Health Insurance and You!

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

As we’ve blogged about a couple of times (November 2011, April 2012), the Affordable Care Act (ACA) gave the Department of Health and Human Services (HHS) the authority to review proposed health insurance premium increases higher than 10%, along with the insurer’s justification for the increases, and decide whether or not they were reasonable. Many found this authority to be lacking teeth, since HHS was not able to block or otherwise do anything about increases found to be unreasonable. Over the past year or two, however, proposed premium hikes have been reduced (though not cancelled) after being deemed unreasonable, suggesting that the review process does have at least some effect.

Now, according to a new rule announced last week, HHS will require health insurance companies to report all proposed rate increases for individual and small business plans – not just those of 10% or more. According to an article by Robert Pear of the New York Times, HHS needs the data in order to monitor changes and predict disruptions to the health insurance market as the ACA takes full effect in January 2014. Insurers, however,  worry about the added administrative burden and possible redundancy of reporting and justifying all rate increases to both state and federal officials.

Another rule released late last week addresses multi-state health insurance plans, writes Timothy Jost in a blog post for the journal Health Affairs. The multi-state plan program (MSPP) was created by the ACA to make sure consumers in every state have choices between at least two health plans and can benefit from market competition between those plans. As we mentioned in a blog post last October, at least one of these plans must be run by a nonprofit organization. Any additional plan(s) will be managed by the U.S. Office of Personnel Management (OPM), the agency that currently manages health insurance options for federal employees. MSPP insurers must offer at least one plan at the gold level of coverage and one at the (slightly less comprehensive) silver level.

The new rule states that multi-state plans must meet the essential benefit requirements of all states that they are sold in. If an exception to this rule is warranted, multi-state plans will have to cover OPM’s set of essential health benefits at the federal level. In these situations, OPM will work with the states involved to ensure that MSPP plans are on an even competitive playing field with the other health plans sold in those states.

Given that 2014 is less than a year away, MSPP plans won’t be available in every state by next January, but they will be available in at least 60% of the states by then and in all states within four years. Critics of this “phased-in” approach worry that insurers will gravitate toward the states that may already have enough competition between health plans, and that states with fewer options won’t be adequately served until later, Mr. Jost explains.

For more information on the MSPP regulations, see:

• March 1, 2013, Wall Street Journal: Obama Clarifies Part of Health Law

Last year, the Department of Health and Human Services (HHS) released a list of ten broad categories of ‘essential’ health benefits: types of treatments and services that all new health insurance plans would be required to cover. Among the essential categories were emergency care, hospitalization, maternity and newborn care, dental and vision care for children, and preventive care. The overall goal was to ensure that all plans covered a certain baseline level of treatment and to allow consumers to more accurately compare the costs and benefits of a particular plan.

Though HHS did provide this general guidance, it stopped short of specifying exactly which benefits fell into each category, opting instead to leave that decision up to the states. In order to be sold on a state’s health insurance exchange, individual and small business market plans would have to cover all of that state’s essential benefits.

Hoping to disrupt the market as little as possible, many states decided to designate a plan popular in the state as a benchmark plan, requiring other plans to cover all treatments and services that the benchmark covered. This has resulted in wide variation between states’ definitions of essential benefits. For example, coverage for autism treatment, acupuncture, and bariatric surgery differs between the states.

On Wednesday, HHS released its final rule on essential health benefits. In general, writes David Morgan in an article for Reuters, the rule had no major changes from previous iterations, and states would continue to be the main regulators of the health insurance market. Insurance companies repeated their warning to consumers that making coverage more comprehensive would drive up premiums. Mr. Morgan quotes one insurance executive who considers plans to be sold via the exchanges as a new category of coverage that is more comprehensive than plans on the market today – likely with prices to match. With the varied coverage requirements involved, not all insurance companies plan to participate in all state exchanges.

