Last December, the New England Journal of Medicine provided some interesting insights into money and the legislative and electoral process.

Devil Tree

Using data collected by the Center for Responsive Politics (CRP) for the first nine months of 2009, the Journal estimates that the health sector would spend about a half billion dollars in lobbying in 2009.  About half of that came from the pharmaceutical industry and other health care product manufacturers.

The health care sector does not include the insurance industry which added an additional $160 million to that half billion.

The Center for Public Integrity (CPI) arrives at a much bigger number, $1.5 billion, but their report does not indicate whether it includes spending on elections.  Those amounts are reported separately by CRP.

And now?

What has happened since the bill passed in March?  Again, according to the Center for Responsive Politics (CRP), spending by the pharmaceutical industry during the first half of 2010 is lower than at any other similar time period since Obama’s election.  Since the bill’s passage in March, spending both by individual companies and by the industry trade group, PHARMA, has slowed to a relative trickle.

CRP reports that just three drug companies along with the their trade association, PHARMA, spent $30 million to lobby Congress during the first six months of 2010, two-thirds of that in the first quarter.

But CRP points out:

Despite the decreases experienced by these large groups, the health care reform bill’s passage did not mean a universal decrease in health-oriented lobbying. A few health-related groups actually invested more on lobbying last quarter than at any other point of the Obama era.

Between April and June, American Medical Association and its subsidiaries invested more than $8.8 million in lobbying. Since January, the trade group has spent about $15.2 million on lobbying — an increase of nearly 80 percent above its spending during the same period last year.

And the American Hospital Association, along with its subsidiaries, spent more than $4.6 million on lobbying. Since January, it has now spent about $8.7 million on lobbying — an increase of nearly 12 percent compared to its spending during the first half of 2009.

Lobbying shifts to states

Meanwhile, the Physicians for a National Health Plan (PHNP) reports that insurance companies are shifting their lobbying efforts to the states and focusing their efforts on the details of health care reform implementation.  One of those focus areas is the National Association of Insurance Commissioners (NAIC) who have considerable influence on details like the definition of medical loss ratio.

The Center for Public Integrity  also reports that five for profit insurers are considering a front organization to pump $20 million into this year’s Congressional races

Aetna Inc., Cigna Corp., Humana Inc., United HealthCare Inc. and WellPoint Inc. are weighing the new drive in part to shape the government regulations that will implement this year’s sweeping new health care legislation.

The devil is not just in the details.  The devil is trying to shape the details.

Photo Credit: Flickr – Chris Lim

Hoops

The recently passed Patient Protection and Affordable Care Act (PPACA) does much to promote long term reform of the way physicians are paid for their services.

But could something be done now to simplify the system for both patients and their doctors?

Many health care policy experts tout the current payment system as a major contributor to distorted incentives within the current health care delivery system

Fee for service reimbursement promotes more procedures, surgeries, images, etc. at the expense of patient listening time.

So the PPACA implemented a number of pilot programs to promote efforts to develop more global approaches to reimbursement.  I have discussed some of these in previous posts.

Payment reform now

But there may be intermediary steps that can be taken now to simplify a system that makes sense to no one; sometimes not even the insurers who administer them.

Example one – payment confusion.

A patient, someone I know well, gets a referral from their doctor for physical therapy.  Since I have had some experience with physical therapy and with health insurance, she asks my opinion.  I advise her to go on line to her insurance carrier’s webs site and check if certain physical therapists are in her network.  She does that and identifies a physical therapists in the network and close to her home.

Again, acting on my advice, she calls in advance to confirm that the practitioner still is contracted with this insurance carrier.  She is reassured and schedules a series of appointments.  Several weeks later she gets an Explanation of Benefits (EOB to the cognoscenti) and the insurer has paid nothing.

