Health Insurance and You!

Tuesday night’s State of the Union speech addressed a variety of national issues – notably the sluggish economy – but the annual status check on the country’s biggest challenges and the President’s ideas for resolving them did touch on a few topics relating to health and health insurance. So did Sen. Marco Rubio’s (R-FL) televised response to Obama’s ideas.

Medicare was a big topic, notes David Pittman in an article for MedPage Today. A few days earlier, the Obama administration had announced its intention not to raise the eligibility age for the program from 65 to 67, one of several cost-saving measures that has been proposed as a way to keep the program going. During the State of the Union, Obama added to the plan to keep the program viable, suggesting that Medicare reimbursement should be changed to reward the quality of treatments performed, rather than the numbers and types of procedures that take place, and that the payment levels for prescriptions should be reformed to cut costs. He also advocated raising Medicare premiums for wealthier seniors, according to an article by N.C. Aizenman of the Washington Post.

In addition, Mr. Pittman writes, the President pushed for improved health care for veterans, including mental health care, as well as continued global health efforts to reduce preventable childhood deaths and the spread of diseases such as HIV/AIDS. His speech also contained a mention of health reform and the slowdown in healthcare cost increases that has taken place in recent years – though he did not imply that the health law has caused costs to level off.

In the Republican Response, Sen. Rubio expressed skepticism that health reform and the President’s other proposals would go far enough in curtailing the growing costs of healthcare, according to a blog post by Glenn Kessler of the Washington Post’s Fact Checker Blog. Rubio cited the difficulties that some businesses are having in complying with the law’s requirements and the effects that this is having on workers and hiring. According to a discussion between health policy experts at Kaiser Health News, Rubio also worried that Obama’s proposed reforms to Medicare could bankrupt the program and suggested a bigger overhaul that would change its overall aim to health insurance premium support rather than coverage of all (or nearly all) of a senior’s health costs.

Yesterday, the Department of Health and Human Services (HHS) gave its approval to 106 new accountable care organizations (ACOs), a new type of health provider group that was created as part of the 2010 health reform law. According to an article by Sam Baker of The Hill, ACOs aim to improve quality of care and outcomes while reducing costs.

ACOs – and the physicians who belong to them – are motivated to cut costs by receiving a set percentage of the savings they bring to Medicare, instead of being paid for every appointment and treatment, according to an article by John Dorschner of the Miami Herald. And if the care is high-quality the first time around, patients are less likely to need additional care, thereby saving the ACO time and allowing them to see more patients.

ACOs, which include physicians with a variety of specialties as well as outside entities like pharmacies, aim to coordinate a given patient’s care within the organization. One pilot program, writes Mr. Dorschner, found that ACOs’ structure and incentive-based payments can reduce hospital readmissions by as much as 40%.

Readers, do you plan to seek healthcare from an ACO in your area?

Late last night – as many of us were recovering from the holidays and reluctantly getting ready to return to business as usual – the House of Representatives passed a deal on sequestration, also known as the ‘fiscal cliff’. The deal allowed the country to narrowly avoid a set of automatic tax increases and spending cuts to government programs. According to the New York Times’ ‘Debt Reckoning’ interactive, the bill passed in the Senate with an 89 to 8 vote in the wee hours of New Year’s Day and later passed in the House with a vote of 257 to 167.

The deal had a few important effects on healthcare and health policy. According to an article by David Pittman of MedPage Today, reaching a deal prevented a scheduled 26.5% cut in reimbursement rates to doctors who treat Medicare patients. An additional 2% cut to the reimbursement rate was postponed by two months to March of this year. Though the deal prevents short-term problems, President Obama and many in Congress expressed a need for long-term reform of Medicare and other entitlement programs, which account for a growing portion of government costs. Possible options include slowly raising the eligibility age for Medicare or requiring wealthier Americans to pay higher Medicare premiums, Mr. Pittman writes.

Another result of the bill, according to an article by Emily Ethridge of CQ Roll Call, was the final repeal of the Community Living Assistance Services and Supports (CLASS) Act, a long-term care insurance program that was originally part of the 2010 health reform law. Soon after the CLASS Act was passed, analysts began doubting whether it could sustain itself long-term, as required by health reform. In October 2011, the Obama administration decided to stop implementing the program, though it was not formally repealed. Last January, the Act edged closer to repeal as the House started debating its viability. Though some hoped to modify and improve CLASS instead, ultimately, it was fully repealed and replaced with a plan to assemble a 15-member commission of experts to find a better solution to long-term care.

Readers, were you surprised that a deal was reached in time? What do you think of the contents of the deal?

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.

By tomorrow, states will have to decide whether to create and run their own online health insurance exchanges or join the federal exchange. So far, 14 states have chosen to develop their own exchanges, and 22 have opted to be part of the federal one. Some of the remaining states may decide on a hybrid approach.

