Consumer Power Report #351
This piece by Jonathan Cohn in The New Republic is amazing for a number of reasons. It lays blame for Obamacare’s potential failure at the hands of a few think-tank critics, particularly (and deservedly so) Cato’s Michael Cannon. Clearly worried about the future of the law’s implementation, Cohn says states that respond to these critics by not creating exchanges are “totally sticking it to their own citizens” – this is news to the citizens of many of these states, who voted against exchange creation in ballot initiatives (most recently in Missouri – yes, the same voters who re-elected Claire McCaskill voted not to implement an exchange). Who knew the citizenry of Missouri was just one vast libertarian think-tank!
Cohn’s piece serves as an admission that state implementation of exchanges is almost essential to Obamacare’s ability to function, something the administration has always denied, but now seems ready to acknowledge:
“It’s a situation no one anticipated when the Affordable Care Act was written. The law assumed states would create and operate their own exchanges, and set aside billions in grants for that purpose.
“There’s no way around it – this is a big job,” said Sabrina Corlette, a health policy expert at Georgetown University.
Since different states have different insurance markets and different eligibility requirements for Medicaid, Obama’s Health and Human Services Department can’t simply take a system off the shelf as a one-size-fits all failsafe.
“You can’t simply deploy one federal exchange across the board,” said Jennifer Tolbert, director of state health reform at the Kaiser Family Foundation. “Each state is different – their eligibility systems are different, their insurance markets are different. [HHS is] going to have to build these exchanges to fit into the context of each state.”
Every state must have an exchange by Jan. 1, 2014, meaning HHS doesn’t have a lot of time to do a massive amount of work. The department could quickly run through a $1 billion fund designated for implementing the exchanges.”
“Beyond insurance rules and insurance exchanges, Obamacare faces other enormous uncertainties, like how many states will embrace its Medicaid expansion after the Supreme Court decision last summer allowed them to opt-out. Currently, six states (Florida, Georgia, Louisiana, South Carolina, Mississippi, and Texas) are saying they’ll sit out the expansion. Large states such as New Jersey and Pennsylvania are on the fence. Since Medicaid accounts for about half of Obamacare’s Medicaid expansion, and the exchanges are supposed to facilitate Medicaid enrollment, governors have leverage to push for changes to the program that will help them manage expenses.”
I understand Cohn is frustrated because he knows a federal exchange encompassing a third of the country is going to be a heavy bureaucratic lift for the administration. It’s also little solace that the states rejecting implementation of the exchanges likely won’t suffer politically, given that the people most engaged on the law are those who still oppose it. But he should get the legislative history right, at least – Cannon corrects him on that point here.
As for the longer game: Expect deadlines to continue to shift into 2014, continued pushback against regulations and rules, and implementation upheaval to become a significant election issue. Obamacare’s workability has always been secondary to political battles over the law’s future. Now, it is the primary concern – and the law’s supporters are increasingly nervous about it.
— Benjamin Domenech
IN THIS ISSUE:
What the contraception mandate means in practice:
If Hobby Lobby ultimately loses this case, it’s not hard to see which decision they’ll make given the choice between a $1.3 million per day fine and a $2 million per month fine. The latter, of course, is the amount they estimate they’ll pay for simply dropping insurance altogether and shifting all employees onto Medicaid and the subsidized exchange coverage.
Think it’ll be a hard decision? Maybe understanding who these people are would give you some clarity.
The Hobby Lobby folks are a straight-up American success story. A family business, started in Oklahoma in 1970 with a $600 bank loan, they started by making their frames from wood bought from local sellers, building them in their garage. The kids glued them together on the kitchen table in exchange for baseball cards. The family opened their first frame retail shop in Oklahoma City in 1972. They had four employees. Now they have 514 stores in 41 states. They employ 13,240 people full time. In 1981 they added another store to the family, Mardel, a Christian/church supply shop which sells Bibles and study books, curriculum, Christian craft supplies. That’s another 35 stores, in 7 states, with 372 employees. So they went from a garage business started with $600 to two businesses that employ more than 13,600 people full time across basically the entire country.
The company remained all privately owned, with no franchising. Their statement of purposes and various commitments all begin with Bible verses, commitments to honor the Lord. The Hobby Lobby folks pay well above minimum wage and have increased salaries four years in a row despite the recession. They are teetotalers of the old Oral Roberts variety, refusing to stock shot glasses, don’t sell any of their store locations with liquor stores, don’t allow backhauling of beer shipments – all things that could make them money, but they just bear the costs. Every Christmas and Easter, the Hobby Lobby folks advertise a free Bible and spiritual counseling. They are closed every Sunday. The family also signed the giving pledge, committing to donate the majority of their wealth to philanthropy.
So: I doubt this is the type of company to spend one dime on this contraception mandate. They will just drop coverage, and pay employees the difference, shifting them onto the exchanges or the taxpayer, rather than compromise their beliefs. It’s logical, it’s more predictable as a budgeting choice, and it will save them tens of millions in the long run versus retaining coverage and paying the fine.
The Supreme Court has revived the religious liberty-based challenge to Obamacare from Liberty University, which could accelerate consideration of many of these matters.
SOURCE: Real Clear Politics
Robert Book on the recently released HHS rules:
“Insurers will not be able to charge someone more just because she is sick or because she used to be sick,” as Health and Human Services Secretary Kathleen Sebelius described the law’s ban on surcharges and exclusions for pre-existing conditions.
