#ACA – M2HCC

It’s all about the premiums, for a tiny but mighty political powerhouse

By M2|2017-10-20T04:24:21+00:00October 19th, 2017|Health Plans, Health Reform, Insurance, Uncategorized|

It’s all about the premiums, for a tiny but mighty political powerhouse

On October 17, 2017, Senators Lamar Alexander (R-TN) and Patty Murray (D-WA) announced a bipartisan deal to “stabilize individual market premiums and provide meaningful state flexibility.” The latest “repeal and replace” proposal from Alexander/Murray came just a week after U.S. Health and Human Services (HHS) Acting Secretary Eric Hargan and Centers for Medicare & Medicaid Services (CMS) Administrator Seema Verma announced cost-sharing reduction (CSR) payments would be “discontinued immediately based on a legal opinion from the Attorney General.” Lots and lots has already been written about the CSR policy change (I recommend Timothy Jost’s piece in Health Affairs for a brief summary of the major issues).

Professor Jost explains the CSRs succinctly:

The Affordable Care Act (ACA) requires insurers to reduce cost sharing for individuals who enroll in silver plans and have household incomes not exceeding 250 percent of the federal poverty level (FPL). These provisions reduce the out-of-pocket limit for these enrollees—particularly for those with incomes below 200 percent of poverty—and sharply reduce deductibles, coinsurance, and copayments. The reductions cost insurers around $7 billion a year currently.

Based in part on what the Senators heard from state officials in early September (see this ) the Alexander/Murray deal would continue to fund the CSRs for two years, would allow people of any age to purchase catastrophic health plans and would allow states even broader latitude to waive provisions of the Affordable Care Act (ACA) in order to lower premiums – for example, by allowing health insurers to offer products that do not cover all of the essential health benefits.

If lower priced products can’t be offered in the portion of the market that is unsubsidized, it is difficult to foresee how a bill gets through Congress. A tiny but mighty political powerhouse is fighting hard for a fix that solves a very particular problem in the current ACA structure.

It’s all about the premiums

Keep in mind, about 17 million people receive their health insurance through the ACA health exchanges (see Charles Gaba chart – aka The Psychedelic Donut – below) – approximately 5% of the American public. Of those 17 million people, 1.6 million are in Exchange plans, but do not receive a subsidy. That is, health insurance companies are not obliged to reduce their premiums or cost-sharing requirements, most likely because they make more than 250 percent of FPL – about $30,000 for a single person, or $61,500 for a family of four.

Charles Gaba’s Psychedelic Donut Chart

Florida’s 6.6%

Let’s take the example of Florida. Just before the CSR announcement from the Trump Administration, one of the state’s largest insurers, Florida Blue, said it would be raising premiums, on average, 38 percent, for the 2018 plan year. A spokesperson explained:

“So who’s the one losing in this scenario? It’s the people who don’t get a subsidy to help out. Florida Blue has about 66,000 of their 1 million Obamacare customers who would have to cover the premium increases on their own. These are people with higher incomes, many who are maybe freelancers or self-employed.

But who are those 66,000 people? In my estimation, that mighty 6.6%, and their counterparts across the U.S., are the ones who have effectively driven this policy change, and much of the “repeal and replace” demands over the past few years. Small business owners, especially tiny ones with fewer than five employees, are very focused on the issue of rising premiums and have been instrumental in communicating to their elected officials that their premiums are too high. The National Small Business Association (NSBA) 2016 Politics of Small Business Survey last year asked nearly 1,000 small business owners (47% of the respondents had five or fewer employees) what they contacted elected officials about.

What was the top issue? Controlling the costs of health care (see chart).

And amazingly, “97 percent of small-business owners say they vote regularly in national contests, compared to” only 58 percent turnout for the general election in 2012.

The Florida Blue spokesperson explained why this is such a hot-button issue for these politically-motivated, non-CSR-receiving, small business owners:

“The good news in all this: most people in Florida get private health insurance through their work. Those increases are going to be much more normal – about 8 percent on average for small companies.”

There is the whole issue in a nutshell. If you run a business or are self-employed and you make more than about $30,000 a year, you pay high premiums that jump 20, 30, 40 percent or more a year. In Florida, the average premium increase on the Exchange will be 45 percent in 2018, and the highest approved rate increase was 71 percent according to the Florida Office of Insurance Regulation. But if you buy the same insurance a slightly different way, either by becoming self-insured or becoming an employee of a bigger company, your premium increase will not be as great.

