Under Obamacare, Young Americans, Smokers Hardest Hit

Published January 28, 2013

Consumer Power Report #358

It’s clear that under President Barack Obama’s new health care reality, there will be at least two sets of people who will see the most significant premium increases from what they’ve experienced in recent years: people who are young and healthy who no longer experience any premium cost benefit from being young and healthy, and people who are exempted from the community rating requirement that they not be penalized for being prone to costly diseases – namely, smokers.

First, the young: Here’s a new calculator from Young Americans for Affordable Healthcare that will help you analyze how much your premiums are likely to go up over the next few years. Here’s an analysis conducted for the American Academy of Actuaries that outlines what a typical young, healthy person might experience:

Consider, for example, a 25-year-old person with income at 300 percent of [the federal poverty level], or $33,510. This person currently could purchase coverage for about $2,400 per year, or 7.2 percent of his or her income. Age band compression and the other changes to the [Affordable Care Act] would result in premiums (before premium assistance) increasing by 42 percent to $3,408. … This person at 300 percent FPL will be required to pay 9.5 percent of his or her income, or $3,183, toward the cost of coverage. The cost of his or her actual premium would increase by $783, even with the $225 in premium assistance.

That’s an enormous hit to the wallet, considering how strained the finances of young people can be. The possibility of just paying a fee of $95 and getting coverage if you need it seems far more appealing, and it makes rational sense.

What about smokers? The Associated Press reports on the price hikes they’re likely to see:

Take a hypothetical 60-year-old smoker making $35,000 a year. Estimated premiums for coverage in the new private health insurance markets under Obama’s law would total $10,172. That person would be eligible for a tax credit that brings the cost down to $3,325.

But the smoking penalty could add $5,086 to the cost. And since federal tax credits can’t be used to offset the penalty, the smoker’s total cost for health insurance would be $8,411, or 24 percent of income. That’s considered unaffordable under the federal law.

What about the argument that this should be up to them, as adults, to make a decision about their lives and health?

“This is my life. I should be able to do what I want,” said Sebastian Lopez, a college student from Queens, speaking last September when the New York City Board of Health approved the soda size rules. … If 1 in 5 U.S. adults smoke, and 1 in 3 are obese, why not just get off their backs and let them go on with their (probably shortened) lives?

Because it’s not just about them, say some health economists, bioethicists and public health researchers. “Your freedom is likely to be someone else’s harm,” said Daniel Callahan, senior research scholar at a bioethics think-tank, the Hastings Center. …

That’s the rationale for a provision in the Affordable Care Act – “Obamacare” to its detractors – that starting next year allows health insurers to charge smokers buying individual policies up to 50 percent higher premiums. A 60-year-old could wind up paying nearly $5,100 on top of premiums.

As Walter Russell Mead notes, however, this cuts both ways:

The concept that access to health care should be independent of the traditional principle of insurance (the higher the risk the greater the cost) is the animating moral core of America’s health reform movement. This effort to reintroduce a risk based insurance principle affecting tens of millions of people seems odd, to say the least.

It also seems a bit unfair. If we just look at a cost benefit calculation, it may be that smokers by living shorter lives and therefore incurring fewer Medicare bills and getting less money from Social Security are already contributing towards a ‘fair share’ of the cost of their condition. Most of us will ultimately get sick and die of something very expensive; smokers do so roughly a decade earlier than most people. Shouldn’t those savings be factored into the costs being imposed on them?

We also wonder how the law will be enforced. Will the government send snoops into the homes of people who claim to have quit smoking? Will there be spot checks? Will poor, elderly, semi-literate men be prosecuted for the crime of lying about their smoking behavior in order to get health insurance?

Perhaps Mead’s example seems extreme. But is it really? This is the inevitable result of government attempting to warp markets to behave the way they wish they would: lawsuits against poor people for lying about their behavior for the only preexisting condition Obama doesn’t appear to care about – one he himself shares.

Benjamin Domenech



Problem: No idea how to pay for it.

After two years of pressure to say how it was going to pay for its single-payer health care plan, Gov. Peter Shumlin’s administration on Thursday released a new accounting of what Vermont’s universal health care system might cost, but left for later how it would be paid for.

Reports released by the governor’s office say Vermonters would have to pay $1.6 billion in new taxes to pay for their share of a single-payer system that can’t be implemented until 2017. But that would be more than offset by the fact that most individual and employers would no longer be buying private health insurance, a savings of $1.9 billion, the report said.

Exactly what kinds of taxes would provide that $1.6 billion will be decided in a public discussion process whose details are to be announced next month, administration officials said.

