Part 3

September 24, 2010 is exactly six months after the federal health insurance reform legislation was passed. There are many provisions in the law that will take affect at this time. Many of these provisions will undoubtedly increase health insurance premiums for all Utahans. There are many provisions so I will get right to it: 

Six Months from Enactment
Varying Health Plan Rules Based on Salary:  The law now requires all group health plans to comply with the Internal Revenue Section 105(h) rules that prohibit discrimination in favor of highly compensated individuals.  This provision starts either plan years beginning on or after six months after date of enactment (September 24, 2010), or six months from the date of enactment. However, grandfathered status applies.  So if you have a highly compensated employee and want to pay more for their benefits than a lay employee–forget it–it is not allowed.  

Lifetime Benefit Limits:  The law now prohibits lifetime limits on the dollar value of benefits for any participant or beneficiary, for fully-insured and self-insured group and individual health plans including health plans with grandfathered status.  This provision starts plan years beginning on or after six months after date of enactment (September 2010).  This provision will increase premiums on just about every plan.  Most health insurance plans have a lifetime maximum benefit of $2 Million/person.  The feds now mandate that insurers have to pay an unlimited amount of benefits for the lifetime of the policy–ouch.  

Annual Benefit Limits: The law now requires the annual benefit limits on coverage would be limited to DHHS-defined non-essential benefits for plan years beginning prior to January 1, 2014, for fully-insured group and self-insured group and individual health plans, including health plans with grandfathered status (Annual limits would be prohibited entirely for subsequent plan years.).  Some plans (not all) have annual benefit limits on certain services.  Those annual limits will be restricted initially and then in 2014 they will be eliminated.  This is yet another provision that will increase the cost of your health insurance policy. 

Mom, I'm moving in...

Increased Dependent Coverage: The law now requires increases the age of a dependent for health plan coverage to up to age 26.  This is not new for Utah since we already allow dependents to stay on a parent’s plan up to age 26.  The difference is that dependents can be married and the group health insurance income tax exclusion (future article I will explain this) would apply to value of the benefits provided for these dependents for fully-insured and self-insured group and individual health plans, including health plans with grandfathered status.  If the “dependents” have the option of group coverage with their employer–they will not be able to go on their parent’s plan.  

What I don’t understand is how you are still considered a dependent of your parents if you are married–gives a whole new meaning to the term ”boomerang kids”.  I know my wife would not be happy if I stayed on my parents plan.  She would tell me to cut the umbilical cord already! 

Coverage for Preventative Care: The law now mandates coverage of specific preventive services with no cost sharing for fully-insured group and self-insured group and individual health plans.  The services that must be covered at minimum include: 

• Evidence-based items or services with a rating of `A’ or `B’ in the current recommendations of the United States Preventive Services Task Force;
• Immunizations recommended by the Advisory Committee on Immunization Practices of the Centers for Disease Control and Prevention with respect to the individual involved;
• For infants, children, and adolescents, evidence-informed preventive care and screenings provided for in the comprehensive guidelines supported by the Health Resources and Services Administration.
• For women, additional preventive care and screenings provided for in comprehensive guidelines supported by the Health Resources and Services Administration.
• For women, the recommendations issued by the United States Preventive Service Task Force regarding breast cancer screening, mammography, and prevention shall be considered the most current other than those issued in or around November 2009.

The reality is that you can buy health insurance plans in just about every market in the USA that offers these preventative benefits.  Currently, you can also buy plans that do not cover preventative benefits.  Once this provision takes effect, you will only be able to purchase a policy that covers preventative care with no cost sharing (no deductibles, coinsurance, copays, etc…)  This provision will increase the health insurance premiums for most Americans. 

ER Coverage

Coverage of Emergency Services: The law now mandates coverage of emergency services paid at the in-network level regardless of provider.  This provision makes sense but insurance carriers should already be doing this.  This provision may attribute to increased cost of your health insurance premiums. 

Preexisting Condition Coverage for Children: The law now requires to insure preexisting conditions for children 19 and under for all group and individual health plans, including self-insured plans.  In other words children 19 and under cannot be denied health insurance coverage for health conditions.  This is called guarantee issue coverage an is a prelude to what will apply to all Americans in 2014.  This provision sounds great on the surface but the reality is that it will increase the cost of health insurance dramatically, especially for individual plans.  Eventually (2014) this law will prohibit medical underwriting on anyone and that is when health insurance ceases to be health insurance and it will truly become socialized because insurance companies will not be able to rate policies based on risk of the individual.  It’s the same idea as not allowing a bank to ask for employment info, past pay stubs, verification of income and assets to get a loan.  Isn’t it that type of reckless lending that lead to the financial crisis? I digress…cross your fingers this law doesn’t crash the health insurance system! 