Notably, the new rule does require plans sold on exchanges to cover mental health and substance abuse treatment, writes Robert Pear in an article for the New York Times. According to federal officials, the rule will allow 32 million people access to mental health care and improve the care available to 30 million more. Currently, almost 1 in 5 people with individual health insurance do not have coverage for mental health treatment and almost 1 in 3 lack coverage for substance abuse treatment.

In addition to defining essential benefits for plans sold on the exchange, the final rule also sets levels of coverage, prevents discrimination based on age or preexisting health conditions, and elaborates on prescription drug coverage, according to an article by Kelly Kennedy of USA Today. It also clarified questions of how and when procedures could be coded and classified, with the goal of reducing surprise medical bills. These provisions and others came from more than 11,000 comments that HHS received from the public and various stakeholders on the draft version of the rule, which was published in November.

Previous coverage of this topic on our blog:

• Oct. 1, 2012: States Begin Defining Essential Health Benefits for Exchanges
• Sept. 4, 2012: California Considers Essential Health Benefits, Insurance Premiums for Smokers
• Oct. 11, 2011: IOM and HHS Work to Define What Health Benefits are Essentia

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.

On January 22, Republican Senators Orrin Hatch (Utah) and Lamar Alexander (Tennessee) introduced bill S. 40, which would eliminate the individual health insurance mandate, a key provision of health reform. According to a blog post by Sam Baker of The Hill, the senators nicknamed the bill the “American Liberty Restoration Act.” The bill’s full title states its goal of restoring Americans’ individual liberty by striking the mandate to purchase insurance. As currently written, the individual mandate requires everyone above a certain income level to either enroll in insurance or pay a fine.

After the bill was introduced and read twice in the Senate chambers on Tuesday, as is customary, it was referred to the Senate Committee on Finance for their consideration. It currently has 21 cosponsors in the Senate.

According to Mr. Baker’s article, Senators Hatch and Alexander believe the individual mandate encroaches on rights guaranteed in the constitution. However, last June, the Supreme Court upheld the mandate – and other portions of the health law – as constitutional.

Furthermore, as insurance companies and analysts argue, the mandate is essential for other parts of the law to work as intended. If people are not required to enroll in health insurance, but coverage benefits are required to go up, the people who need those benefits most – and thus are likely to drum up the biggest medical expenses – are more likely to enroll in insurance than those who need them less. This means that the costs of care will be distributed among fewer people, causing each person’s premiums to increase. This cycle, known in insurance parlance as a ‘death spiral’, continues until only the most expensive patients choose to stay covered. The health law makes it much more difficult – if not impossible – for insurers to deny coverage to these sickest patients.

Meanwhile, accidents and other unexpected health events affect people who have been priced out of the insurance market and so have chosen to be uninsured. These result in higher costs for those individuals, hospital emergency departments, and everyone else.

Readers, how do you feel about the individual mandate on its own and as part of health reform? Do you believe the health law can (or should) function without the mandate?

Last month, states made their final decisions on whether to join the federal health insurance exchange or develop a state-based one. After submitting their initial exchange plans, a slew of states have been undergoing federal review and receiving preliminary approval on their plans during the past few weeks, with the first six being approved in mid-December.

Besides federal and state exchanges, an intermediate option is for states and the federal government to partner on an exchange, allowing states to take on the functions that they feel best able to handle – customer service, outreach, health insurance plan management, or market research, for example – and leave other tasks to federal administrators. State Partnership Exchanges, as these shared systems are called, are also a viable option for states that are moving toward developing their own exchanges but won’t have them ready to go by January 2014. On Friday, the Centers for Medicare and Medicaid Services (CMS), part of the Department of Health and Human Services (HHS), released its first set of guidelines on these hybrid exchanges.