A state law passed in 2011 with strong legislative support called for Vermont to move well beyond the federal health overhaul of 2010 to something closer to what Canada has in place: a universal health insurance system in which the government ensures everyone has coverage. Shumlin’s administration estimates the total cost of universal health care to be $3.5 billion, with much of that being covered by federal contributions.

A group critical of the state’s health care plans, Vermonters for Health Care Freedom, said the cost is simply too high.

“$1.6 billion is over two and one half times what Vermonters pay in income taxes, and nearly five times what the state collects in sales and use taxes,” the group said.

One section of the law set a deadline of Jan. 15, 2013, for the administration to make a proposal for the legislature providing what the new system would cost and how it would be paid for.

At the time, it was thought the state might get a special federal waiver allowing it to start up its new system in 2014, but Congress has [not] taken action [on] a waiver. Under the federal Affordable Care Act, that means 2017 is the earliest Vermont could implement its system.

Administration officials have been saying for months there’s no point in deciding how to pay for the universal system four years before it starts.

SOURCE: Brattleboro Reformer


Rick Snyder signs tort reform measure into law.

Michigan Republican Gov. Rick Snyder signed legislation last week that strengthens the state’s medical malpractice tort laws and provides additional protection against lawsuits to physicians.

The Michigan State Medical Society (MSMS) initiated the legislation, known as the “Patients First Reform Package,” with support from medical malpractice insurer The Doctors Company and its trade organization, the Michigan Insurance Coalition. The legislation is comprised of Senate Bill 1115 – which clarifies that loss of society or companionship constitutes noneconomic damages and is therefore subject to Michigan’s noneconomic damages limit – and Senate Bill 1118 – which limits the time period for suing on behalf of a deceased person and bans prejudgment interest on costs and attorney fees incurred during the time before a judgment is issued.

“In general, physicians are supportive of tort reforms that keep them out of the courtroom and keep them in the operating room,” said Colin Ford, MSMS’ senior director of state and federal government relations. “It’s good when the rules are clear to both sides and fair to both sides.”

Ford noted that the legislation is not intended to bar all lawsuits from reaching the courtroom.

“When people have a justifiable reason to go to court, they still have access, but we are doing anything we can do to limit (unwarranted) cases from going to court,” he said.

Ford also believes the new legislation will decrease the prevalence of defensive medicine and reduce the burden on doctors who often fear being the target of a lawsuit. Although it is difficult to pinpoint the cost of defensive medicine, it is generally thought to add 10 to 20 percent to the annual cost of healthcare nationwide.

SOURCE: Health Care Finance News


States try to calculate costs:

Nebraska is a perfect example of a state eager to avoid the high costs that a state-run health insurance exchange would bring to the Cornhusker State. In the November 2012 press release in which Nebraska announced that the state would participate in a federal health exchange, it was revealed that a state-run health insurance exchange would cost the state an estimated $646 million from 2013 to 2020 for an average annual cost of nearly $81 million. For comparison, a federal health insurance exchange in Nebraska would cost the federal government only $176 million over the same period, a difference of $470 million over the course of eight years. Of the cost difference between state-run and federal-run exchanges, Governor Dave Heineman stated that “it is simply too expensive to do a state insurance exchange.” …

Wisconsin, led by Governor Scott Walker, is another state which has acted to avoid the high costs that would result from the implementation of a state-run health insurance exchange. Estimates from the Walker administration indicate that implementing a state-run health insurance exchange in Wisconsin would lead to an annual operating cost between $45 million and $60 million. For Governor Walker, the estimated annual cost would be too much to pass along to taxpayers, saying that “if the state option is chosen … Wisconsinites face risk from a federal mandate lacking long-term guaranteed funding.” By avoiding the $45 million to $60 million annual costs associated with a state-run exchange, Wisconsin is also avoiding the potential for higher annual costs in the future, with estimates showing that ObamaCare will lead to an average increase in individual insurance premiums in the state of 30 percent by 2016.

In Ohio, estimates from the state’s Department of Insurance indicate that setting up a state-run health insurance exchange would cost as much as $63 million, followed by costs of $43 million to run the exchange each year. Among the reasons why Ohio decided to avoid a state-run exchange, Governor John Kasich lists “higher health insurance costs, significant uncertainty in [Ohio’s] insurance market and major new costs to states.” Instead, it will cost the federal government only $21 million to set up its health insurance exchange in Ohio, with smaller operating costs than those which the state of Ohio would have incurred with a state-run exchange. In addition to avoiding the cost of implementing ObamaCare from being passed along to them by the federal Government, Ohio is also avoiding the possibility of higher annual operating costs in the future. According to projections from the Ohio Department of Insurance and the actuarial consulting firm Milliman, it is estimated that individual health insurance premiums in Ohio will increase by 55 to 85 percent by 2017.