Her immediate reaction is to cancel all of her remaining appointments.  I persuade her to contact customer service and she if she can get a better explanation than that offered by her Explanation of Benefits.  She is told that the doctor is an out of network doctor and consequently she is liable both for an out of network deductible and for “balance billing” – charges over and above the amount negotiated and approved by the insurance carrier.

“How can this be?” she says to me.  “I looked the provider up on the carrier’s web site, I called the therapist, I don’t understand.”

We got on the phone together and I was able to learn from the customer service agent that this therapist was, in fact, signed up as an HMO provider, a PPO provider, but not as an “Open Access” provider.  Many carriers have developed “open access” networks that are less restrictive than the traditional HMO networks.

The patient contacted the therapist who was more than willing to clear this administrative oversight.

But why should she?

This was a small physical therapy office with only two full time professionals.  They need to hire a support staff that will keep track of all of these different provider reimbursement agreements for each of the countless insurance carriers that she may or may not encounter.

Each reimbursement arrangement will have its own peculiarities, its own administrative procedures and its own customer service contacts.

For whom does this make sense?  Certainly not the patient and certainly not the provider.  Yet, isn’t that who this system is supposed to serve?

Example two – payment confusion

A patient goes for his annual heart check up with the same practice he has always used.  Only this time, the bill is not paid in full as it has been in the past.

The initial inquiry to customer service yields a response similar to patient one – this is an “out of network” provider and the patient must pay the out of network deductible.  Further probing by me elicits some additional information.  This practice is a “participating” provider, but not a “preferred” provider”.  This is more than a bit confusing, because this member has always had PPO coverage.  PPO means Preferred Provider Organization.  What is going on?

What changed is the patient.  He got older, he retired and he enrolled in Medicare.  He still retained the same insurance.  He is one of the lucky few who have employer sponsored health insurance as a retiree.

But some clause somewhere in those provider reimbursement agreements means that the same insurance paid when he was under 65, but not over 65.

A better approach

It is time we developed a single reimbursement methodology for all providers.

That does mean that all providers get paid the same.

It does mean that each provider is paid the same amount regardless of who he or she treats.  Within that system, there can be different degrees of patient responsibility for different groups.

The system may decide that a provider in a rural area may get paid more or less than a similar doctor in an urban area.  It would endeavor to pay those providers with better performance more than those who could not meet the outcome targets.  There could be many other differentiators but one theme will prevail – doctors will know and understand the system they are getting reimbursed by.  And it will not inconvenience patients.

Doctors can opt out of the system, but they cannot pick and chose insurance carriers.  If they are outside of the system their patients will be 100% responsible for all expenses they incur.  The insurance carriers will have no responsibility.

That is the kind of payment reform that would make a real difference.

Photo Credit: Flickr, The Smithsonian Institute

This was always a daunting challenge even before health reform.  The Patient Protection and Affordable Care Act has raised the bar even higher.

Hawaii

ERISA and its preemption

Before PPACA a legal hurdle called the ERISA preemption severely hamstrung state health reform efforts.  For those of us in the employee benefits profession, ERISA, including its preemption clause, is our bible or at least our Deuteronomy.

ERISA was passed by Congress in 1974 to regulate employee benefit plans.  The preemption clause precludes states from regulating employee benefit plans.  There were two exceptions to that preemption and both are instructive.

Insurance and not insurance

Under the McCarran Ferguson Act of 1945 states have the authority to regulate insurance plans.  Under ERISA states still retain the right to regulate insured health plans.

After the law was passed, Congress figured out that the state of Hawaii had already established a law requiring employers to provide health insurance to their employees.  I guess news travels slowly from Hawaii.  Congress passed the first of many subsequent amendments to ERISA making an exception to the general preemption for Hawaii.

One reason for the preemption clause was the belief that Congress would tackle national health care reform soon and they wanted to protect that right at the national level, a theme that would reappear in PPACA.