Going Broke!

There are two possible outcomes from the majority of these health insurance provisions: further increases in health insurance premiums and/or health care rationing.  As always, my goal is to make sure my clients are informed and prepared.  I will continue to make sure my clients understand their options and are on the best plans at the best price.  If you have any questions or comments please let me know.  Don’t for get to visit my web site at www.uthealthplans.com.  Check out my vlog on this subject below.

Now what?

For many States in the Union the next few months leading up to July 1, 2010 will be somewhat  chaotic as they deal with the new federal health insurance legislation–but not Utah.  The following provisions in the federal health insurance law is important to know–but won’t really affect Utahans much since Utah has already enacted similar legislation in the past.

90 Days of Enactment

High Risk Insurance Pool

High Risk Pool:  The law now creates high-risk pool coverage for people who cannot obtain current individual coverage due to preexisting conditions. This national program can work with existing state high-risk pools and will end on January 1, 2014, once the Exchanges become operational and the other preexisting condition and guarantee issue provisions take effect. It will be financed by a $5 billion appropriation.

Utah has had it’s own high risk pool (catch-all plan as I like to call it) for many years called HIP Utah (official name is The Utah Comprehensive Health Insurance Pool–I like calling it HIP).  In Utah everyone can get health insurance coverage it just depends on where and how much you are going to pay for it.  Today your choices are private individual plans, private group plans, public Medicaid, Medicare, CHIP, COBRA, and NetCare.  The reasons for approximately 200k+ Utahans are uninsured is due to cost, apathy, they don’t want it, and/or they don’t know their options and where to get it (pssst- That’s why you need a good agent to educate you on your choices).  As for the HIP Utah plan–this legislation may infuse some money into it and help keep it a float until 2014 when all health insurance becomes guarantee issue (this will be discussed in a later post).

July 1, 2010

Utah Health Exchange

Web-Based Information Portals: The law now requires the states and the Secretary of DHHS to develop information portal options for state residents to obtain uniform information on sources of affordable coverage, including an Internet site. Information must be provided on private health coverage options, Medicaid, CHIP, the new high-risk pool coverage and existing state high-risk pool options.  The State of Utah is already a step ahead of this legislation as the Utah legislature and it’s progressive Speaker of the House, David Clark  has already enacted legislation (Obamacare super-lite) over the past two years that established an insurance exchange including an informational portal (See Utah HB 133 2008; HB 188 2009; and HB 294 2010).    Funny how the federal government is now mandating (controlling) this when private and public entities have been doing this for years. 

10% Tanning Bed Tax

Tanning Bed Tax: The law now requires a ten percent excise tax on amounts paid for indoor tanning services, whether or not an individual’s insurance policy covers the service. The service provider is to assess the tax on the customer for services performed on or after July 1, 2010.  I believe the rational here is to discourage tanning because it leads to skin cancer which will then lead to more burden/cost on the health care system.  Sounds fine on the surface but if a tan costs $10 and now it costs $11-I don’t think you are going to discourage much tanning (I don’t go to tanning salons so I am a little naive on this topic).  Seems kind of like a racist tax –I mean if you think about it only those with lighter skin go to a tanning salon to become darker–so in essence the federal government is taxing people based on the color of their skin.  I believe that is against the Civil Rights Act.  Just saying

I hope that gives you some more insight on the federal health insurance legislation.  Stay tuned for my next article which will focus on some bigger provisions that become enacted 6 months after passage (I’m sure you can’t wait!!!).  If you have any questions or comments please leave them below. Don’t forget to visit my web site at www.uthealthplans.com.  Thanks for reading!

Now what?

The largest transformation of health insurance in our nation’s history was passed in March by the Democrats and President Obama. If you are familiar with my previous posts you will know that I am against most of the “reform” that was passed in this law because I know it will increase our insurance premiums substantially and reduce our choice. With that said–what’s done is done. There will be legal challenges and efforts to repeal the law but until that happens–the bill is the law of the land.

I want to make sure you understand the changes and how they may effect you, your family, and your business. This health care law is huge (2700+ pages) and there are many changes–therefore I will be posting a series of articles that inform you of the changes in the order that they take effect.  I will only be posting the changes that effect your health insurance.

IMMEDIATE CHANGES

1) Grandfathered Plans:  If individuals and groups want to keep their current plan –they can do so only if they do not make any changes to their plan.  The only acceptable changes they can make and keep their plan is if they add or delete members to the plan.  So, if you want to change a copay, deductible, coinsurance, etc…even if you stay with the same insurance company, the “new plan” will have to be compliant with the new federal mandates.  This effects all Utahans because over time everyone will make a plan change of some kind and have to purchase a federally compliant health plan with the new federal mandates (even if you don’t want them).  Health insurance mandates add to the cost of the health plan–so this is one way Utahans will pay higher costs. 

