Health Insurance and You!

Yesterday, global marketing research company J.D. Power and Associates published the results of its 2013 Member Health Plan survey, which measures consumers’ satisfaction with their health insurance plans across the United States. According to the company’s press release on the survey results:

• Overall satisfaction has not changed much, decreasing very slightly from 702 out of 1,000 in 2012 to 701 in 2013.
• 59% of survey respondents had only one choice of health insurance plan when enrolling.
• 51% of respondents reported an increase in their premiums during the past year.

The survey noted a growing interest in enrolling in coverage through online health insurance exchanges, a key part of the 2010 health reform law. Overall, 43% of survey respondents were interested in using a state exchange, though that number varied widely between different groups of participants. Among people in the individual health insurance market, for example, 73% “probably” or “definitely” plan to shop for coverage via exchanges when they debut in October. Among people with employer-sponsored coverage, those working at small companies were most interested in exchanges (53%), followed by employees of medium-sized (48%) and large (43%) companies. According to an article by Dennis Domrzalski of Albuquerque Business First, people with more choices of employer-sponsored coverage were less interested in exchanges, with 50% of those with only one choice of plan expressing interest, compared with 36% of those with two or more choices.

Interest in exchanges also varied among people with different types of coverage. Health insurance exchanges were more popular among consumers currently enrolled in a high-deductible health plan, of whom 59% reported interest in the new systems, than those in more traditional, low-deductible plans, of whom 45% were interested. This could be because high-deductible plan members, who are more immediately affected by the prices of treatment, are more aware of what their coverage buys them and more inclined to find ways to control their health expenses, the J.D. Power analysts explain.

The results were based on a survey of more than 33,000 members of 136 health plans in 17 regions across the United States.

Readers, do you plan to try out the health insurance exchanges later this year and in 2014? Why or why not?

When trying to get someone to do something, such as losing weight or dropping an unhealthy habit, leaders have a choice in how forceful they want to be. This month, researchers at Harvard published a study on people’s responses to gentle approaches to encouraging healthy behavior vs. more coercive methods. They found that survey respondents were more supportive of gentler approaches, such as labeling menus with calorie counts or making nicotine patches and other quit-smoking aids easier to access, than of strategies that punished unhealthy behaviors, such as higher health insurance premiums for the overweight or outlawing smoking in homes and other private places.

In other words, they preferred policies that made it easier to adopt healthy habits but wanted to retain the final choice of whether to do so. In general, between 70% and 90% of survey respondents supported policies to make fruits and vegetables more affordable, and physical education and health classes to encourage exercise in public schools. But when the policies took on a more punitive tone, support went down to less than 40%.

An important caveat: The study addresses which approaches consumers prefer, but not necessarily which ones are most effective. It’s likely that whether a particular approach works or not varies between people and cultures, and takes into account a variety of other factors, such as their current health status, financial situation and other priorities, personal likes and dislikes, and intrinsic motivation to improve their health. For example, a person who plays with an intramural sports league in their free time would be more likely to join a company-based softball team than someone who has more fun reading, watching TV, or enjoying other less physical activities. Similarly, a person who has lost a relative or close friend to cancer caused by smoking cigarettes would have added motivation to quit smoking – or never pick up the habit – than someone who hasn’t experienced this loss.

Readers, how would you like to be steered toward healthier behaviors? Which approach do you think would make you adopt those behaviors and why?

For more on this topic, see:

• Sept. 20, 2012: Health Insurer Rewards Customers for Healthy Grocery Shopping
• April 9, 2012: TREND: Health Insurers Use Group Games to Encourage Wellness
• Oct. 31, 2011: Stronger Incentives: Charging Unhealthy Employees More for Premiums
• April 13, 2011: Medicaid to Add Incentives for Keeping Good Health

If you were enrolled in a comprehensive health insurance plan with low co-payments and deductibles, would you go to the doctor more often? And if you expect to seek healthcare more often, would that affect your choice of health plan? These are the questions posed in a recent study by economists at the Massachusetts Institute of Technology (MIT), published this month in the journal American Economic Review.

Previous studies of consumer behavior have looked at related questions, such as whether people with insurance get needed emergency room care more often than the uninsured do, which we blogged about last spring. (The answer, as you may expect, is yes.) In general, such research has found a correlation between being insured and getting more health care.