The consequence of allowing states to only regulate “insured” health plans was the movement by many larger employers to “self-insured” plans.  By taking on the risk of health insurance themselves, employers escaped the mandates imposed by state insurance departments.  Companies operated in multiple states could establish uniform benefit designs for all of their employees.  At least one source estimates about 43% or 53 million people with health care coverage are regulated by ERISA and not by state insurance departments.

Hawaii

When Congress exempted Hawaii from the preemption clause they only exempted the Hawaii law as it existed in 1974.  Employers have since discovered the loopholes in Hawaii law for part time employees and contract employees.  Now, even though Hawaii has always had the lowest rate of uninsured in the country, that number is increasing as more and more employers exploit that loophole.

The ERISA preemption prevents efforts by state to expand coverage by requiring employers to offer health insurance.  Instead they are confined to a hodgepodge of confusing and complicated programs to expand state Medicaid insurance programs or offer subsidies to small employers.

Obama blocks states?

The PPACA does not make it easier for state single payer advocates.  The Obama Administration vigorously opposed bipartisan efforts in the House Education and Labor Committee to give states more latitude as laboratories for reform.

According to the Wonk Room:

During the House Education and Labor Committee’s mark-up, Rep Dennis Kucinich (D-OH) introduced an amendment that would authorize and require “the Secretary of Labor, in consultation with the Secretary of Health and Human Services” to waive the ERISA pre-emption (Sec. 514) for states that have enacted a state single payer system. The committee adopted the amendment, but it was left out of the final House bill.

I heard a participant in that hearing describe the White House lobbying efforts, and it was only the support of some Republicans who supported state’s rights that allowed its passage in committee.  The Kucinich amendment would have required the Department of Labor to grant an ERISA preemption to any state single payer system that met certain requirements.

Wait until 2017?

What did survive was an amendment by Senator Bernie Sanders.

This permits states to develop their own “innovative solution” but not until 2017

But they still have to jump through hoops.  Not only do they have to meet some understandable requirements for coverage and affordability, but they now have to request separate waivers from ERISA from the Department of Labor, and from Hthe Department of Health and Human Services (HHS) for Medicare, Medicaid and SCHIP.  The Kucinich amendment would have made the ERISA waiver automatic under the certain conditions. At least the law seems to require that HHS implement a single waiver process for all of the programs – Medicare, Medicaid, SCHIP, IHS – under its authority.

While none of these issues will deter state single payer advocates, they may give some state legislators pause.

Photo Credit:  Maui-Tropica

But they are not going away.

July 30, 2010 was the 45^th anniversary of Medicare.  Activists across the country took the opportunity to remind us that Medicare works for older Americans and it can work for the rest of us.

Click here to view the embedded video.

Medicare at 45

The Obama administration took the opportunity to tout improvements in Medicare as a result of the Patient Protection and Affordable Care Act (PPACA):

• More benefits, especially preventative benefits
• More tools to fight fraud and abuse
• Lower drug cots for seniors
• Improved quality of care through pilot programs that encourage more integrated and coordinated care delivery

CMS also issued a report that the savings from the PPACA would extend the life of the Medicare Trust Fund an additional 12 years.

The irony of touting Medicare while its Deficit Commission warns of the need to rein in entitlements seems lost on this administration.

Medicare for All

Meanwhile, three strong congressional proponents of a single payer health care system used Medicare’s birthday anniversary to remind their colleagues in Congress that “Medicare for All is inevitable in the United States.”

In their letter to “friends of health care for all”, Representatives Dennis Kucinich (D-OH), and John Conyers (D-MI) and Senator Bernie Sanders (I-VT) wrote, “We vow to continue to fight along side you for health care justice for all at both the federal and state level.”

States and single payer

It is at the state level that activists hope to make breakthroughs.  One of the more promising states appears to be Bernie Sanders’ own state of Vermont.  Governor Jim Douglas has allowed a bill to become law without his signature that could challenge the federal health reform law in a very positive direction.  Apparently he is passing on the opportunity to have the name Douglas permanently associated with single payer in both Canada and the United States.