How much could this add to premiums? We can get an idea by looking at premiums for “guaranteed issue” insurance that already exists, as a result of the HIPAA law passed in 1996 (by a Republican Congress, and signed by President Clinton). HIPAA requires guaranteed issue insurance with no surcharges or exclusions for pre-existing conditions to individuals and families who’ve lost employer-sponsored coverage and exhausted their COBRA continuation coverage (if any).
To take an example, in Virginia CareFirst BlueCross charges $1978 per month for guaranteed issue coverage (with variations depending on the deductible the customer selects). An equivalent plan without guaranteed issue costs $333 per month. That’s a difference of $1645 per month, or almost $20,000 per year more. As it stands now, people with pre-existing conditions might find it worthwhile to pay that much, but others can get coverage at a much lower rate. But for 2014 and onwards, only the more expensive coverage will be available. This means that healthy families buying coverage on their own could see premium increases of $20,000 – a far cry from the decrease of $2500 promised by candidate Obama in 2008.
Of course, it is possible in theory that with more people, including healthy people, enrolling in guaranteed-issue insurance, the average health of the insurance pool would improve, and the premium increase could be lower than the full $20,000. But it is not likely to be much lower. Consider the decision from the point of view of a healthy customer with no pre-existing conditions. Would they rather pay an extra $20,000 for insurance, or pay a penalty of a few hundred dollars for not having “qualified” insurance? Especially if they know that if they ever develop a serious health problem, they can always get insurance at the same guaranteed issue rate that they would pay without it. (Even if they have to wait until the next calendar year to begin coverage, most people would have saved more than enough in the years before to pay out-of-pocket until the following year and still come out ahead.)
In other words, the same ban on on surcharges and exclusions for pre-existing conditions that makes it easier for those with pre-existing conditions to obtain coverage simultaneously makes going without insurance much more attractive for those without pre-existing conditions.
Nowhere close to what we’ll need given the aging population:
In this projection of workforce needs, we used the Medical Expenditure Panel Survey to calculate the use of office-based primary care in 2008. We used US Census Bureau projections to account for demographic changes and the American Medical Association’s Masterfile to calculate the number of primary care physicians and determine the number of visits per physician. The main outcomes were the projected number of primary care visits through 2025 and the number of primary care physicians needed to conduct those visits.
Driven by population growth and aging, the total number of office visits to primary care physicians is projected to increase from 462 million in 2008 to 565 million in 2025. After incorporating insurance expansion, the United States will require nearly 52,000 additional primary care physicians by 2025. Population growth will be the largest driver, accounting for 33,000 additional physicians, while 10,000 additional physicians will be needed to accommodate population aging. Insurance expansion will require more than 8,000 additional physicians, a 3% increase in the current workforce.
SOURCE: Annals of Family Medicine
Giving employees more choice, less money:
In a major shift in employer-sponsored health insurance coverage, companies such as Sears Holdings Corp. and Darden Restaurants Inc. are giving employees a fixed amount of money and allowing them to choose their own coverage based on their individual needs.
The approach, called defined contribution health insurance, contrasts to the decades-old practice by most U.S. employers of offering workers a one-size-fits-all plan with benefits they may not want. It also means American workers who’ve grown accustomed to having their benefits chosen for them could wind up with bigger bills and inadequate coverage if they don’t choose wisely.
“It’s a big, big change in the nature of what it means to have health insurance,” says David Cutler, a Harvard University economist.
Until now, defined contribution health insurance plans have been largely limited to small businesses and retirees. But more employers are considering them as a way to control their rising health care costs. After all, the average annual premium – or cost for insurance coverage – for an employer-sponsored family health plan has almost doubled in the past decade to nearly $16,000, according to the nonprofit Kaiser Family Foundation. And companies generally foot at least 70 percent of that bill.
But now the plans are catching on. Benefits consultant Mercer found that 45 percent of the 2,809 employers it surveyed earlier this year are either using or are considering a defined contribution approach.
As a result, insurers and benefits companies are rolling out online exchanges where workers can buy insurance coverage roughly similar to how they buy plane tickets on travel websites. The private sites are similar to the public online exchanges that will enable people to buy insurance starting late next year as part of President Barack Obama’s health care overhaul.
Aon Hewitt, a benefits consulting giant, expects 200,000 people to enroll this fall in coverage offered through its online exchange. Darden, which operates the Red Lobster and Olive Garden chains, and Sears are offering their defined contribution plans through Aon’s exchange site.
SOURCE: Washington Post
An interesting study:
In this study, we found that patients with online access to their medical records, including secure e-mail communication with clinicians, had a subsequent increase in use of most in-person and telephone clinical services, which is contrary to our expectations and the results of some prior studies. In the year following activation, members with such access had increased rates of office visits, telephone encounters, and acute care services compared with a matched cohort of members without online access. These findings were consistent in both younger and older individuals and for those without chronic health conditions. We found more variability in rates of utilization by MHM users with chronic illnesses. This finding is in contrast to a previous study of MHM users but consistent with the finding for patients with chronic illnesses using telemonitoring services.
There are several possible explanations for these findings. Coile stated that patients need “better, faster, cheaper” processes of care for diagnosing, treating, and monitoring their health. Online access to care may have led to an increase in use of in-person services because of additional health concerns identified through online access. Members might have activated their online access in anticipation of health needs. Members who are already more likely to use services may selectively sign up for online access and then use this technology to gain even more frequent access rather than view it as a substitute for contact with the health care system …
Further research is needed to evaluate why patients seek and subsequently use online access and whether online access affects health outcomes beyond utilization. Comparing clinical outcomes between online users and nonusers may prove beneficial in tailoring services to member needs. Further evaluation of the cost and benefits of online access to health care services, virtual visits (such as e-mail communication between patients and clinicians), and clinical decision making is also needed.