Department of Labor–ACA Summary Plan Description Guidance

There has been a great deal of conversation and interest from brokers, insurers and employers regarding the highly touted Summary of Benefits and Coverage paperwork that employers were required to start distributing on March 23, 2012 (according to PPACA).  The closer we got to March, the more concern there was in the ranks as everyone needed direction on how/what they needed to do in order to comply.  What were the documents to look like (i.e., what were the required contents)?  What was the timeframe that they needed to be distributed?

On Thursday, November 17th, the U.S. Department of Labor quietly posted a FAQ on their website which brings a great deal of clarity to this requirement.  It appears that the deadline has been delayed indefinitely until public comment and final regulations could be concluded.  Most pleasing, of course, instead of the Obama administration’s prior track record of making many provisions of various laws RETRO thus forcing carriers and brokers great expense in going back to clients that were newly eligible for the requirement (like the COBRA subsidies contained in the original Stimulus Package [and subsequent extension of the program] and the creation of the term ‘grandfathering’ in the ACA legislation effective the date of the passage of the law even though guidance/regulations that were required to administer that provision of the law did not come out for several months afterwards), they eluded to the fact that once the regulations were created, they would give the carriers lead time to implement the requirements.  Here is a link to the official release (http://www.dol.gov/ebsa/faqs/faq-aca7.html#pagecontent).  We wanted to get this note of positive news out to the field as soon as it became available.

If the healthcare law is upheld, what will happen in the small employer health plan market???

There is a great deal of uncertainty as to how the markets will react.  Different entities have speculated that anywhere from 30% to as high as 57% of employers will drop their health plan (Study Sees Cuts to Health Plans; McKinzey&Company June 2011 Quarterly Report).  That is a far cry from the Congressional Budget Office’s report (that was referenced by many when deciding how to vote on the law) which projected a mere 4% of the privately insured, employer sponsored healthplan population (equating to 6 or 7 million people) losing their employer sponsored plans (CBO Director’s Blog). 

The dicotomies of the two projections are ironic and only time will tell, where the ultimate truth lies; however, I found the attached Forbes article which was an interesting perspective on why employers would want to continue to offer benefits into 2014 (Five Reasons Small Businesses Shouldn’t Dump Health Care Benefits).

Health Insurance Carrier Profits

In my last post, I explained the Minimum Loss Ratio (“MLR”) requirement.  Today I am going to revisit the topic of “health insurance carrier profits” as, again, this seems to be an issue that is wildly misunderstood (even before the MLR came into play) and I think it is worth doing some more client education on the subject matter. Once again, the biggest disconnect between the “healthcare utilizing public” and the facts is that people do not seem to comprehend the cost of healthcare.  People do not seem to understand or make the connection that health insurance premiums are expensive because THE UNDERLYING COST OF HEALTHCARE IS EXPENSIVE and it is getting more expensive everyday (new treatments, new medications coming to market, new technologies and our aging population–just to name a few).  Since many plans have copays ranging from $20-$50 for doctor office visits (or Rx), people seem to think that equates to the cost of the visit but that is not the case.  The insurance carrier is paying many multiples of the copay even after you have paid your “copay”.  Since the average insured consumer usually has little idea what healthcare costs, the assumption is that because premiums are so expensive, the carriers must be wildly profitable.  Large premiums=large profits.  Although I cannot argue that premiums are quite high (and rising), I would like to dispel the myth of large profits.  Truthfully, according to Fortune Magazine in 2009, “Health Care: Insurance and Managed Care” ranked 35th on the list of profitable industries (Top industries: Most profitable), and the level of profit was only 2.2% margin.  Note that is well behind “Pharmaceuticals” (ranked 3rd at 19.3%), “Medical Products and Equipment” (ranked 4th at 16.3%) even behind “Health Care:  Medical Facilities” themselves (ranked 34th at 3.4%).  The products available in the marketplace also are indicative of this fact because the margins are so thin, many companies simply cannot make money and thus have left the market–and because the margins are so thin, no carriers are entering the market to replace them!  If an industry was super profitable, wouldn’t you think that companies would be flocking to it in order to reap the profits?  At the beginning of 2009, Illinois lost one of its largest insurers–UniCare–and since the legislation has passed, at least three of the longest term players have exited the health insurance market (The Principal®, Guardian, and Pekin).  So the next time the conversation comes up about “the profit taking insurance companies”, hopefully you will be able to shed some light on the realities versus the myths.

