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Archive for December, 2009

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There seems to be a consensus that the Senate bill in it’s current form would most likely be what could end up being signed by the POTUS.  The theory is that if the merging of the House and Senate bills doesn’t closely resemble the Senate bill, there is no way the merged bill could get 60 votes in the Senate (and thus be killed altogether).  That said, I’m starting to think about what impact this particular bill will have on health insurance as we know it. 

Recently, there has been a trend toward “Consumer Directed” health insurance.  Essentially, putting more control in the hands of the consumer via High Deductible plans and/or plans with higher co-insurance and/or co-pays.

Enter the Mandated Medical Loss Ratio (MLR).  This feature of the Senate bill says that the insurance company must spend 80% of premium dollars on care (85% for large groups). 

Given the fact that high deductible plans tend to have lower MRL’s and are much more expensive to administer, I don’t see a bright future for High Deductibles, co-pays and co-insurance.

Ironically, those who understand insurance realize that deductibles, co-insurance and co-pays play an important role in reducing overall healthcare costs.  Essentially, first dollar coverage give the insured no financial incentive to ration their own care.  Care becomes essentially “costless” from the insured’s perspective and we tend to consume more of things as they get cheaper.  Medical care is no different.

Obviously, from the insurance company’s perspective, the more dollars they pay out for care, the more dollars become available in the 20% piece for administration and profit.  At that point, they just need to price the product for richer benefits since they have zero incentive to control claims cost (if they achieve a MLR under 80%, they are required to refund this to the insured anyway, so why bother?)

Might the mandate for minimum MLR’s actually INCREASE the rate of increase in Health Insurance Premiums?  CBO is projecting that this provision will have the affect of lowering premiums while I believe a strong case could be made for just the opposite.  Could the MRL mandate bend the cost curve UP??

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This story is from the National Underwriter.  Previous versions had HHS regulating the amount which agents could be compensated inside the Insurance Exchange.

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Health Care Reform passed its biggest hurdle to date with a 1:01 AM cloture vote earlier this morning.  The measure passsed 60-40 on a strict party line vote.  This clears the way for the bill to be brought up for passage in a vote scheduled for 7pm on Christmas Eve.

Here is analysis of the measure which includes Senate Majority Leader Harry Reid’s (NV) “manager amendment” which was released on Saturday, December 19th.

More details on the vote are available in this New York Times story.

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Seems we might be nearing passage of a “Health Care Bill” in the Senate.  Cloture vote is scheduled for this Monday at 1pm and Vote on the final Bill is scheduled for 7pm on Christmas Eve. 

The latest amendment was revealed on Saturday and here are some of the highlights:

  • Cuts to Medicare Advantage:  Seems like all states with the exception of Pennsylvania, New York, Florida and, possibly, Nebraska, will be having their Medicare Advantage reimbursements cut (via a competitive bid system).  In these states which carved out special deals, it seems the deals will favor the urban areas.
  • Cuts to Medicare.  In addition to the cuts to Medicare Advantage, there will be cuts to provider reimbursements.
  • Filling the Prescription drug “Doughnut Hole”.
  • Easier access to some Preventative Benefits under Medicare
  • Changes to the Medicare Advantage and Part D Open Enrollment and Annual Enrollment periods (starting in 2011)
  • No Doc Fix.  The Physician’s fee schedule fix was not included in the Senate compromise bill.  This (undoubtedly) will be fixed by this Congress (that’s basically why the AMA supported the bill).  The estimated cost is $200 Billion over 10 years, but this will likely happen in another bill to keep the cost out of Health Care reform.
  • Medicaid Expansion.  Some cost will be shifted to the states with the exception of one state – Nebraska.
  • No Underwriting – No denying coverage, no pre-existing conditions exculsion.
  • Weak Mandate – Penalty for not purchasing “Qualified Coverage” will be $75/year phasing up to $750/year in the 10th year.
  • Tax on Health Insurers.  (Except Mutual of Omaha, Blue Cross of Nebraska and Blue Cross of Michigan)
  • Tax on Medical Providers
  • Tax on Indoor Tanning Salons
  • Tax on “Cadilac” Health Benefits
  • Increase in Medicare Tax on Individuals making $200k or more or couples making $250k or more.  Tax will increase from 1.45% to 2.35% or 90 basis points.
  • Mandated Medical Loss Ratio.  80% mandated MLR for Individual and Small Group and 85% mandated MLR for Large Group.
  • Subsidies for Health Insurance.  Many families (even in the middle class) will be getting subsidies to purchase health insurance.  The susbidies will only apply to plans bought within the “Insurance Exchange.”
  • Private Insurance Option managed by the Office of Personnel Management (this is the entity which oversees the Federal Employees plans).  At least one of these options must be a non profit (Blues plan maybe?).

This could amount to the single worst piece of legislation ever devised.  The “palm greasing” (Nebraska, Louisana, Florida, New York, Michigan, Vermont and Pennsylvania got sweetheart deals) will undoubted lead to others wanting to “get theirs” and mushroom the cost of this into the stratisphere.

About 1/2 of the “projected” cost of this will come from cuts to Medicare which (historically) don’t occur.

The impact on the Small Group and Invididual Health Insurance markets is not realistically contemplated by the CBO in this bill.

That’s enough for now!

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Here is a link to the article from the Life and Health Underwriter.

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Here is a link to a C-SPAN video and transcript of comments made by Senator Crapo of Idaho.  Senator Crapo highlights a provision in the Senate Bill which would carve out Medicare Beneficiaries in 3 counties (Miami-Dade, Broward and Palm Beach) from the cuts to Medicare Advantage.  The provision was inserted by Senator Nelson of Florida to protect Medicare Beneficiaries in his home state.  Appartently, other Senators are seeking similar protections for their constituents, however, they are voting against extending this protection to all Medicare Beneficiaries.  The cost to protect Medicare Advantage in these 3 counties in Florida is projected to be $5 Billion over 10 years.

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