The law will create a health reform commission, which has until Feb. 1, 2011, to propose to the governor and general assembly three design options for universal coverage in Vermont.  One of those options will be creating a single system of health care in the state.

California has twice passed single payer bills only to be vetoed by the Governor Schwarzenegger.

Other states are actively pushing their legislatures.  Maryland has two identical bills in both houses of the Maryland Legislature, called the Maryland Health Security Act”.  They have held hearings and have about ¼ of the legislators on board as sponsors.  Healthcare-NOW of Maryland is trying to raise money for an economic impact study.

Maryland and Pennsylvania

Across the Mason-Dixon line in Pennsylvania, Governor Rendell has promised to sign a single payer bill if it should reach his desk.  Since the Governor will be leaving office in January, that window of opportunity may be closing fast.  Nevertheless, activists in Pennsylvania are building a movement that is gathering momentum.  In response to grass roots pressure, The State Democratic Committee endorsed single payer and both Democratic candidates for governor and senator have said they would support single payer legislation.

The prospect of two border states enacting single payer health care offers an exciting vision of a regional single payer health care plan network.  But there are more than just local challenges that face these activists.  And the “Letter to friends of health care for all” certainly highlights that issue.

The PPACA gutted efforts to encourage state initiatives for health care reform.  Instead, the law puts up roadblocks for any creative state initiatives to resolve their own health care issues.

More on that topic next week.

The United States is still last in health system performance.

The 2010 version of Mirror Mirror updates comparative health system performance data from seven industrialized countries.  The sad conclusion is that the United States is last or next to the last in five dimensions of a high performance health system: quality, access, efficiency, equity, and healthy lives.  And they are last overall.

This conclusion is no different than that reached in previous versions of the report issued in 2004,2006, and 2007.  This year’s update adds physician and patient survey data on care experiences and dimensions of care and also adds the Netherlands into the comparison.

The Netherlands – first;  The US – last

The Netherlands may not have made it to number 1 in soccer, but they leaped to the head of pack in health system performance.

Those who consistently tout the US health care system as the best in the world clearly are not paying attention to this and similar studies.  In fact, they are not listening to their neighbors, or at least to other Americans.

Although the U.S. spends more on health care than any other country and has the highest rate of specialist physicians per capita, survey findings indicate that from the patient’s perspective (emphasis added) , the quality of American health care is severely lacking. The nation’s substantial investment in health care is not yielding returns in terms of public satisfaction.

In addition:

Americans and higher-income Americans were more likely than their counterparts in other countries to report problems such as not getting recommended tests, treatments, or prescription drugs.18 This is undoubtedly a reflection of the lack of comprehensive health insurance coverage and the high out-of-pocket costs for care in the U.S., even among the insured and those with above-average incomes.

The study does not dwell on the cost of care, but instead focuses on its dimensions of a high performance health systems:  quality, access, efficiency, equity, and long, healthy and productive lives.

Quality

For some, this is supposed to be the one area that the US excels in.  Unfortunately, the only positive spin potential here is that this is the only dimension in the study that the US did not finish dead last in.  The US finished behind Canada on quality.  In fact, in one sub-dimension of quality we were number one – prevention.

Access

No surprise here.  The US finished last.  But one sub-dimension of access was timeliness of care.  Even here we finished next to the last in a survey that included questions like time needed for medical attention and emergency room waiting time.

Efficiency

This is the one dimension that examined cost and cost as a percentage of GDP.  But it also included re-admissions, duplicate tests and unnecessary trips to the ER.  The US finished last in this category.

Equity

The U.S. ranks low on all access to care measures and, as a result, does poorly on all measures of equity. … almost half of lower-income adults in the U.S. said they went without needed care because of costs in the past year.

Among the higher-income population, U.S. respondents often were more likely than their counterparts in other countries to report difficulty obtaining needed care because of costs.