Discussion on Rate Actions

Well, after taking a several months “sabbatical” from writing blog posts, I thought I would pick this up again in the new year.  The contract modifications that carriers were required to institute with new or renewed business (that was modified) starting after six months of the law– the critical 9/23/10 date since the legislation passed on 3/23/10 has come and gone.  Since my last post, the HHS, DOL and IRS have been very busy releasing clarifications/revisions related to the law with the IRS clarifying the tax deductiblity of dependents, releasing clarifications (and postponing) the W-2 reporting requirements and postponing the Discrimination testing requirements for the health plans just to name a few. 

But the thing I want to focus on most in this post is a comment I often hear when presenting to the groups.  Frequently I hear clients say something along the lines of “Now the carriers are just increasing rates and using the legislation as an excuse to do it.”  But now that we have passed 1/1/2011, it is critical that we (as brokers) educate our clients on the not very well publicized acronym “MLR” that is a very important part of the Affordable Care Act (ACA) law.  It stands for the “Minimum Loss Ratio” requirement which legislatively states that the individual and small group markets MLR are set at 80% for individual and small group markets and 85% for large group markets.  What the provision of the law mandates is that if a carrier in the individual or small group market pays less than 80¢ on the dollar in claims, they will have to refund any excess to policyholders in the class across the board.  It is important to note that this calculation is done on a BLOCK basis–not an individual or specific small group basis–because we all know that there are many individuals and small groups that maintain several hundred percent loss ratios (ie, that the carrier has paid out claims many times over in excess of premiums received).  As a random and greatly simplified example, an individual policyholder that has been diagnosed with cancer and pays $4,500 per year in premium but has $265,000 paid in cancer treatments by the insurance carrier would have to have no additional claims for the next 59 years in order for the carrier to “break even” (claims equaled the premiums received).  Thus, it takes several hundred individuals or small groups running “very well” (ie, 50¢ of the $1.00 of premium received paid out in claims) in order to be able to offset that one shock claim.  The new legislation states AS AN ENTIRE BLOCK (all individuals or small groups), the carrier must spend 80% of that total populations’ premiums received on claims.  In the unlikely event that they spend less than 80%, a proportional refund would be required across the entire block– which would be an incredibly expensive endeavor to administratively undertake.  So to the contrary of the clients’ thoughts that the carriers are trying to “reap huge profits” before the balance of the law hits in 2014, they are simply uninformed. If the carriers overprice their products TODAY and exceeds the 80% MLR, they will have to refund the difference.  The fact of the matter is one that nobody ever wants to really admit–the cost of healthcare is going up rapidly because the underlying cost of care is increasing.  It is important for brokers to educate their clients as to the existence of the MLR; and that in the event they have a large increase, it is NOT to feed the “excessive profits” of the health insurance companies but rather to cover the claims of the ever changing, perhaps health status degrading, insured population.  In fact, due to the 80% MLR and the requirement that any excess be returned, there is no incentive (and frankly huge disincentive) in ”missing that mark”.  It is an education worth having particularly in harsh renewal environments.

Early Retiree Reinsurance Program (“ERRP”)

On June 29th, The Department of Health and Human Services’ (“HHS”) Office of Consumer Information and Insurance Oversight (“OCIIO”) announced that it will begin accepting applications for the Early Retiree Reinsurance Program (“ERRP”).  Created by the Affordable Care Act as a bridge to the new health insurance marketplace established by the Exchanges in 2014, this $5 billion program will provide financial assistance for employers including businesses, unions, state and local governments, and nonprofits that offer coverage to early retirees as part of their medical program so retirees can get quality, affordable insurance (HHS 6/29/2010 News Release).

The Official ERRP Program Application and instructions are now available.  Applications will be certified by HHS on a first come, first served basis.  Please remind your clients to read the Official ERRP Application Instructions as well as the Application Submission Dos and Don’ts before completing and submitting the application to HHS.  Incomplete, inaccurate and draft applications will not be accepted by HHS.  Resubmitted applications will “go to the end of the line” in the application process. 