The guidelines outline the ways in which states and the federal government can partner up and divide the work of building and running an exchange. In a State Plan Management Partnership Exchange, which take advantage of state officials’ knowledge of the insurance market in their state, states will certify health insurance plans to be sold via the exchange, make sure insurers and plans continue to meet its requirements, and monitor the quality of their services. In a State Consumer Partnership Exchange, which take advantage of state officials’ knowledge of their residents’ circumstances and needs, states will manage the customer service, outreach, education, and marketing aspects of their exchanges, including the role of insurance brokers and agents. For both types of hybrid systems, HHS will handle the functions that the states are not taking charge of. The CMS guidelines include deadlines, a suggested timeline, and a list of tasks for states choosing each approach.

States that opt for a Partnership Exchange will have until February 13, 2013 to declare their intention to do and submit an initial application describing how the system would work.

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.

The 2010 Affordable Healthcare Act (ACA), often referred to as health reform, will be taking full effect in January 2014, but 2012 was an important year in the development and planning of how exactly that implementation will take place. Until June, in fact, the very constitutionality of the ACA was in question – until the Supreme Court decided to uphold nearly all of the law. The results of the 2012 presidential election, seen by many as a referendum on the ACA, further cemented the Supreme Court’s ruling.

States took the spotlight in recent weeks, as they decided whether to accept federal funds to expand Medicaid eligibility and whether to build their own health insurance exchanges or join the federal one, and began applying for federal approval of their exchange plans. Health insurance coverage of abortion and contraception came under fire from religious organizations opposed to the practices. And through it all, the costs of health care and coverage continued to rise, though at a slower pace than in previous years.

Some of the milestones we’ve blogged about in the past year include:

Supreme Court Decides on Constitutionality of Health Reform

• As it became more and more certain that the Supreme Court would be hearing arguments on health reform, Congress, media leaders, and the general public debated whether or not to televise those arguments (Jan. 6). Ultimately, the Court decided not to allow cameras in, but to release audio recordings and transcripts of the proceedings at the end of each day (March 19).
• The Court heard six hours of oral arguments over three days in late March (March 29). In June, the individual mandate was upheld, as were other key parts of the law, but the expansion of Medicaid eligibility was made into an option for the states (June 28). Within a week, 7 states had opted out of the Medicaid expansion (July 6).
• Policy and financial analysts had doubts about the sustainability of the Community Living Assistance Services and Supports (CLASS) program, health reform’s program for long-term care insurance (Jan. 19). Meanwhile, hybrid plans for different types of long-term care gained popularity (Sept. 24).

Specifics of Health Reform Implementation Are Determined

• HHS unveiled new, standardized forms for health insurers to use to summarize the benefits of different plans and make it easier to compare plans (Jan. 25) and finalized the forms’ design (Feb. 10).
• Politicians, religious organizations, and other stakeholders debated whether all organizations must cover abortion and/or contraceptive care for their employees, even if it goes against the organizations’ principles (Feb. 9). The requirement ended up going into effect (August 1), though the debate continues.
• Experts analyzed the possible impact of health reform on other specific groups, including people with HIV/AIDS (July 23), young adults (August 7), undocumented immigrants (August 9), and transgender people (Sept. 6).
• Federal and state officials continued reviewing proposed premium increases greater than 10% and enforcing their new right to deem increases ‘unreasonable’ (April 17).
• The ACA required insurers to spend at least 80% of premium revenues on medical expenses, with any extra profits being given back to consumers. In the first year of this medical loss ratio (MLR) rule, consumers received $1.3 billion back in rebates (April 27).
• Insurers pushed for broker fees not to count as administrative or overhead costs with the MLR rule, and the House considered this question (Sept. 19).

States Continue Developing Health Insurance Exchanges

• The White House released its highly anticipated final guidelines for state health insurance exchanges, which provided more flexibility and less guidance than expected (March 13).
• States continued to develop their health insurance exchanges by putting together advisory boards and establishing contracts with companies to build the exchanges. For example, GetInsured joined the team developing California’s online exchange (July 1). Exchanges provided a new opportunity for companies and professionals interested in health and technology (Nov. 29).
• States began defining essential benefits for plans to be sold on each state’s exchange, with considerable variation between the states (Oct. 1).
• HHS granted conditional approval to over 10 states that had put together exchange plans (Dec. 25). More are expected in the near future.