Long Healthy and Productive Lives

This should be the ultimate outcome measure for a health care system.  This measure examines mortality that might be avoided with health care, infant mortality and healthy life expectancy.  The US finished last.

There is a lot in this report that deserves further discussion, but it is a stark reminder that the United States has a long way to go to rank as a high performing health care system.

Photo Credit:  The Commonwealth Fund

According to PharmExec.com relations between the pharmaceutical industry and physicians in the United States reached a “tipping point”.

It seems that doctors in the US have traditionally been considered strong allies of the drug industry.  In 2009, this was no longer true.

According to a survey by TNS Healthcare the number of “rebel” doctors has increased dramatically from 12% in 2008 to 19% in 2009.

Negative WOM

What is a “rebel” doctor?  “Those deeply dissatisfied with the pharmaceutical industry and actively generating negative word of mouth (WOM)” (TNS Healthcare acronym).

Why is a jump from 12% to 19% considered a “tipping point”?  According to Andrew Brana, Senior Global Consultant, Sales Performance Optimization for TNS Healthcare, a “rebel” percentage above 15% makes it increasingly difficult to overcome the negative buzz and promote the industry message successfully.

In fact, there is a metric for this.  It is called the Market Resistance Index.  This MRI (my acronym) measures the number of rebels and the number of “apostles” – active advocates.  It takes three apostles to overcome the negativity of one rebel.

That’s why 2009 was a critical year.  For the first time, the apostle to rebel ratio in the United States dropped below 3 to 2.  TNS converts this ratio into the Market Resistance Index.  An MRI of 1 or less is optimal.  The MRI moved from 1.0 in 2008 to 1.62 in 2009.  According to Brana:

For the first time, US companies are facing a truly negative market environment. We call that apostle-to-rebel ratio the Market Resistance Index-and it is basically the headwind working against you. The stronger the headwind, the harder it is to make progress with your customer base.

The pharmaceutical industry is accustomed to this “negative headwind” in European countries, where resistance to the drug industry marketing has a much longer tradition.  The Market Resistance Index ranges from 3.75 in the United Kingdom to 1.38 in Italy.

Why the negative WOM?

What the survey is measuring is physician reaction to “detailing”.  Pharmaceutical firms have always “detailed” marketing representatives to physician offices to promote their products.  It is these detailers who provide physicians with free samples and information about new products.

TNS Healthcare offers little explanation for this dramatic reversal of pharma’s perception among physicians.  But ParmaExec.com points to the reductions in industry sales forces to explain this downturn.  The switch to “alternate channels” such as the Internet have not compensated for this switch.

Curiously, they add “The decline may also be a reaction to some of the new promotional guidelines that have prohibited more traditional ‘services,’ such as theater tickets, free lunches for office staff, golf balls, and other non-medically relevant gifts.”

Is negativity deserved?

The American Medical News offers some additional insight into this phenomenon.

Drug company profits per marketing rep dropped 23% in 2009.   For every 100 physician office reps by drug company marketing reps, only 37 result in products placed in the physician sample cabinet and only 20 were able to meet with a physician.

Time and physician revenue was one explanation.  One in four doctors work in practices that refuse to see drug company detailers and 40% of doctors who do see drug reps, require appointments.  But another factor just may be justifiable negative buzz.

Controversies over the drugs marketed as Vioxx (rofecoxib), Avandia (rosiglitazone) and Vytorin (ezetimbe and simvastatin) appear to be making doctors more skeptical of drugmakers as an information source, said Jerome L. Avorn, MD, professor of medicine at Harvard Medical School in Massachusetts.

And the Tea Baggers?

So what does this have to do with the Tea Bagger Movement?

Did they know about this apostle to rebel ratio?  Did they deliberately develop a rebel strategy knowing that it would take at least three apostles to overcome the negative buzz of their message? Did they count on the mainstream media amplifying their buzz into a roar?