Of those 14 on the path toward state-based exchanges, six have reached a key milestone: making enough progress in developing the systems to get conditional approval from the federal Department of Health and Human Services (HHS). According to an article by Robert Pear of the New York Times, the states are Colorado, Connecticut, Massachusetts, Maryland, Oregon, and Washington. These six state exchanges can begin enrolling customers in October 2013 and operating fully by the following January.

In an article for Bloomberg, Alex Wayne describes some of the emerging details of these six systems. Different states have varying philosophies about the purpose and intended use of exchanges – presumably, part of the reason they chose to build their own exchanges in the first place – and those values are resulting in a wide range of rules governing the systems.

Three of the state exchanges, among them Maryland, plan to allow all health insurance companies who want to participate to sell their plans through the system – a decision supported by insurers, who are wary of health reform’s potential impact on their operations and costs. The other three, including Connecticut, have established strict coverage criteria for companies that want to join, an approach known as active purchasing. Both approaches have pros and cons, a topic we covered in more detail on this blog last summer. The decision to go with one or the other depends on a variety of factors, including the level of competition in the state’s insurance market and public opinion on the state’s role in regulating insurance sales.

Whether actively purchased or not, health insurance plans sold in a state will have to adhere to that state’s definition of essential health benefits, once those definitions go into effect.

Connecticut’s rules go one step further. Mr Wayne explains that insurers who want to sell through the state’s exchange will have to commit to staying in the system for two years. Similarly, insurance companies that leave the exchange must wait two years before re-joining.

For more information on health insurance exchange progress in your state, check out the Kaiser Family Foundation’s State Health Exchange Profiles. For more information on the newly approved exchanges, see:

• Massachusetts Health Connector site, already up and running
• Dec. 10, 2012: Hartford Business Journal article on Connecticut’s exchange
• Dec. 10, 2012: Associated Press article on Maryland’s exchange
• Dec. 11, 2012: The Oregonian article on Oregon’s exchange
• Dec. 12, 2012: Insurance Journal article on Colorado, Oregon, and Washington’s exchanges

We recently came across a couple of great resources for learning about the latest health insurance exchange developments around the country. They are:

• Healthcare Payer News, which publishes a weekly digest of news about health insurance exchanges
• The Advisory Board Company, which just published a summary of state-by-state activities regarding exchanges and Medicaid expansion

Weekly digest of exchange news

Healthcare Payer News includes a section devoted to coverage of exchanges, which features a weekly digest of state exchange activities. In its most recent digest (for November 19), it describes how some Republican governors are rethinking previous anti-ACA stances, efforts to keep track of questions about exchanges that the U.S. Department of Health and Human Services still needs to answer, and consumer efforts in Connecticut to have the state become an “active purchaser” of health plans.

State-by-state adoption of key ACA programs

What states are building health insurance exchanges under the Affordable Care Act? And which ones are opting out of Medicaid expansion under the bill? It can be a challenge to collect that information yourself. Saving the rest of us a lot of time and trouble, The Advisory Board Company’s recent report, Where each state stands of ACA’s Medicaid expansion, provides a handy map of the country showing where the states stand on expanding Medicare and building exchanges. Additionally, it provides more information (with links for detail) about each state’s participation in those two aspects of the ACA as of November 19, organized by the following:

• States not participating
• States leaning toward not participating
• States leaning toward participating
• States participating
• Undecided state

State adoption of these key measures of the ACA by the states is likely to increase in the coming months, but for now this provides the most complete picture we know of. We hope The Advisory Board Company will continue to update this resource.

With or without government mandates calling for state and federal exchanges to launch in 2014, health insurance exchanges are likely to become an increasingly popular way for Americans to purchase health coverage.

A new practice in which businesses provide a set amount to help employees purchase health insurance should drive demand for the services offered by exchanges. American businesses — including Sears Holdings and Dardens Restaurants — are already offering so-called “defined-contributions plans,” and many are expected to join them soon as a way of controlling the cost of employee benefits. The new technique effectively shifts the risk of rising health insurance costs from the employer to the employee.

Most employers currently offer “defined-benefit” plans, under which companies determine a set of health-insurance benefits from which their employees can choose. With defined benefit plans, if premiums increase, employers are exposed to increased costs. With defined contributions plans, companies pay a fixed amount and employees choose their own plans, using the company contributions to help pay the premiums.

Workers covered by defined contribution plans will need a way to find health plans, and that’s where exchanges come in. Under such plans, workers take employers’ contributions and purchase their own insurance. To do so, they’ll have to turn to any of a number of exchanges available to them–whether private exchanges like Getinsured.com or the state and federal exchanges that will be launched under the PPACA in 2014.

We’re beginning to see the introduction of private exchanges designed to meet the needs of those covered by defined-contribution plans. For example, the Minneapolis-based Bloom Health, jointly owned by Health Care Services Corporation, Wellpoint, and Blue Cross Blue Shield, announced plans to launch a nationwide private exchange for use by workers covered under defined contribution plans. (As of this writing, it’s unknown when the exchange will open.) According to CFO Magazine, Bloom has a client base of nearly 150 corporations that together employ more than 100,000 people.