Please read the ERR Program information carefully.  In its Special Bulletin dated June 29, 2010, BlueCross BlueShield of Illinois (“BCBSIL”) identified the following changes/additions from draft materials previously posted:

1. Send the signed original ERRP Application and attachments (if any) in hard copy to:
   HHS ERRP Application Center
   4700 Corridor Place
   Suite D
   Beltsville , MD 20705
2. On page 3, Part I:  Plan Sponsor and Key Personnel Information, Section B3 and B4, Date of Birth and Social Security Number are NOT required at the time of application.  However, they will be required only after approval from HHS.
3. On page 8, Part II:  Plan Information, Section E (Intended Use of Early Retiree Reinsurance Program Reimbursements) has been clarified:  Please summarize how your organization will use the reimbursement under the Early Retiree Reinsurance Program to reduce health benefit or health benefit premium costs for the sponsor of the employment-based plan (i.e., to offset increases in such costs); or reduce, or offset increases in, premium contributions, copayments, deductibles, coinsurance, or other out-of-pocket costs (or combination of these) for plan participants; or reduce a combination of any of these costs (whether offsetting increases in sponsor costs or reducing, or offsetting increases in, plan participants’ costs).
   
4. On the last page of the application (page 14), note the following:  Attachment:  Additional Benefit Options (Complete this form for each unique benefit option not already specified above in Part II.B).

The employer is responsible for completing and submitting the application as well as ensuring the accuracy of the information provided.  In the previously referenced Special Bulletin dated June 29, 2010, HCSC (parent of BCBSIL) announced it is offering the following services for a fee:

Application Services

• Anti-fraud and abuse standard language
• Custom chronic care and high-cost condition language
• Cost estimate for first two plan cycles

Reporting Services

• Claims reporting
• Report updates

For accounts that select a self-service option, the following services will be provided at no additional charge:

• Anti-fraud and abuse language
• Standard chronic care and high-cost language

Data Exchange and Service Agreement Information

In order for BCBSIL to provide reporting for the ERRP, HHS requires that the employer/sponsor sign a Data Exchange and Service Agreement prior to submitting claims for reimbursement.  Please note the signed agreement is not required for the application process. 

In summary, the ERRP will reimburse employers for medical claims for retirees age 55 and older who are not eligible for Medicare, and their spouses, surviving spouses and dependents.  Employers, including state and local governments and unions, who provide health coverage for early retirees are eligible to apply.  Reimbursements will be available for 80% of medical claims costs for health benefits between $15,000 and $90,000.  ERRP participants will be able to submit claims for medical care going back to June 1, 2010.

Fact sheets and application assistance can be found at www.hhs.gov/ociio.

IL Continuation/ARRA Update

The most recent “extension” of the original ARRA health insurance subsidy is set to expire on May 31, 2010.  As of this writing (as seems to be the case with the current political climate), no “fix” has been completed yet BEFORE the actual expiration date of the government program.  The initial passage of ARRA and the subsequent “extensions” of the subsidies have all been enacted to retroactive implementation dates.  
 
There is a current law pending in the house called the “American Jobs and Closing Tax Loopholes Act” which (in its current form) would extend the subsidy until yearend.  Based on what we are seeing, we are not expecting it to be completed before the summer recess (scheduled from May 29th to June 6th).  And of course once the House passes the bill, it will need to move to the Senate for approval and then ultimately to the President for his signature.  It is worth noting that this administration has proven on numerous occasions that once a bill starts to move, they are able to move it through the process quite quickly—even if it will need to be on a retroactive basis.  
 
Meanwhile, at the State level, on Saturday, May 15^th, Governor Quinn quietly amended the Illinois Continuation laws that intended to extend Illinois Continuation eligibility to ARRA subsidy eligible individuals to 15 months in order to coincide with the Federal ARRA subsidy program.  
 
NON-subsidy eligible Illinois Continuees appear to still have 12 months of Illinois Continuation.  We have reached out to all of our carriers for their interpretation/administration of the above referenced amendments.  Although all the carriers acknowledged that they were aware of the legislation, BCBSIL is the only insurer that has acknowledged that they are presently offering/ administering Illinois Continuation for up to 15 months for ARRA subsidy individuals (the materials reflected on BCBSIL’s website may not reflect this most recent change). The other carrier responses ranged from they were still reviewing the legislation and waiting for DOI responses/ clarifications or that they were waiting for corporate policy to be officially promulgated.  
 