That may give them more credit than they deserve.  But the  parallels are uncanny.

Where are we going?

Will health care reform be good for employee benefit plans?

Readers familiar with my musings and rants will know that I will not mourn the demise of employer sponsored health coverage.  But I am also no fan of an individual mandate.

Good guys

Nevertheless, Bolton’s perspective is an interesting one.  Like me, she administers a public plan.  She asks the question, “Aren’t employers the good guys?”

Why didn’t the politicians who loudly proclaimed support for employment based health care, do more to underwrite its cost.

This translated to me, as a purchaser of an employer-sponsored health plan, that any reform would have to contain incentives to encourage employers to stay in the game.

I suspected post-reform employer-sponsored insurance would resemble a Medicare Part D subsidy on steroids, since the anticipated cost just to cover the nation’s estimated 30 million uninsured is staggering.

I find this argument curious, since her plan is already a public plan supported by county tax dollars.

Going against the grain

She is justifiably proud of the role her employer has played in providing health care security to 5,000 families.  As she navigates the changes imposed on employer-sponsored plans, she questions the future of that plan and that tradition in her community.

She finds herself in the unpleasant role of calculating the opportunity costs of continuing to provide health care coverage and she finds the results a bit disturbing.

The cost of coverage is four times the cost of paying the fine.

As I noted previously, this logic is curious. Prior to fines, the alternative dollar cost of not providing coverage was zero.  There was, and is for now, the cost of not being able to recruit talent.  Will the insurance exchanges of health care reform make that argument go away?   If so, will fines or other incentives be the only reason to persuade employers to stay with their own plans?  Bolton is not the only one making that calculation.

A poll by the Society for Human Resource Management reveals that:

Respondents at nearly half of the organizations (46 percent) said they have decided not to drop health care coverage for employees as a result of the new health care reform law.

What about the other 54%?

As Bolton observes, there may be some consequences to the wage side of that calculation that may make the math for terminating coverage less favorable.  But  a straightforward comparison of the fines to the cost of coverage does not make a compelling case for continued coverage.

During the health reform debate, organizations purporting to support employer sponsored health care coverage opposed a strong employer mandate.  That includes the American Benefits Council (ABC), the Society for Human Resource Management (SHRM), the Chamber of Commerce, the National Federation of Independent Businesses (NFIB) and others.  All of these organizations were more interested in protecting the “right” of businesses to not offer health insurance.

It may well turn out that the absence of a strong employer  will create an economic mandate to end coverage.

The end of the world?

As I argued in a previous post, the end of employer-sponsored health insurance will come when a large national employer, citing competitive pressures, abandons its health care coverage.  Others will quickly follow suit.

But a public employer does not have those competitive pressures.

So when a public employer is considering, even reluctantly, the option of discontinuing its health plan; this is ominous.

Bolton writes that health care reform reminds her of the REM song, “It’s the end of the world as we know it (and I feel fine)”.

The world of employer sponsored health insurance is changing.  But if an individual market is the alternative should we really feel fine?

Photo credit:  James L. McGee

Bob Harper thought he’d found a better health-insurance deal. The Oklahoma man bought coverage from an outfit called American Trade Association (ATA). The price seemed affordable, and he thought he’d save decent money while maintaining a solid healthcare safety net.

Harper’s heart then went bad. His strength fading, he urgently needed a pacemaker. But he discovered too late that ATA was fake. Trying to find legitimate health protection he was having trouble convincing insurers to cover him because of his pre-existing condition.

A Colorado man was gravely hurt in a hit-and-run accident. His hospital bills soared to $43,000 before he died. His so-called health plan, the National Trade Business Alliance, paid out just $250, the insurance department says.

More victims like these are showing up as fake health plans operate widely around the United States over the last two and a half years, exploiting people’s anxiety over finding affordable coverage amid rising premiums, mounting layoffs and general financial distress in a downturned economy.