The correlation makes sense. If you have insurance, you’d have no qualms about using it for needed care; that’s what it’s for. But what about care that isn’t strictly necessary? In a press release for MIT, Peter Dizikes addresses the concept of “moral hazard”, the idea that people with insurance change their behavior because they know they don’t have to pay for it – or at least not as much. When it comes to health insurance, he explains, it’s pretty much a given that people with coverage get more care.

The MIT study builds upon those findings by considering how consumers become enrolled in a comprehensive health plan in the first place – what makes people choose that plan? One result was fairly intuitive and not that new: people in worse health tended to choose more comprehensive plans. But their second big finding was surprising: people who thought that being insured would increase their use of healthcare also tended to choose comprehensive plans. In fact, the economists found, expecting to visit the doctor more often was just as important as overall health in people’s choices of coverage.

What the two groups had in common was their expectation of using healthcare, whether the reason was needing to (because of poor health) or simply being able to (because of being insured). Readers, when shopping for and enrolling in health insurance, how have your expectations of using healthcare affected your decisions?

As the rules and regulations surrounding essential health benefits and employer-sponsored health insurance continue to evolve, a growing number of companies are finding self-insurance to be an attractive alternative. Companies that self-insure directly take on the risk for (and pay for) their employees’ health care, rather than working with health insurers to do so. In some cases, employers can buy insurance to protect themselves at the company level from the risk of very large, unexpected medical bills.

Generally, self-insurance has been popular among larger companies that may cross state lines, but the 2010 health reform law, hoping not to rock the boat for self-insurance plans that are already working successfully, allows companies that self-insure to opt out of many of the law’s new requirements. This makes it potentially appealing for smaller firms as well, explains Robert Pear in an article for the New York Times.

In fact, the percentage of people enrolled in a company’s self-insurance plan has increased during the past decade or so. According to an analysis by the Employee Benefit Research Institute (EBRI) released late last year, 40.9% of private-sector workers with health insurance were in self-insurance plans in 1998, compared with 58.5% in 2011, the most recent year of data available. Most of this increase comes from companies with more than 1,000 employees, the EBRI report explains. Among people working at firms with less than 50 employees, the percentage enrolled in self-insurance plans remains low, hovering around 12% for the past many years.

Despite the upward trend, it’s hard to say whether health reform has been a driving factor, since the rate has been increasing since long before 2010. The increase has been generating some concern, Mr. Pear writes. Smaller and mid-size companies – particularly those with young and healthy employees – have been showing more interest in self-insuring since the health law was passed. While the company-level insurance can protect employers from huge claims, these insurers can limit their payout for employees with certain preexisting conditions, such as HIV/AIDS, cancer, diabetes, and heart disease. In fact, analysts have noticed these insurers making a special effort to market their coverage to employers of the young and relatively healthy and refusing to cover companies that employ people with riskier health conditions, a practice that many consider unfair.

Another worry is that companies with young and healthy workers may be more likely to choose to self-insure than other firms. By taking the least risky enrollees out of the equation, this could increase the risk – and therefore, premiums – for everyone else.

Finally, if employees at a self-insuring company do end up with a costly illness or condition, the company always has the option of turning to the outside insurance market. The health law generally prevents insurers from turning down applicants based on their medical history, which further cuts down on the risk for companies that want to try self-insuring; their employees are unlikely to go untreated.

Readers, does your employer self-insure? If so, how do you believe it’s affected your experience of the health law – has it blunted the costs of coverage or kept you from accessing benefits you consider important, or both?

This month, insurer industry group America’s Health Insurance Plans (AHIP) released the results of its latest survey of how quickly and by what modality health insurance claims are processed. Based on data from 2011, the survey found that technology continues to play a growing role in how claims are processed. In general, more claims than before were filed electronically, rather than on paper, and the proportion of claims processed within 30 days of receipt went up.

Some highlights from AHIP’s data:

• Between 2002 and 2011, the percent of insurance claims processed electronically went up from 44% to 94%.
• During the same period, the percent of claims received within two weeks of the health service or treatment increased from 45% to 66%.
• In 2011, 98% of claims were processed within 30 days of being received – the same percent as in AHIP’s analyses of 2009 and 2006 data.

The increase in electronic processing, which cuts down on mail time and human effort required, comes at the same time as a decrease in time taken to receive and process claims. For example, 16% of electronic claims were received by the insurer more than a month after the health service or treatment, compared with 54% of paper claims. Similarly, 79% of paper claims were processed within two weeks of receipt, compared with 93% of electronic claims.