Rather than waiting for the carriers to take a position, we wanted to make sure you were aware of the legislation that is “out there” and what the DOI most likely will be telling your clients if they were to call or email the DOI about their Illinois Continuation/ARAA subsidy eligibility.  Resource Brokerage was in contact with the DOI directly regarding this state law as soon as it passed to see what guidance they could provide, and the above synopsis summarizes our lengthy communications with them.  But as we all know, from time to time, carriers will interpret/administer the same legislation differently.  We will keep you posted as soon as more information becomes available on both the Federal and State levels!

ARRA Extension/IRS Releases Small Business Health Care Tax Credit Formula

As if we do not have enough going on legislatively as we try to understand the larger bill that went through (HC Reform Bill Timeline), the House and Senate passed a jobless benefits extension that was signed into law yesterday.  The “short-term fix” continues the COBRA/Illinois Continuation (ARRA subsidy) for all people who experience a loss of coverage (for qualified reasons) until May 31, 2010.  Congress has been working on a bill that “fixes” the problem through yearend but due to the nature of the legislation, the “longer term fix” seems bogged down in the process which is forcing them to pass these “interim measures” as the fixes expire (Amendment to H.R. 4851).  The CliffNotes version is if you become and maintain a ”qualified beneficiary” status between now and May 31, 2010, you will be able to continue your COBRA subsidy for up to 15 months.   

Last week, the IRS posted their “guidance” on the subject matter of the small business health care tax credits.  Click on the following link to review the Q & A (Frequently Asked Questions).  I also have attached a sample worksheet to determine if your small business will qualify for the tax credit (Three Simple Steps) and sample scenarios as to how the tax credit will work (Small Business Health Care Tax Credit Scenarios).

H.R. 3590 Gets Signed Into Law

As the Patient Protection and Affordable Care Act migrated through the House over the last few weeks, the Senate version (passed on Christmas Eve) ultimately passed the House and was signed into law today.  I was one of the few people that actually watched C-SPAN for nearly 5 hours this past Sunday.  Honestly, I was disheartened by the passage.  Believe it or not, not solely because of the content of healthcare bill but because of where this bill has taken our political system in this country. 

One congressman or congresswoman would say it would lower the deficit; the next person would say that it would add billions to the deficit.  One person would say it would help small businesses; the next person would say it would cost billions in new taxes to the small employer (Caterpillar: Health Care Bill Would Cost $100 Million).  The question that kept rolling around in my head was, “Is one party universally uninformed as to the contents/impacts of the bill (and spending nearly a trillion dollars) or do both parties know the realities–and one is lying and simply trying to mislead their constituency and hold onto their seat in November?”.  I often wondered about the 32 million uninsured people that were referenced literally by the moment with no discussion of the other 276 million people (the other 90% of the country with an official population of 308 million) that are being served by the system (and will be affected by taxes on durable medical equipment, prescriptions and the costs of mandates of increasing coverage levels to the legislative levels or the newly installed premium taxes).  How do we solve the affordability issues by legislatively increasing the cost of the items we are specifically trying to make affordable?     

I often heard references of the ”excellent programs” of Medicare and Social Security, but not one person seemed to talk about the fact that they are both bankrupt (Status of the Social Security and Medicare Programs)!  Nobody seemed to mention that they are both horrendously underfunded, and it does not appear that anybody has any answers as to how to sustain them on a go forward basis.  There was no shortage of trumpeting the two programs’  effectiveness.  How effective is a program that is not able to be financially sustained?  When people were trumpeting the attributes of Medicare, nobody was talking about the fact that doctors and hospitals are beginning to limit the amount of Medicare beneficiaries they are treating (Mayo Clinic to Stop Accepting Some Medicare Patients).

Finally, the thing that saddened me most was the lack of partisan support.  We are all in agreement that there are problems in the system and that some things need to be reformed.  But to have a single party take control of the legislative process–where they pass a piece of legislation right down party lines using terms of “avoiding the filibuster” in the Senate, resorting to reconciliation of a “simple majority” to ram a piece of legislation through–caused me to pause.  This is arguably the largest public entitlement program ever passed (with subsidies built in for families of 4 making $88,000 per year), and we do not have partisan support–in fact, it seems to have been designed and negotiated to “accomplish the bare minimum in order to pass it” as opposed to getting the most votes and the resulting best possible piece of legislation.  As American citizens, given that 40% of the members in the Senate didn’t like it and just shy of 50% of the legislators in the House did not approve of the bill, I do have to ask, “Did we end up with our best solution?”  Again, going back to Medicare in 1935 and Social Security in 1965 (History of 1935 Social Security Act), both had some level of bipartisan support when they were passed.    