Fraud Bureaus Report Sharp Rise in Fake Health Plans

Not!

Take the provision in the Patient Protection and Affordable Care Act that extends care to dependents up to age 26.

HR 676 – the single payer legislation that is still before the House of Representatives – has this to say about eligibility:

All individuals residing in the United States (including any territory of the United States) are covered under the USNHI Program entitling them to a universal, best quality standard of care.

Compare that with language in the Patient Protection and Affordable Care Act (PPACA) regarding eligibility just for those young adults up to age 26 who are children of parents with employer sponsored health insurance.

SEC. 2714. EXTENSION OF DEPENDENT COVERAGE.

‘‘(a) IN GENERAL.—A group health plan and a health insurance issuer offering group or individual health insurance coverage that provides dependent coverage of children shall continue to make such coverage available for an adult child (who is not married) until the child turns 26 years of age.   Nothing in this section shall require a health plan or a health insurance issuer described in the preceding sentence to make coverage available for a child of a child receiving dependent coverage.

‘‘(b) REGULATIONS.—The Secretary shall promulgate regulations to define the dependents to which coverage shall be made available under subsection (a).

‘‘(c) RULE OF CONSTRUCTION.—Nothing in this section shall be construed to modify the definition of ‘dependent’ as used in the Internal Revenue Code of 1986 with respect to the tax treatment of the cost of coverage.

And the regulations mentioned in 2714(b)?  They are 67 pages.

What can you possible discuss in 67 pages?  Well let me remind you that hair splitting is difficult business.

To be fair, the actual regulation part of these 67 pages is really only seven pages times three.  The 67 pages include the interim final (don’t you love “interim final”?) regs for the Internal Revenue Service, the Health and Human Services and the Employee Benefit Security Administration.

What do the regs address?

Was the child previously covered?   -  Doesn’t matter

Was the child previously eligible for coverage? ?   -  Doesn’t matter

What is a dependent?  – Consult IRS rules

Does a dependent need to be dependent?  -  No

What was that last one?  A dependent does not need to be financially dependent, they only need to meet the family relationship test.  They could be married, employed and have access to employer sponsored health insurance.

Married?  Yes, the language quoted above in the PPACA was eliminated in the Health Care and Education Reconciliation Act of 2010.

What if the plan is “grandfathered”? ?   -  Almost doesn’t matter.

Does the dependent or parent pay more for this coverage?  -  In short, no.  But that answer is less than precise.

When are these changes effective?

This is perhaps the most confusing part.  The regs are fairly clear.  The changes are effective the first day of the plan or policy year after September 23, 2010.  For most people that means January 1, 2011.

Confusing?

It is the public perception that is confused.  And justifiably so.  Several insurers have announced different approaches to early implementation of these rules.   What is an individual to think when the health insurer that provides their employer sponsored health insurance announces that will begin early implementation of the rules concerning coverage of dependents up to age 26.

That employer sponsored plan may be covered by state insurance regulations that also have jurisdiction.  If it is regulated by ERISA, state regulations do not apply.  If it is a government sponsored employee benefit plan, neither ERISA or state insurance regulations may apply.

Eight pages of these regulations describe “take up rates”.  Of the 29.5 million young adults in the 19-25 age cohort, the rules are expected to extend coverage to 2.83 million people.

Meanwhile the rules have no effect on 9.5 million people in that age group because those 9.5 million young adults either have no parents or have no parents with employer sponsored health insurance.

Get the picture?  67 pages of rules to extend coverage to 8% of an age group that represents 10% of the US population.  Sixty seven pages on how to cover less than one percent of the population.

Should I remind you that eight of those 67 pages are devoted to the Paperwork Reduction Act?

Photo Credit : FLICKR: Don Solo

How much longer?

President Barack Obama used these words on September 9, 2009 before a joint session of Congress.

On other occasions the President has stated more bluntly, “If you have insurance you like then you will be able to keep that insurance.  If you have a doctor that you like, you will be able to keep your doctor.”