Health Insurers Try New Strategies to Reduce Costs

• Health insurance and policy leaders experimented with new approaches to health insurance sales and administration (April 30), including value-based insurance design (Jan. 11), tiered health insurance plans (Jan. 17), private health insurance exchanges (Jan. 23), reimbursing doctors for time spent coordinating care and doing paperwork (Feb. 2), personal health accounts as an alternative to health insurance exchanges (March 6), the global payment model (July 13), and expanding their marketing efforts (Oct. 15).
• Insurers also tried to involve consumers in lowering their own health costs, by rewarding consumers who chose less expensive providers (March 30), developing group games and competitions to encourage healthy behaviors (April 9), encouraging telemedicine for simpler health issues (May 7), and rewarding healthy grocery shopping (Sept. 20).

Readers, as we start flipping our calendars to 2013 and inching toward full implementation of the ACA, what are your thoughts on this year’s developments? Are you surprised by any of it? Disappointed or pleasantly surprised? What do you expect to see next year?

For more summaries of health insurance and health policy developments this year, see:

• Children’s Health News 2012 (Huffington Post, Dec. 28)
• ACA Figures Prominently in Top 5 Health Policy Developments of 2012 (PhysBizTech, Dec. 27)
• 2012 Policy Report Card: Health Care Forecast (Politico, Dec. 12)
• 2012: A Year of Huge Uncertainty in Health Care Policy (The Health Care Blog, Jan. 10)
• 2011 in Health Insurance and Policy: A Roundup (GetInsured blog, Dec. 29, 2011)

One week from now, states will have to decide whether to open up and run their own health insurance exchanges or join the federal one in 2014. And as the deadline approaches, more and more states are making that decision; those that don’t decide will default to being part of the federal exchange. So far, according to an article by Julie Appleby of Kaiser Health News, 18 states have decided to make their own exchanges, six will partner with the Department of Health and Human Services (HHS) to develop a joint exchange, and the remainder have either opted out of a state exchange or haven’t yet announced a plan.

In making this decision, states are considering a variety of issues. Though state and federal exchanges will essentially serve the same purpose, each approach has its pros and cons. States that build their own systems have more flexibility in tailoring it to their residents – they can require insurers to cover treatments that are popular in the state, take into account cultural factors in designing the online tools and setting rules, use local ties to market more effectively to potential users, keep in mind the existing practices of the insurers and major medical centers already in the state, and allow more local input into the whole process.

On the flip side, joining the federal exchange decreases the work states need to put into planning, developing and maintaining exchanges – no small matter at a time when states are strapped for cash and staff time, but still have to balance their budgets and continue funding other programs. (HHS is providing states with grants to assist with start-up costs, but starting in 2015, exchanges will have to be self-sustaining). With HHS taking longer than expected to release final guidance and rules on exchanges, time is also a factor; according to an article by Bill Toland of the Pittsburgh Post-Gazette, states making their own exchanges are worried about being able to fully set them up by October 2013, when enrollment through exchanges is scheduled to start. Finally, joining the federal exchange would allow residents of those states to take advantage of potential interstate health insurance plans and any economies of scale that may lower their coverage costs.

As mentioned in a recent blog post, both state-based and federal exchanges are likely to pay for exchange maintenance through a surcharge on insurance premiums of less than 5%. In both environments, this fee is likely to be passed on to the consumer in the form of higher prices.

Taking all of these factors into account, Gov. Chris Christie of New Jersey announced yesterday that his state will not be developing its own exchange. According to an article by Jason Millman of Politico, Gov. Christie is most worried about the uncertainty of exchanges, their costs, and how much control states will have over them. He explained his decisions in more detail late last night on the Daily Show, with the caveat that he’s “not going to do this now; the law permits you to make a decision later…if [HHS] ever give[s] me all the information I need to know that it’s worthwhile for a state to do it, I’ll reconsider my decision.”