As Washington and the states continue to debate “repealing and replacing” the Affordable Care Act, keep an eye on what policy proposals mean for the politically-active small business owner. Fixes such as allowing anyone to buy catastrophic health plans (not just those under the age of 30) or allowing health insurers to sell products that offer fewer benefits will likely lower the premiums for people who buy health insurance on their own, whether tiny businesses or freelancers. Stopping payment of the CSRs won’t fix the problem small business voters are having with health care. If a proposal fixes this tiny but mighty political group’s problem with the ACA, the likelihood of passage improves immensely.

My Experience with Obamacare

By M2|2017-10-08T11:23:43+00:00September 6th, 2017|Health Reform, Uncategorized|

My Experience with Obamacare

A few weeks ago I wrote about working with patient advocates…

While my patient advocate session was focused on Medicaid, my personal experience with Obamacare is in a different health care system, if you will, because I run a “micro-business” (fewer than 10 people) and I buy an individual policy “off-Exchange.”

My income is above 400% of the Federal Poverty Level (FPL) so I don’t receive any assistance to buy the insurance, i.e., pay the premium, nor do I receive any assistance with copays, etc. (the cutoff for cost-sharing help is 200% of FPL). Personally, I feel I make enough money to pay for insurance, and I do worry about getting into a car accident or receiving a life-changing diagnosis, so I choose to buy health insurance every year.

Even still, the patchwork system that has been built is truly not designed for someone like me. I am lucky enough to have few health problems. I fill a prescription less than once a year and when I do, it’s usually for some kind of travel-related thing, like malaria prevention. I am not writing this to brag, but simply to say, I don’t “need” health insurance other than the way I “need” homeowner’s insurance. I am insuring myself against something terrible happening. If I pay $12,000 a year in premiums, I expect I will receive no value from that expense each year except peace of mind. For some people, they do “need” health insurance because they have health care needs they could not afford to manage without that insurance.

Should the person with health care needs pay more for insurance than I pay? Well, they already do, because even if we pay the same amount in monthly premiums, they certainly pay more in deductibles, copays, and any other cost-sharing than I do because they use health care services that require those payments. The essence of insurance, whether car, home, fire, or health, is that more people pay premiums than incur claims. I am buying protection against a possible eventuality. For people with health care needs, health services aren’t an eventuality, they are a reality. That’s what insurance is for.

But the other important question is whether my purchase of insurance should be tax-advantaged in some way. I mentioned above that some people are eligible to receive tax-payer supported health insurance or health care – either because they qualify for Medicaid or because they have an income low enough to allow them to buy insurance in the Exchanges.

Should my purchase of health insurance be tax advantaged because of my job status? How about because I am an employer? That may seem an odd question, but as most of this blog’s readers know, the employer-sponsored insurance (ESI) tax exclusion is the single largest tax break in the nation. It is also worth more to people who earn more income. The Tax Policy Center estimates the “ESI exclusion costs the federal government an estimated $260 billion in income and payroll taxes in 2017.” (For comparison, the mortgage interest deduction was worth about $70 billion).

So despite my income and work status, I am eligible for tax-advantaged health insurance after all! But the patchwork nature of the U.S. health insurance system rears its ugly head again because it turns out, it’s cheaper for me to buy health insurance in the individual market (and to help my employees do the same), than it is for me to buy in the small group market. The choice is to access the tax deduction, but pay more for insurance for me and everyone in my company, or buy a plan in the individual market and pay less.

As ZaneBenefits explains, “for the majority of small groups, individual health insurance is more affordable than group health insurance because of the size of the risk pool…With a group health insurance plan if one employee has a baby, a surgery, or is diagnosed with a chronic illness, [the business is] likely to see a large premium rate increase at annual renewal time.”

Part of the debate about repealing and replacing Obamacare concerns patients with high health care needs who could lose access to care, as we have blogged about previously. However, part of the debate is also about the premium increases being seen by small businesses (and other entities as well). Members of the National Federation of Independent Business (NFIB), which represents small businesses, “have reported “The Cost of Healthcare” as the #1 problem for small businesses in Small Business Problems & Priorities since 1986.”

To be graphic, it has led to this:

The chart above from the Society for Health Resource Managers (SHRM) shows the stability of health insurance offering rates by large employers, compared to four smaller employer sizes. Notably, the smallest employer size (10 employees or fewer) represented by the black line at the bottom of the chart, has decreased by the largest percentage (36%).

My personal experience of Obamacare is a mixed bag. On the one hand, because of Obamacare it is much easier for me to buy insurance for myself as a small business owner than it was before the law passed. On the other hand, as an employer, the regulatory burden of and cost of trying to provide insurance coverage to my employees has proven to be too much for our small company to handle. Even with Obamacare, we, as a small business, are at a fundamental disadvantage when it comes to offering support for employees who want to buy health insurance.