Read my lips

I predict that within five years these words will be tacked up along side, “Read my lips!  No new taxes!”  as examples of presidential overstatements.

To be more precise, after the insurance exchanges are up and running, I predict that one of the big private employer plans, bowing to competitive pressures and other “economic realities”, will pull the plug on its employer sponsored health care plan.  That will start a mass exodus that will topple the private employer sponsored market in a very short time.

Was the President naive?

The President’s words were more likely an audacious misstatement or misunderstanding.  The statement  presumes – incorrectly – that employees have the final say on keeping the health insurance – or the doctor – they like.

Even as the President was speaking, workers at SK Hand Tools in Chicago were on strike because their employer had unilaterally stopped paying for their employees’ health insurance.  They may have liked their insurance.  They may have liked their doctor.  It really didn’t matter.  Their employer did not want to pay for it anymore.

Why do I think employers will bail on health insurance?  Le me rephrase that question.  Why do I think private employers will bail on health insurance?  After all, didn’t our politicians repeatedly reassure us that the employer sponsored health insurance was the “foundation” of our health care system?

The buzz

It is not this quote from a story in Time magazine

But now that regulations about existing employer-sponsored plans have been issued, it’s becoming clear that many of the 160 million Americans with job-based coverage will not, in fact, be able to keep what they currently have.

Much of this noise is consternation from some employers and conservatives  that the PPACA restricts employers’ ability to raise costs or cut benefits to employees.  Poor Karl Rove is beside himself about this.

Jonathan Cohn has the proper retort to this:

Insurance changes all the time. And it’s not usually for the better. In recent decades, as the cost of health care has skyrocketed, millions have become uninsured while additional millions have become under-insured. The point of health care reform is stop and, eventually, reverse this trend–to make sure everybody has access to an insurance policy, to make sure insurance policies actually provide adequate protection, and then to make sure coverage is affordable both for individuals and the country as a whole.

I am not concerned that plans won’t be “grandfathered”.

What are employers thinking?

The chief executive of UnitedHealth Group says he does not think the federal health reform law will force large employers to end their health insurance plans.

Stephen J. Hemsley, the company’s CEO and president, gave the forecast at the Sanford C. Bernstein investor conference, according to a report on the Dow Jones Newswires.

“We really don’t expect a significant movement…with respect to a broad exodus from commercial benefits into the exchange version,” Hemsley was quoted as saying.

Mr. Hemsley, it seems , is reacting to concerns about the small group market.  Why is he couching his response in terms of the large group market?

New rules

Two things have changed that affect the framework for employer decisions.

The first is an employer mandate.  Employers are weighing the cost of providing health care coverage to the alternative of paying the penalty.  For most employers, especially smaller employers, that could be an easy decision.

The second factor is the existence of an alternative.  The health insurance exchanges will give employers an alternative that did not exist before.

Large employers will be weighing additional factors.

Will health care reform reign in cost increases enough to offset some of the other additional costs that will flow to employers such as adding young adults to age 26 and the removal of certain benefit limits?  One of those costs that employers will be watching will be the tax on drug and medical device manufacturers that will surely pass through to employers.  If the net result is not a reduction in the medical benefit cost trend, the tower starts to tip.

Then there is the tax on Cadillac health care plans benefits.  This may prompt the work force, especially the unionized workforce, to press for offsetting wage increases putting additional cost burdens on the employer.  that tower tips a bit more.

It is easy to imagine that the cumulative effect of these cost pressure will prompt one large and especially vulnerable employer to pull the plug on its health care plan.  It is also not hard to imagine not just a race to the bottom, but a free fall.

It is why single payer advocates need to keep the heat on legislators.  When the “foundation” crumbles and the tower tips over,  Americans will be screaming, “We want to keep our health care coverage – and our doctor.”

Photo credit:   Im Pastor Rick / Flickr