Sunday, August 30, 2009

Health care reform, part two

I'm in the midst of a discussion about health care reform on another internet forum. A point was raised by Paul, the author of my previous thread here, which I think merits mention because focusing on it and thinking about it, and talking about it could change the tenor of the debate.

"Having everyone in the risk pool is not an 'arbitrary' definition of meaningful at all. It is how you make insurance work economically, efficiently.

Let's take a different tack here. We have mandatory auto insurance laws. Illegal to drive without auto insurance. Matter of responsibility and economic efficiency. No partisanship. No significant political opposition to such laws. No opportunity to say that you should be exempt because you have an exemplary driving record and are willing to take the chance. We determined a long time ago the social costs of your personal risk tolerance are too great to allow you the decision to do without.

The same logic applies. When healthy people exclude themselves from the risk pool, economic inefficiency is created, regardless of outcome. When unhealthy people are excluded from the risk pool, the costs of their care don't disappear, rather they are simply exported off the books of insurance companies and onto the books of a different system--either the provider who gets stuck with the bill that the patient can't pay, or the government (which means taxpayers, which means *you*) that has provisions for providing care to such persons.

Because individual insurance companies are allowed to exclude such persons, *all* of us pay bigger hospital bills, and *all* of us pay more taxes.What all of the people shouting about the cost of the health care bill are ignoring is the costs we are all bearing, right now, of the current inefficiency of our system. When they insist that the kinds of changes contained in the proposal will drive up medical costs, they are also ignoring the empirical evidence of every single other western country that making coverage and access universal is associated with lowering overall costs, not raising them. "

Saturday, August 22, 2009

The Health Care Bill--a damn fine summary

Over the years, I have had the opportunity to meet some very good people via the internet. It's the new wave, I guess. But this fellow is a former ERISA attorney and a very sharp thinker. He's read the entire House Bill concerning health care reform and has summarized it without inserting any political opinion whatsoever. I offer it for your information herewith:

The Bill is divided into three divisions, A, B & C. Only Division A is concerned with what we think of as 'health care reform', and it is the first 215 pages of the 1018 page pdf document.

Division A

Title I is concerned with reform of the health insurance marketplace. Contrary to disappointingly common criticism, there will still be a health insurance marketplace.

Although people call this a health care reform bill, it is nothing of the kind. It is a health insurance reform bill. It is concerned with changing the rules applicable to health insurance companies, and it does that by asserting federal power into an area previously left to the states: regulation of insurance. It does not abolish state insurance licensing and regulation. Rather, it adds a number of rules at the federal level that must be adhered to.The main features:

Subtitle A

--contains the grandfathering provisions for current health insurance plans and policy holders; current policies and policy holders will not be subject to all that follows, as long as the current arrangements continue in effect

--as has been noted, employer based plans are not grandfathered, but have a 5 year transition period to be subject to the new rules; and while some critics have tried to make this into ERISA armegeddon (the WSJ erroneously stated that ERISA would be repealed--hogwash), the reality is that most of the new rules imposed in Subtitle B are already rules employer plans must follow (including bars to pre-ex, guaranteed issue, no risk rating, and certain mandated benefits); consequently, the effect on employers presently offering health insurance would seem to be rather minimal

Subtitle B

--pre-existing condition exclusions will be barred
--all policies must be guaranteed issue
--risk rating of insurance premiums will be prohibited
--community rating (charging premiums by risk rating the entire population of a geographic area) will replace individual risk rating to price policies; the only other pricing variances to be allowed being policyholder age and family coverage
--mental health parity and substance abuse benefit requirements currently applicable to employer plans under ERISA will be applicable to all health insurance policies (if it matters to anyone, my professional experience was that these benefit mandates had a negligable impact on employer plan premiums)
--PPO and HMO style plans still allowed, but the feds will now determine the standard of adequacy of provider networks to constitute a legitimate plan, instead of leaving it to state by state insurance commissioners
--in an apparent attempt to prevent cherry picking, the federal government will monitor the 'medical loss ratio' of insurance issuers to ensure that they are providing adequate access

Subtitle C

--establishes an 'essential benefits package' for all health insurance sold; inaddition to enumerated benefits, the essential package also limits copays and prohibits annual and lifetime maximums on the enumerated benefits
--the ten enumerated benefits are: hospitalization, outpatient hospital/clinic services, including ER, health professional services, services, equipment and supplies incident to professional services, drugs, rehab (all kinds), mental health/substance abuse, preventive care and vaccines, maternity, well baby
--copays and deductibles prohibited for preventative and well baby care
--copays and deductibles limited by an acuarial value that I don't really understand, but also by a hard cap of $5k individual $10k family annual out of pocket
--establishes a federal committee to determine if more essential benefits need adding in the future
--establishes a mechanism for developing better plans than the minimum at greater premium cost

Subtitle D

--is concerned with 'additional consumer protections'
--creates a federal standard for grieving/appealing insurance claim denial
--creates a set of reporting and disclosure standards familiar to administrators of ERISA plans applicable to all insurance
--creates timely reimbursement standards
--federalizes coordination and subrogation issues

Subtitle E

--establishes the Health Choices Administration, a new federal agency to oversee all this

Subtitle F

--contains legal housekeeping rules that I doubt will be important to anyone

Subtitle G

--applies the anti-cherry picking rules to everyone, including the grandfathered group health arrangements
--applies anti-recission abuse rules to everyone, including grandfathered insurance
--creates electronic data transfer standards for the industry in an attempt to reduce administrative cost by getting the medical profession onto the information superhighway with the rest of us
--creates a federal retiree re-insurance program; this appears to me to be a bailout of private sector employers who can't afford to keep their retiree insurance benefit promises any more

Title II establishes a new health insurance marketplace called the Health Insurance Exchange