Readers, have you noticed that your claims are being processed faster than before – and if so, are you satisfied with this change? Do you think electronic processing is the only factor at work, or might there be another explanation?

For more information on the shift to electronic processing, see:

• 2/5/2013. The Hill–Healthwatch Blog: Insurers Press Doctors to File More Claims Electronically
• 2/7/2013. MedPage Today: More Insurance Claims Filed Electronically

High-risk health insurance pools, some created by the 2010 health reform law and some state programs that have existed for years, were designed to cover people with preexisting health conditions who had no other option for health insurance – people without access to employer-sponsored coverage who, due to their health status, had also been turned down in the individual market. A safety net existed for children caught in this scenario – child-only health insurance plans, which have dedicated open enrollment periods every year – but for many of the adults who had been declined coverage, the high-risk plans that were available cost too much.

According to an article by Brett Norman of Politico, about 300,000 people across the country are currently enrolled in such plans, about two-thirds of them in state programs and the remaining third in plans created by health reform. But the plans were always supposed to be temporary. Now, as we move closer to the debut of online health insurance exchanges, the idea was that people enrolled in high-risk plans would be transferred to plans sold via exchanges. The transfer would happen gradually, Mr. Norman explains, to keep premiums from spiking as patients with costly conditions enrolled. Such a spike might trigger healthier people, whose premiums fund the care of those who end up needing it, to decide not to enroll, which could create a vicious cycle of premiums escalating and consumers dropping coverage. Health reform included limits on how low premiums for the healthiest consumers could be in relation to premiums for the sickest, adding to the risk of such a vicious cycle since healthy consumers can no longer be wooed with extremely cheap premiums.

Thus, a slow transfer was the goal – until the Department of Health and Human Services (HHS) announced a $20 billion reinsurance fund designed to stabilize the finances of health insurance companies as consumers with preexisting conditions transitioned to plans sold via the exchange. Now, hoping to access part of that $20 billion, health insurers are hoping to have all of their high-risk plan enrollees switch over as the exchanges open.

Estimates vary over what kind of impact a sudden influx of high-risk plan enrollees would have on premiums for everyone else. Mr. Norman quotes one study that predicts an average rise in premiums of 45%. Others expect the effect to be smaller since exchanges will be flooded with millions of new customers in their first few months, and the sheer number of new customers could offset the impact of a smaller number of high-risk plan enrollees.

Another question is how far the reinsurance fund will go in keeping insurers’ finances intact. HHS anticipates that it will lower individual market premiums by about 10-15% – but of course, that’s an average, and the ups or downs of any particular plan’s costs could be much more significant.

Readers, are you or a loved one enrolled in a high-risk health insurance plan? How have these plans affected your ability to get affordable coverage, and has it improved in the past few years?

For more on the inception and evolution of preexisting condition health insurance plans, see:

• July 23, 2012: Health Reform’s Impact on Care for Patients with HIV/AIDS
• February 27, 2012: Cost of High-Risk Health Insurance Pools is Higher Than Expected
• September 14, 2011: Boosting Awareness of and Enrollment In PCIPs
• June 6, 2011: Coming Soon to a PCIP Near You: Lower Premiums and Easier Enrollment
• March 22, 2011: A New Insurance Option for Consumers with Preexisting Health Conditions

This morning, the Department of Health and Human Services (HHS) relaunched Healthcare.gov, the department’s website on all things health reform, to include information for consumers on the federal health insurance marketplace. With exchange-based coverage scheduled to kick in next January, and plan sales set to begin in October, the new information aims to help consumers explore the different kinds of options that will be available and get a sense of what it will be like to shop for insurance on an exchange. The site already provides the basics of health insurance plans and the health law and how the upcoming changes will affect individuals.

By and large, consumers don’t yet know what to expect, writes Kelly S. Kennedy in an article for USA Today. Other obstacles to public acceptance of exchanges include previous experiences with health insurance companies and a hesitation to have the government involved in healthcare at all. But in the coming years, federal budget experts project that a large group of Americans will shop for coverage through the online exchanges – an estimated 25 million by 2022, according to Ms. Kennedy’s article.