Finally, from all the polls that I saw leading up to the vote, it seemed that the American people were concerned, worried and suspect of  THIS BILL and wanted the politicians to slow down and rework the document to come to a partisan solution.  Unfortunately, it does not appear (in this instance) that the government of the people, for the people, paid much attention to their constituents. 

So where we do we go from here?  Well, as mentioned earlier, the Senate version of the law has passed and was signed into law today by the President.  Simultaneously, as the Senate bill was passed, the House sent a separate bill to the Senate to “clean up” things that they did not like about the Senate version for Senate consideration.  In past congressional sessions, normally these differences are ironed out before the inital bill was passed.  HOWEVER, in this instance, because of the aforementioned political wrangling and the Democrats’ loss of a seat in the Senate since December (Scott Brown [R-MA]), they could no longer impose their will so they DID NOT want to open up the orignal bill for reconsideration (thus a revote).  So they came up with this solution…pass the originally passed Senate version (which they did not like) and then immediately send a separate bill (with a hope and a prayer) to the Senate to amend the things the House did not like about the original Senate bill.  Harry Reid (Senate Majority Leader) allegedly produced a letter for the House Democrats prior to the vote showing that 51 Senators had vowed to support the House bill that would be sent back to the Senate in the event that they passed the prior passed Senate Bill.  It is expected that the Senate will pick up the second bill this Thursday.  From our carriers’ perspectives, it appears that most carriers are immediately taking the “wait and see” approach to see if (or how quickly) the second House bill indeed makes it through the Senate (the one that amends H.R. 3590) before jumping into the original legislation (when, in fact, it could be immediately amended). 

My hope at this point is that the Republicans see the situation for what it is.  A bill was passed, and it has already been signed into law.  I am hopeful that the Senate will pick and choose their battles over the items that are indeed crucially important and NOT take the approach of muddying up the waters out of spite for being railroaded on the prior piece of legislation.  Make no mistake about it.  I do believe the law will be worse for America and Americans, but I also realize the bulk of the damage has been done and will continue to be done as the states try to pass their laws to amend/contradict the various aspects of the Federal law that they disagree with (for example, Individual Mandate).  Unfortuantely, I suspect this law will meet numerous lawsuits about items being constitutionally sound (where some states feel their soveriegn rights have been infringed upon).  

Bottom line–I believe America is tired of hearing and dealing with this.  They just wanted it done right–the first time.  It is unfortunate, but I feel that our legislators failed us on that goal.  Now the damage is done.  Our politicians (who are supposed to represent us) have cast their votes.  Now we want to get on with dealing with it.  The fact is that employers and individuals need their brokers now more than ever in order to assist them in navigating this new complex healthcare environment as it unfolds in the days, weeks, months and years to come. 

My only intentional political statement in all of this is to ask if you are unhappy with the path this bill took to become a law.  If you feel that the ‘checks and balances’ that our forefathers wrote into the Constitution were circumvented or manipulated (if nothing else by sheer congressional composition), cast your vote in November to make sure that the people we put there are held accountable to you as their constituents and perhaps get more of a balance where the two parties will be FORCED to work together to get anything done.

2010 Capitol Conference

I have just returned from spending three full days on Capitol Hill.  I was working with members of the House on the Senate passed Patient Protection and Affordable Care Act (now in the House for consideration).  There sure is a great deal of turmoil in DC right now.  I will be hosting a seminar, going over the numerous meetings I had with members of both chambers, on both sides of the aisle.  It was an action packed three full days (actually flew out this morning from DC and made it to my office desk by 9:30am).

If you are interested in hearing the details, please come to our seminar next Tuesday, March 16th, from 9-11am at the Schaumburg Conference Center in our office building (1501 E. Woodfield Road, Schaumburg).  Please RSVP to Judy Wrigley at 847-598-0039 or jwrigley@resourcebrokerage.com!

