’s future.
Michigan’s fiscal year starts Oct. 1, when the federally funded expansion would begin, so officials need time to get federal approval for changing the program to the Legislature’s liking, Snyder spokeswoman Sara Wurfel said.
Snyder’s original proposal to expand the Medicaid program under the federal government’s terms was rejected by fellow Republicans who want to place new restrictions on the taxpayer-funded insurance program.
The federal government has promised to pay for expanding access to the program to individuals earning up to $15,282 annually (or $31,322 for a family of four) through 2017. Then the state gradually would be expected to cover 10 percent of the costs.
“If we take this money, it’s not going to be on their terms, it’s going to be on our terms,” Senate Majority Leader Randy Richardville, R-Monroe, said Friday.
But federal officials have signaled they won’t approve a four-year lifetime cap on Medicaid enrollment, and Snyder has questioned the legality of such a restriction.
“That would be a challenge,” Snyder said of getting federal approval. The governor recently met with federal health officials in Washington, D.C., about the House GOP plan after lawmakers did not include his $1.3 billion Medicaid expansion plan in the 2014 state budget.
SOURCE: Detroit News
National Review editorializes:
Governor Brewer’s desire to expand Medicaid is predicated on a particular kind of economic illiteracy – to wit, the belief that there is such a thing as “free money” from the federal government, as though Arizona taxpayers were not also federal taxpayers. Medicaid is an extraordinarily expensive program, and one that has been shown in study after study to produce little or nothing in the way of measurable health benefits for recipients. It is an additional indicator of the program’s low quality that nearly a third of all U.S. doctors refuse to take on new Medicaid patients. It is the definitive federal entitlement boondoggle: big cost, little upside.
In addition to elementary economics, the governor requires a remedial education in civics. We have multiple branches of government and divided powers for a reason; she is the governor of Arizona, not its viceroy. Executives are entrusted with veto power to ensure that defective bills do not become law, not to hold the entire legislative process hostage until they get their way. Governor Brewer’s shenanigans are the political equivalent of holding one’s breath and stamping one’s feet. She is the Veruca Salt of governors.
Other Republican governors have made it clear that they intend to reject the Obama administration’s plan to expand Medicaid, a key part of the president’s wider program of cultivating maximum dependency upon the federal government by the states and the people at large. It is a companion piece to Obamacare – a program Governor Brewer has criticized – and necessary to the full implementation of that regulatory mess. Governor Brewer’s calculation here is particularly cynical: She rejects Obamacare, but wants the money that goes with it.
The Medicaid expansion is superficially attractive in that states are at first required to kick in only 10 cents for every $1 in new spending. They will have to pay more down the line, of course, but Governor Brewer does not seem to be looking beyond the next election. The 10 percent that Arizona will be responsible for will be paid for with a new tax on hospital services. It takes a special kind of genius to make health care more affordable by making it more expensive.
SOURCE: National Review Online