SOURCE: Freedom Works


Small business owners remain concerned about rising health care costs:

The most-important takeaway from the January Wells Fargo/Gallup Small Business Index is that health care costs are a huge worry for small businesses.

Fifty-four percent of respondents said health care costs were hurting their businesses a lot, and this is translating into less hiring. The survey found that 61% of small business owners who said they weren’t hiring “point to worries about the potential cost of healthcare as the reason they are not hiring.”

Supporters of the Patient Protection and Affordable Care Act (PPACA) said it would reduce costs, but as the U.S. Chamber’s Small Business Outlook found, small businesses don’t buy that. Seventy-five percent think the health care law will increase their costs, and 71% said it would make it harder to hire more workers.

The PPACA is forcing firms to be creative in managing expected new costs. Some are looking at hiring part-time workers instead of full-time ones and others are restructuring their businesses to stay below the magic 50 full-time equivalent employees line to avoid being hit by the PPACA’s employer mandate set to take effect in 2014.

SOURCE: Free Enterprise


A trend likely to continue:

While the number of concierge doctors remains small, it’s growing at a rapid clip. In the U.S., there were about 4,400 private physicians in 2012, a 25% increase from 2011, according to the American Academy of Private Physicians. That’s out of some 600,000 practicing doctors nationwide. At an average of roughly 350 patients per concierge doctor, that means more than 1.5 million Americans are under the care of a physician who provides an additional level of service in exchange for a fee.

Concierge medicine’s perceived advantages will only grow in the coming years, experts say, as the traditional health-care system becomes even more strained. The full implementation of the Affordable Care Act next year is expected to bring more than 20 million formerly uninsured patients into the health-care system through 2022, exacerbating an existing physician shortage.

What’s more, proposed changes to Medicare could cut doctors’ reimbursements, further squeezing their revenue. Concierge doctors make the case that their fee cushions them, and by extension their patients, from these changes looming on the health-care horizon.

That’s an argument that could be particularly persuasive to those approaching retirement – and Medicare eligibility. As one of the biggest recipients of federal tax dollars – the government spent $486 billion on Medicare in 2011, according to the Center on Budget and Policy Priorities – Medicare is vulnerable to cuts as part of any congressional effort to trim the budget deficit.

Proposed changes to the program include raising the eligibility age and implementing more income-based pricing. The government could also decide to reimburse doctors even less for their services. As it stands, Medicare these days usually pays doctors only enough to meet their overhead – that is, to pay the rent, support staff and other expenses – with little left over for the doctors’ salary, said Jeffrey Milburn, a consultant in the Health Care Consulting Group of the Medical Group Management Association, a trade group for medical practice managers.

SOURCE: Market Watch


Shouldn’t emergency rooms be for emergencies?

People who arrive in the ER with less pressing issues often have to wait for care, sometimes for hours. But when a minor complication sent Uner back to the emergency room at St. Alexius Medical Center in Hoffman Estates, he was able to make an appointment online and practically waltz right in.

“Instead of sitting there in the waiting room with everybody else coughing and with colds, I could wait at home,” said Uner, of Schaumburg. “I got there and probably waited less than five minutes.”

St. Alexius is one of more than a dozen Chicago-area hospitals that have begun posting ER wait times on the Internet or allowing patients to reserve a place in line from their homes. Administrators say they hope to put an end to the long, unpredictable and uncomfortable waits people associate with emergency rooms.

But adding such conveniences is about more than the warm and fuzzy side of medicine. Hospitals paid by Medicare are now required to report whether they are trying to reduce their ER wait times. And a decline in payments from the government and insurance companies is pressuring hospitals to explore new strategies that will attract new patients and boost revenues.

Some experts also question whether such services might send a mixed message to people with life-threatening symptoms. Those patients shouldn’t waste time looking for the shortest line, doctors say; they should go directly to the nearest ER, where they will be seen immediately – regardless of anyone’s appointment …

Edward Hospital’s wait times are accessible via app, text, online and phone. In addition, the health system posts the information on digital billboards in Plainfield and Bolingbrook, a move that a hospital administrator acknowledged was as much about brand exposure as customer service.

Experts say hospitals’ motive for offering such information is clear: bringing in patients and creating new revenue streams. Emergency departments are a crucial pipeline for people who require hospital stays and tend to bring in the most money.

But hospitals are after even those patients who don’t need intense treatment. Once hospitals get new patients in the door, they can funnel them through primary-care physician groups – either owned by the health system or affiliated with it – for follow-up care, raising their chances to hold on to those customers over the long term.

SOURCE: Chicago Tribune