Legislation Passes Senate

No big surprise, the Senate did pass their version of the bill straight down party lines.  Of course the Senators that got in line first (or last if you were Sen. Ben Nelson, D-Nebraska) appeared to be huge winners for their constituents.   Click here to see the list of what the specific Senators won for their states (Concessions Lawmakers Won in the Health Bill).  Kudos to them for looking out for their constituents.  It is disheartening that the rest of the Senators sit on the sidelines and let their own constituents incur the cost of this “deal making”.  It is a shame that the American bureaucracy has come to this–instead of people voting on legislation based on the strength of the legislation and the fair and equitable distribution of the cost of the government programs “that will benefit all Americans”,  their votes could be simply “bought” by more government funding/subsidies while simultaneously transferring their costs to the rest of the country.  To the voters of Illinois, it is important to note that neither of our Senators looked for any help or had any issue with the cost of the program that will begin to be shifted over to the states in 2017 despite the fact that the Illinois state budget gap is $10 billion heading into 2010 and despite the fact that our state bond rating has been downgraded earlier in the same month.  It is also important to note that Illinois has the 5th largest population in the country so you can expect the “Federal government subsidy phase-out” (transferring liabilites to the states– with significantly more people eligible for the Medicaid subsidies than todays numbers) will have some of the largest financial impact on the state of Illinois (Illinois Debt Rating Cut by Standard & Poor’s).

I believe the American people “checked out” of the debate after the summer recess of the house with all the yelling and screaming at the town hall meetings.  Despite the fact that most people do not like the legislation and/or have concerns about the legislation, my personal belief is that they have resigned themselves to the fact that our politicians do not listen to us and are going to do what they are going to do whether we like it or not (Republicans Want Democratic Healthcare Defectors).

The next few points directly relate to the most recent Congressional Budget Office (CBO) scoring of the bill that passed the Senate (CBO letter of December 19, 2009 to Sen. Harry Reid [D-Nevada]).  I do believe if this bill passes, it will end up hurting Americans for several reasons:

1.)  The Plan is going to be way over budget, and it is going to hurt middle America.  The reason?  I cannot see any employer actually PAYING the “40% excise tax on the amounts that exceed a specific threshold… $8,500 per single policies and $23,000 for family” associated with the “high premium” insurance plans (Page 7 of the above 12/19/09  CBO lettter).  Employers are already seeing their premiums rise at nearly unsustainable levels (which is why we are doing this, to make insurance more affordable right)?  I do not see employers paying the premiums AND the 40% excise taxes associated with so called ”Cadillac plans”.  Rather, I see employers AMENDING  THEIR HEALTH PLANS  (cutting benefits) provided to their employees to get the premiums to a level below the aforementioned levels thus  not being subject to the tax!   If you look at the Associated Press link above, you will see some of the unions were successful in getting THEIR PLANS carved out in terms of the ”high premium plan taxes”.  Larger ”industries”  that I did not see excluded were Teachers, City and Municipal governments (although police, fire and first responders were on the list).  In the event these , tax payer funded (presumed Union represented) health plans hit the premium ceiling, tax payers can look forward to higher taxes or higher defecits to contend with in the event this legilsation goes into affect.   Those people who are in smaller groups without union representation will most likely be seeing benefits cut in order to miss the tax implementation point.    As for the unions that did not get the exclusion, I suspect those employers that are offering those plans will have significant financial challenges when the taxes are implemented because they will have a huge tax bill to contend with, yet be in the middle of a previously negotiated (prior to the tax implementation) contract term with the union.  I suspect that when those contracts come up for negotiation, there will be serious issues to contend with as well.  If my pojection is correct, there goes $149 billion dollars in alleged offsets of the government program, AND simultaneously millions of Americans just obsorbed a benefit CUT solely as a result of this legislation. 