In addition to federal exchange administrators, state exchange planners and insurance companies are also trying to get the word out. Earlier this week, we tweeted about innovative ways states are trying to market exchanges, such as running ads on the online radio website Pandora and pushing for TV show writers to mention exchanges in their plot lines. Once the exchanges are launched and consumers start using them to shop for coverage, states are planning ways to keep consumers informed throughout the shopping process. For example, Colorado is planning to hire and train a corps of health insurance navigators to guide consumers and help them choose among the plans available, according to an article by Katie Kerwin McCrimmon of Health Policy Solutions.

Readers, what do you think of the new HHS resource and other efforts by states to promote and explain exchanges? What kinds of questions remain?

Happy New Year, readers! We’d like to take a moment to thank you for your continued reading and thoughtful comments on our blog, and wish you all the best for 2013.

As health reform continues to take effect and states prepare for the law’s full implementation, including the debut of health insurance exchanges, next year promises to be an interesting one. The effects of decisions made over the next many months will likely be felt for years down the road. Here’s what we are anticipating.

Health Costs and Employer-Sponsored Insurance

According to an article by Aaron E. Carroll of WTHI-TV, recent numbers from the Centers for Medicare and Medicaid Services suggest that in 2013, health spending in the United States will total about $2.9 trillion, a 3.8% increase over 2012. That’s a slower increase than in previous years, partly due to bigger jumps immediately after health reform was passed, and partly due to the lagging economy and low growth in salaries.

Despite the slowdown, though, employers remain wary. Paul Davison of USA Today writes about the results of a recent survey of human resources firms, which indicate that many companies plan to hire fewer workers next year and encourage part-time work in order to save on health insurance costs. In particular, some small businesses hope to keep less than 50 full-time staff on their payroll so that they don’t have to cover everyone (or pay the penalties for not offering coverage).

State Health Insurance Exchanges and Medicaid

Now that states have announced their final decisions on whether to build their own online health insurance exchanges or default to the federal one, they are moving full steam ahead to have those exchanges ready for comparison-shopping and enrollment by October 1, 2013. A number of states have already received federal approval on their planned exchanges. To make it easier for consumers to compare and choose health plans, insurers have put together standardized, four-page forms describing the costs and benefits of each plan they offer.

States are also deciding whether or not to accept federal funding to expand Medicaid eligibility to an income of 133% of the federal poverty level. As of earlier this month, according to Mr. Carroll, 17 states will expand the program and 9 have opted out. With less stringent eligibility rules, analysts are expecting a big influx of new Medicaid patients. In order to make sure these new patients have somewhere to go for their care, starting in 2013, doctors who treat Medicaid patients will be reimbursed at a higher rate – the same rate as Medicare patients. The hope is that this change will make doctors less reluctant to accept and treat patients on Medicaid.

New Taxes and Limits

An article in the Courier-Journal describes two tax increases on people earning $200,000 or more per year ($250,000 for those filing jointly) to finance Medicare: a 0.9% increase in the Medicare hospital tax and a 3.8% increase on investment gains known as the Medicare Contribution.

On a different note, as we blogged last month, contributions to flexible spending accounts (FSAs) and health savings accounts (HSAs) will have new limits next year. Starting in 2013, employees will be able to contribute a maximum of $2,500 per calendar year to their FSAs. Employer contributions to FSAs will remain unlimited. HSA contributions limits will increase to $3,250 per year for individuals ($6,450 for families).

Open Questions

As the fiscal cliff talks continue in Washington, we’ll be keeping an eye on possible reforms to Medicare. Some of the proposed changes include a gradual increase in the age cutoff for eligibility and a scaling back of scheduled, annual increases in the monthly checks program participants receive. Also on the table are limits to the tax exemptions that people who receive employer-sponsored coverage currently receive on their premiums, a topic we blogged about a few weeks ago. However, writes Ricardo Alonso-Zaldivar of the Associated Press, it’s unlikely that these exemptions would totally disappear and almost impossible for such a change to take place in the next year or two.

For a five-minute summary of the potential effects of health reform on insurance and healthcare in 2013, watch this video interview between PBS NewsHour correspondent Ray Suarez and Jay Hancock of Kaiser Health News.

One of the least-discussed – and most valuable – tax breaks is receiving closer scrutiny lately, as the federal government looks for ways to reduce the deficit and reform health insurance policy.

That’s the tax break on contributions made by businesses to pay for employee health insurance plans. Estimates of the value of the tax break place it between $185 billion and $250 billion per year, which make it by far the largest tax break in the U.S. tax system. By comparison, mortgage interest tax breaks are worth a total of some $100 billion per year.