Employers are also offering their own exchanges to go along with defined-contribution plans. Sears and Darden announced they would provide a joint private exchange in 2013 where their employees can use defined contribution funds to purchase health plans.

The Sears-Darden exchange foreshadows a model for future private exchanges in which multiple small businesses pool their resources to offer a sophisticated experience to their employees. Instead of having to refer employees to large, possibly less personal exchanges, each business could create their own branded experience in joint small-business exchanges and share the costs across all the companies involved.

According to Peter Orzag, former director of the Office of Management and Budget, over the next decade “defined-contribution plans will gradually take over the market, shifting the residual risk of incurring high health-care costs from employers to workers.” Given that, it seems just likely that we’ll also see a dramatic increase in demand for and use of health insurance exchanges.

On Election Day this week, ordinary voters were not the only ones setting health and health insurance policies in their communities. Health officials were doing it, too, at least in San Francisco, where the city’s Health Commission voted to develop a program for transgender people in need of counseling, health services, and gender reassignment surgery. According to an article by Lisa Leff of the Associated Press, the city already provides counseling, hormone treatment, and preventive health care for transgender residents, but has not yet offered surgery or covered its cost.

That will soon change. This past Tuesday, the Health Commission agreed to remove gender reassignment surgery from its list of treatments that are specifically excluded from coverage through Healthy San Francisco, the city’s universal health insurance plan for uninsured residents. The decision was informed by transgender advocates, who pushed for mastectomies, genital reconstruction, and other surgeries recommended for certain transgender individuals to be covered, Ms. Leff explains. It is also not a new idea in San Francisco, which has been covering the costs of gender reassignment surgery for government employees since 2001. In recent years, employers and health insurance companies have started doing the same, responding to the idea that such surgeries are medically necessary, rather than elective.

The effects of Tuesday’s vote won’t be immediate. “Instead of expanding the existing plan, the Health Commission approved the establishment of a separate program that covers all aspects of transgender health, including gender transition,” Ms. Leff writes. For now, city health officials will need to study the costs of various procedures, determine which doctors and clinics would perform the surgeries, and put together the relevant protocols before they are able to offer surgery. They hope to be ready by the end of next year.

Two recent health insurance surveys bring some welcome good news in terms of coverage rates and cost increases. Yesterday, the Kaiser Family Foundation (KFF) released its Employer Health Benefits 2012 Annual Survey, which found that during the past year, health insurance premiums rose only 4%, a modest number compared to the 9% increase between 2010 and 2011. And then today, the Census Bureau released its Current Population Report on Income, Poverty, and Health Insurance Coverage in the United States: 2011, which among other things, noted that the number of uninsured Americans fell from 50.0 million (16.3% of the population) in 2010 to 48.6 million (15.7%) in 2011.

According to KFF’s news release on the survey results, the average annual premium for a family of four with employer-sponsored coverage totaled $15,745 this year. Out of that, employees paid an average of $4,316. Though the 4% increase since 2011 was much lower than it has been in the recent past, it was still significantly higher than the 1.7% growth in wages and 2.3% inflation during the same time period, which means that health costs are continuing to account for an ever-increasing portion of people’s income and spending. The survey also found that workers who earned less than $55,000 per year were more likely to pay more out-of-pocket for their health coverage than those whose salary exceeded $55,000. Limited data on companies’ projected costs for 2013 forecasted an average premium increase of 7% between now and then.

About 61% of employers surveyed – the same number as last year – offered their workers health coverage at all, but interestingly, writes David Pittman in an article for MedPage Today, more companies are offering insurance to part-time workers. In 2010, 39% offered insurance to part-time employees. By 2012, that number had risen to 45%.

Whether the changes for part-time workers has affected overall rates of the uninsured is unknown, but the Census report finds that the total number of Americans without health insurance dropped by 1.3 million, the biggest percentage decrease in more than a decade, between 2010 and 2011. That number is even more surprising given that during the same period, after adjusting for inflation, median household income declined for the second year in a row.

The changes in health insurance status were not equal across all groups. In particular, the uninsured rate decreased among whites, blacks, and Asians, but stayed about the same for Hispanics. Young people made significant gains as well. Overall, the proportion of uninsured decreased by about 0.6%, but among young adults age 19-25, that decrease was 2.2%.

The increase in overall insurance rates may be explained by an increase in Medicaid coverage. The survey found that the number of people covered by Medicaid increased from 48.5 million (15.8% of Americans) in 2010 to 50.8 million (16.5%) in 2011. This study confirmed KFF’s finding that the percentage of Americans with employer-sponsored insurance did not change significantly.

With election day coming up in two months, these numbers may affect voters’ views of health reform and the presidential candidates, writes Phil Galewitz in an article for Kaiser Health News. Readers, do the results of these surveys surprise you? What factors do you think are at work, and do you expect them to continue?