Small businesses, defined by the Small Business Administration as those with fewer than 500 employees, comprise 99.7% of firms with paid employees, and employ 48% of private sector employees. Paying more attention to what needs to be fixed in Obamacare based on the needs of small businesses, in addition to focusing on the needs of those with serious health care needs, could lead us to more productive solutions than have been on offer recently.

There are multiple health insurance systems operating in the U.S. We either have to agree we are only going to try to tackle a couple of pieces, or we have to be more transparent about what happens if we make changes to the system that benefit someone like me (low health care needs, high premiums) or to benefit someone like the patient advocates (high health care needs, supported by tax dollars). I wouldn’t mind a little more attention being paid to small business concerns either!

Who Deserves Health Care? (a.k.a. Health Care is Hard)

By M2|2017-10-09T01:51:07+00:00May 17th, 2017|Health care spending, Insurance, Uncategorized|

Who Deserves Health Care? (a.k.a. Health Care is Hard)

Congressional efforts to repeal (and replace?) Obamacare seem to be on track to continue over the summer. The American Health Care Act (AHCA) passed the House May 4, 2017, and as written will gut Medicaid, defund Planned Parenthood for one year, and allow health plans to charge older, poorer people way more than they are paying now for health insurance.

You can read all sorts of news and opinions about why the House-passed AHCA bill is problematic if the goal of the bill was either to reduce health care costs for consumers or ensure access to health insurance coverage. But you might not read this: Late in February President Trump said health care is unbelievably complex – he was right and this is why.

Health care comes down to two questions that are easy to ask, but hard to answer. First, who deserves health care? Second, who should pay for it?

Question 1: Who deserves health care?

If you think everyone deserves health care, great. Then you can just jump ahead to the second question. However, to understand the current health care debate, it is important to know that many people, including many elected officials, think only certain people deserve health care. And when they say health care, they mean health care insurance.

For those promoting a “free market” approach, they support a system in which a person who “works hard” is rewarded with health insurance coverage. That is how most people in the U.S. get health insurance now. The problem is the definition of “works hard.” In 2014, 83% of people with a full-time job who made more than about $48,000 per year (400% of the federal poverty level or FPL) were offered insurance by their employer (see chart from Kaiser Family Foundation).

So one definition of “works hard” to the proponents of “let the free market decide” is well-paid full-time workers. Indeed, employer-sponsored insurance is the basic building block of the U.S. health care system. Historians will explain that in 1940 about 9 percent of the population had health insurance. In 1943, the Internal Revenue Service (IRS) ruled an employer offering the fringe benefit of health insurance could do so tax-free. As a result, in 1953, health plan participation jumped to nearly 65% of people. The IRS giving certain kinds of health insurance tax-free status hardly seems to be “letting the free market decide,” but we digress…

Besides full-time employees, who else worked “hard” enough to deserve health insurance? The second biggest group are Medicare enrollees. About 15% of Americans receive Medicare. But again, they “deserve” it, because every worker in the U.S. pays a portion of his or her paycheck to the Medicare fund. A person receives Medicare because they earned it – he or she either worked a certain number of years during their lifetime and paid into the fund, or their spouse did.

Yes, health insurance is different from health care. Emergency rooms are required by federal law to accept emergency patients. And community health clinics provide care on a sliding scale. So technically, everyone can get health care because we have emergency rooms and free health clinics.

Question 2: Who should pay for health care?

Even if your answer to question 2 is, “We should all pay!” it doesn’t necessarily make the mechanics of everyone paying any easier. If everyone pays, how do we do it? A flat tax for every person? A tax based on income? A tax based on how much health care costs where you live?

Should sick people pay more than people who are well? Should older people pay more than younger people? Should we all pay for a basic set of benefits, even those we don’t use? For example, should men have to pay for maternity care? Should young people have to pay for prostate exams or colonoscopies? Should middle-aged people have to pay for childhood vaccines?

As mentioned previously, we all pay for health care in the system we have today because our taxes go to support free health clinics and to cover the costs of hospitals who provide emergency care that is “uncompensated.”

Which brings us to why health care is so unbelievably complex. Each of us has our own experience with the system, and whatever we don’t like, we blame on “the system.” If your premiums have gone up in the past few years, you might blame Obamacare, but it is just as likely that your employer changed your health insurance plan so they could save some money for their shareholders. On the other hand, if you couldn’t get insurance before Obamacare because you had a pre-existing condition, you might credit Obamacare for that access.

One individual’s experience of health care or health insurance is not everyone’s experience, and your experience may or may not be because of Obamacare. But every story counts. Many elected officials are hearing from constituents that Obamacare is failing them, and that may very well be true. Other constituents are saying Obamacare saved their life, and that may also be true. Having an honest conversation about all the ways Obamacare helps and hurts people, and who deserves what, would be a better way to get to policies that would work. But that would be hard.