The Patient Protection and Affordable Care Act (PPACA) includes a provision that taxes “Cadillac” plans that cost more than $10,200 for an individual or $27,500 for a family starting in 2018. There’s been little or no talk of extending taxation to lower-cost employer-sponsored health plans. When it was first enacted just after World War II, the tax break was barely debated, swept in along with a variety of other measures that were protected from wage and price controls. Since then, both employers and employees have forcefully opposed reducing the break, keeping it off the table as a means of raising revenue.

Until now, that is. Lately, there’s been an uptick in attention to the large tax break. Here are a few examples:

• On December 5, political commentator David Brooks repeated a common argument for lowering the break on insurance benefits in an interview in the New York Times Opinionator blog. He said, “I would definitely cap the health insurance benefits deduction. That nasty thing encourages wasteful and excessive health care spending because you essentially get a health care subsidy from your employer tax free instead of getting your money in plain old salary, which is taxed.” (Note that the interview is somewhat sarcastic in tone, but Brooks’s suggestion is serious and echoes many economists’ critique of the tax break.)
• National Public Radio aired a segment on December 3 in which it said that many economists agree that “excluding the value of health insurance from federal taxes is nuts.” You can read a summary of the piece on the NPR website.
• Fiscal Times recently included the tax break in its “Top 10 Tax Breaks That May Be Eliminated”.

What might result from decreasing or eliminating corporate deductions for health insurance?  One possibility is that employers could push down the costs of health care coverage to employees, offering insurance plans that cover less, asking for higher contributions from employees for premiums, or asking for higher copays and deductibles. Another is that employers might simply stop offering coverage altogether. Or there may be a middle ground involving defined contribution plans that amount to less than the amounts employers contribute to health care coverage, reducing their tax burdens but still helping employees purchase insurance.

The latter two outcomes could influence individuals to use the health care exchanges mandated under the PPACA, which are due to come on line next year.

A different kind of outcome could emerge, as well: lowering or ending the health insurance tax break could spare Medicaid and Medicare from larger cuts.

Discussions about reducing the tax break on company-funded health insurance – and its consequences — can be expected to increase, given the urgency of the need for solutions to U.S. fiscal issues and the size of the tax break. We’ll monitor the discussion and provide further analysis here.

The Defense of Marriage Act (DOMA) was enacted by Congress and President Bill Clinton in 1996. The law defines marriage as between one man and one woman, when used for legal purposes in a national context. According to DOMA, states can choose to legalize same-sex unions, but no state has to recognize a same-sex marriage that took place in another state.

Since then, as times and social norms have changed, the law has been challenged several times in court. These cases addressed a variety of issues, such as access to a same-sex spouse’s long-term care insurance and taxation of an inheritance after a spouse’s death. In 2008, wrote the Associated Press in an article for the Washington Post, newlywed lesbian couple Karen Golinski and Amy Cunninghis were married in their home state of California during the short period when same-sex marriage was legal in the state, before Proposition 8 passed that November and banned same-sex unions. They applied for spousal health insurance benefits through Golinski’s employer, a federal circuit court of appeals – part of the federal government, and thus, not legally required to recognize the couple’s marriage. When their application was denied for that reason, Golinski cited the appeals court’s policy against discrimination and filed a grievance.

The government turned down the application again, and this time, the couple sued. Their case made its way up to a U.S. District Court and won, allowing Cunninghis to receive health benefits through Golinski’s plan. She is currently covered through that plan and interestingly, is the only same-sex spouse receiving health coverage from the federal government. Now, according to the AP article, this case and several others challenging DOMA are up for consideration by the U.S. Supreme Court.

As reporter Howard Mintz explains in an article for the San Jose Mercury News, if the Supreme Court decides to hear and rule on the case, the decision could have a major impact on gay and lesbian rights across the country, including their access to health coverage. Mr. Mintz outlines three possible outcomes: same-sex marriage may be legalized across the country, prohibited across the country, or continue being debated and decided at the state level.

For more on LGBT health insurance issues, see:

• Nov. 9, 2012: San Francisco Prepares to Cover Gender Reassignment Surgery for the Uninsured
• Sept. 6, 2012: HHS Letter Will Ban Health Coverage Denials Based on Transgender Identity
• Feb. 9, 2011: Michigan to Provide Health Benefits to Domestic Partners of State Employees