Subtitle A defines the HIE

--All of the new health insurance plans, the ones not grandfathered, that meet the requirements of Title I, will be bought and sold through the HIE, which will be overseen by the new agency created by the Act.
--In addition to individuals, employers can also purchase health insurance plans for their employees through the HIE
--employers will be transitioned into the HIE over a three year period, smallest first; individuals will be transitioned over a two year period, those without health insurance coverage, first--the Act contemplates four tiers of coverage being available, 'basic' (the minimum benefits described in Title 1), 'enhanced' (basic, with lesser copays), premium (even lesser copay responsibility), and 'premium plus (additional benefits like dental and vision)
--the federal government essentially replaces brokers as the intermediary matching consumers to insurance products; insurance companies develop a product, and submits it to the feds for approval as an HIE product; insurance company tells feds the maximum number of enrollees it is willing to accept; the feds will be responsible for enrolling people in the plans--although the fed handles most broker functions, the Act provides that premium payments are to go directly to the insurance company, not through the feds
--there are a number of rules for coordinating the interaction of low income subsidies for health insurance provided elsewhere in the Act, as well as coordinating between Medicaid and the HIE
--the HIE will be funded through a dedicated trust fund; the trust fund's income will be: taxes on individuals who do not obtain 'acceptable coverage', taxes on employers who do not offer acceptable coverage; excise taxes levied under the Act
--a mechanism is there for states to opt out of the HIE, if they provide a state level equivalent system

Subtitle B provides the public health insurance option

--the public health insurance option is only vaguely defined; it is supposed to generally comply with all the rules being applied to private sector health insurance plan, but with the feds in the role of insurer; pretty much everything is left for the agency to develop, from coverage options to premium pricing
--there are more detailed rules about how the feds are to behave in setting provider reimbursement rates (personally, I would not expect these rules to survive)

Subtitle C provides "Individual Affordability Credits"

--citizens and lawful immigrants whose income is below 400% of the federal poverty level for the family size involved, who is not being offered insurance by an employer, and who are not Medicaid eligible, get a rebate on the cost of buying insurance from the HIE; the amount of the credit will depend on the relationship between the persons' income and the premium rate for a basic health insurance plan
--there will also be rules developed for giving people a break on copay requirements, based on their income/affordabilitiy to themTitle III sets forth the Individual and Employer Responsibility requirements for obtaining insurance
--Individuals who do not have health coverage from an employer and do not buy any coverage will be assessed a tax of the lesser of 2.5% of income or what would have been the cost of a basic coverage option plan.
--Employers satisfy their responsibility requirements by offering health plan coverage that meets all the minimum benefit requirements, and pay at least 72.5% of individual premium cost, and 65% of family premium cost. If an employee opts out of their employer's plan coverage and buys other insurance, the employer must make a premium contribution to that coverage cost.--Employers who do not satisfy their responsibility requirements will have to pay an excise tax amount into the HCA trust fund equal to 8% of their payroll. Lesser amounts will be assessed against 'small employers'
-- generally employers with a payroll under $400,000. Employers with a payroll under $250,000 would be completely exempt.
--The HCA is empowered to create rules to prevent employers from steering employees out of their plans by offering them inducements not to enroll.
--ERISA is amended to make complying with the employer responsibility coverage provisions an ERISA requirement, subject to ERISA enforcement. Offering a plan, but failing to offer proper coverage or make proper contributions becomes an issue of fiduciary duty, and subjects you to the full arsenal of ERISA enforcement. This enforcement scheme will run in parallel with the HCA's own audit and enforcement scheme set forth in the statute. [As a old ERISA hand, I find this odd, as this was the way that ERISA was set up with both DOL and IRS having overlapping jurisdiction and responsibility. This was unwieldy and led to a 'treaty' being signed between IRS and DOL setting forth who would do what, in terms of ERISA plan audit and enforcement.]

--Title IV makes amendments to the Internal Revenue Code consitent with the provisions discusses so far.

In addition:

--Small businesses will receive a tax credit incentive to elect to provide coverage.

--People with an AGI of $350,000 to $500,000 will pay an additional 1% tax. People with an AGI of $500,000 to $1 million will pay an additional 1.5% tax. People with an AGI of more than $1,000,000 will pay an additional 5.4% tax. The two lower bracket rates will double in 2012 unless the HCA calculates that certain minimum health care cost savings have been achieved.

This brings us to the end of Division A of the bill, and the portion that deals with health insurance marketplace reform. This brings us to page 215 of the 1018 page PDF document that is the House version of the bill.

Division B of the bill is all about buffs to the Medicare and Medicaid programs. It takes up pages 216-856 of the bill. Apart from the gross mischaracterization of the proposal in this part to expand the scope of reimbursements for end of life counseling as "death panels", these 640 pages don't seem to have generated any controversey. My take on this portion of the bill is that it is a mixture of needed changes and benefit expansion wishlists/pet projects. It's attachment to the Division A proposals discussed above isn't particularly necessary, but was probably intended to help make the bill an offer you can't refuse as a legislator, lest you be branded in your next election by your opponent as having voted against Medicare benefits.

Division C of the Act is Titled Public Health and Workforce Development

--It takes up the remaining 152 pages of the bill.

--Though nearly as long as the health insurance reform provisions, it is not nearly as ambitious, appropriating a modest (by modern budget standards) $4.6 billion in 2010, escalating to $12.7 billion in 2019 for everything in Division C of the bill

--Activities funded by this appropriation include: community health centers, a national health service corps, expanded student loan programs to fund students of primary care, family, general internal, pediatric and geriatric physicians, as well as nurses, dentists and dental hygenists, a public health corps workforce program, prevention and wellness programs, drug discount programs, school based health clinics, a national medical devices registry

That's it. That's the whole bill.