 2.)  The complete elimination of the pre-existing conditions gives “healthy people” little incentive to enroll in health plans.  Today with pre-ex and underwriting, there are incentives to take it while you are healthy.  Ironically, all other prior legislations include references to 63-day breaks in coverage–HIPAA, Medicare, Medicare Part D, etc.  The reason why they have chosen the odd timeframe of 63 days?–because that guarantees everybody two full months’ time to procure other coverage regardless of which month they ”lose coverage” (for example, both December and January have 31 days and July and August have 31 days).   People could (theoretically) not enroll, have no coverage for years, have a “pain” that they want to get checked out, apply for and be issued coverage, have the ”investigation/and subsequent treatment”  fully covered, then drop out of the system once the matter has been resolved.  Realize the whole premise of insurance is to spread the risk; in other words, “healthy” people pay for the claims of the “sick” people.  This wording of the legislation really provides people THE INCENTIVE AND PROTECTION to enroll only when claims are eminent.  The only liability to this methodology would be accidents or “sudden illnesses”, but my concern is that most people will see this as an opportunity or a false sense of security and, due to this liberal provision, be prone to rolling the dice.   

3.)  Mandates/penalties are ridiculously low.  With premiums equating to several thousand dollars per year and penalties being well under $1,000, what type of incentive are you giving people?  Couple that with the complete elimination of underwriting and pre-existing conditions and you have a perfect storm brewing.  Sure, some revenue will be generated (for the Federal government–not the insurance companies who have to offer the guarantee issue coverage) but the “stick” is not nearly large enough to compel people to buy despite large government subsidies.  You almost “make money” by not having the plan.  See point 2 as to the likely outcome.

A.)  Medicare cuts– the Federal government is cutting nearly $186 billion from Medicare, primarily directed at hospitals (see page 10 of the above CBO post).   I know the Federal government is telling everyone that this will have no affect on their care, but I do not believe that hospitals (otherwise known as “non-MD expenses”) can afford to absorb $186,000,000,000 in cuts (yes, I intentionally typed the zeros) without affecting services in any way, shape or form.  It simply defies logic; we all know there is waste in the system, but I do not believe it is anywhere near that magnitude.  I do believe this is going to affect the services offered by hospitals with high Medicare populations and PRIVATE SECTOR PREMIUMS reflected in the next point (note this is IN ADDITION AND NOT TO BE CONFUSED WITH the $118 Billion in Medicare Advantage funding cuts).    

B.)  When the Federal (and state) governments artificially suppress their payments to balance budgets (remember governments do not negotiate their pricing–they dictate it to the providers; there is no negotiation, it is simply the distribution of the reimbursement schedule), it causes the hospitals to “cost shift” their public sector “losses” over to the private sector in order to compensate or “balance the books”.  Milliman did a comprehensive study on the phenomenon and what effect it has on the private sector (Hospital & Physician Cost Shift).  Expect to see the PRIVATE SECTOR (insurance companies) claims prices to go dramatically higher to compensate for the cuts mentioned in point A (above).  Of course, premiums are a factor of claims so you can expect these cuts to have further dramatic impact on the health insurance premiums for locals that use hospitals that will be hit hardest by these cuts!    

C.)  Hospitals that serve primarily Medicaid populations will be hurt.  This bill is cutting $43 billion in funding that is presently paid to service Medicaid populations.  Using Chicago, Illinois as an example, our COUNTY sales taxes are among the highest in the country in order to fund our local county hospital.  John H. Stroger, Jr. Hospital (the new Cook County Hospital) located in the heart of the city of Chicago primarily serves the Medicaid and uninsured populations.  If the Federal government cuts the funding further, what situation does that leave?  The hospital to close?  Or the city and state to make up the difference?  Not only does Illinois have a $10 billion deficit today (before all of these cuts are instituted), but the city is already $250-300 million in debt (after ”selling” some of Chicago’s most lucrative parking structures, the Skyway (formerly a city owned tollway), parking meters  and mandatory unpaid furloughs (Chicago Turns to Workers to Close Deficit).  Who is going to make up this shortfall? 

Realizing this is a blog whose message is supposed to be “short”, I will tie this up but our only hope at this point is that the House will step to the plate where the Senate left off.  Certainly the Senate version of the bill is much stronger than the original House version, but we can only hope that the House brings further progress to this bill.  We need an ENFORCEABLE mandate, a penalty with teeth that provides incentives for people to purchase coverage.  We need pre-ex for people that willfully/intentionally go uninsured for longer than a 63-day period and guaranteed issue/no riders from the carriers for all people that do not have more than a 63-day break in coverage.  We need the Federal government to actually pay their share of the healthcare tab in this country (versus trying to force it on the hospitals and private sector to cover their shares) rather than forcing through this huge, unpopular monstrosity that nobody really understands and financing sure to unravel that we cannot afford (even using their bogus data).