2) Small Employer Tax Credits:  Makes available tax credits for qualified small employer contributions to purchase coverage for employees. Begins retroactive for premiums paid in taxable years beginning after December 31, 2009.  In order to qualify, the business must have no more than 25 full-time equivalent employees, pay average annual wages of less than $50,000 and provide qualifying coverage.

The full amount of the credit will be available to employers with 10 or fewer employees and average annual wages of less than $25,000, and will phase out when those thresholds are exceeded. The average wage threshold for determining the phase-out of credits will be adjusted for inflation after 2013. Small employers will receive a maximum credit of up to 50% of premiums for up to 2 years if the employer contributes at least 50% of the total premium cost. The credit would phase out entirely for employers of more than 25 employees whose average annual salaries exceeded $50,000. If you have a business that meets this critera–make sure you contact your CPA and take advantage of this tax credit.  There are some exclusions to the credit.

Employers will not be eligible to use the credit for certain employees, including defined “seasonal workers,” self-employed individuals, two percent shareholders of an S corporation (as defined by section 1372(b), five percent owners of a small business (as defined by section 416(i)(1)(B)(i)) and dependents or other household members. However, leased employees are eligible employees for the credit. Employers receiving credits will be denied any deduction for health insurance costs equal to the credit amount.

To check out my video blog on the subject please see below.  I look forward to your comments and questions. Look for my future posts!

I was able to visit with Senator Hatch, Senator Bennett, and Representative Chafetz (I live in his district).  The good news is that they are all on the same page regarding the current health care/insurance reform legislation–they oppose it.  They all seem to understand that health care reform should focus on reducing costs (which is the underlying problem) rather than focusing on access to health care through health insurance. 

Visit with Senator Hatch

The democrats believe that if everyone where to be insured then they would have access to health care.  On the surface this sounds correct, but when you look at the cost of insurance and the ongoing rise in health insurance inflation you will realize that getting people insured will not reduce costs.  Actually it will increase costs because it will most likely increase demand faster than we can increase the supply of doctors and hospitals.  When costs increase people stop buying insurance because it becomes unaffordable.  When costs are too high many people will choose to go on welfare health insurance like Medicaid, PCN, CHIP, etc….  Who pays for all this?  You and I pay for it through higher taxes (not to mention our future posterity).  Getting everyone insurance might make us feel better but it does not solve the problem: cost.

Nation's Capitol

The republican’s proposal is directed more towards reducing costs first.  They believe that if you reduce the costs in the health care system then health insurance inflation will stabilize or decrease and more people will be able to purchase health insurance.  Fortunatley they seem to understand the root problem.  Unfortunately I personally believe their proposal is too weak and does nothing more than half-heartedly promote more consumerism in the market to put downward pressure on costs.  It’s a step in the right direction but not a silver bullet. 

I have many ideas that I believe would truly reform our health care for the better by reducing costs, improving quality, and improving access.  I plan on posting another article on that topic in the future.  For starters the federal government could change the way Medicare, Medicaid, SCHIP, Veterans, Tri-Care, etc…pays for health care since the feds currently pay for about half of all health care.  Those on the government rolls should have more skin in the game (personal responsibility), they should incentivize beneficiaries of these programs to find the best doc and the best price.  They should not pay doctors on a fee-for-service reimbursement but rather require that docs have their prices transparent to the patient and allow the patient to negotiate price.  If Medicare and other federal programs do not allow free-market principles to govern, then I do not see any hope in curbing health care inflation. 

Supreme Court Building

As I met with these legislators, I tried to drive home the point that our current health care system is not a free market and until it functions like a free market costs will continue to go up.  I let them know that many of my clients are having a hard time paying for health insurance and many have already dropped coverage because of cost.  I asked them to do all they can to free our health care system so that costs go down, quality increases, and more people can afford insurance.

Obama supports reconciliation

Yesterday, President Obama gave his blessing to congress to go ahead with a very controversial strategy called reconciliation to pass the unpopular health care reform bills.  Reconciliation is a tactic that only requires a simple majority of 51 votes to pass legislation.  Currently, the House has passed a version of the health care bill and the Senate has passed another version of the health care bill.  The bill was stalled in its tracks once Scott Brown, Republican of Massachusetts, won Ted Kennedy’s (Democrat) senate seat.  Democrats lost their super-majority and now republicans can filibuster the passage of the bill and democrats now do not have the 60 votes to override a filibuster.   In order to avoid the filibuster the democrats are now planning to resort to reconciliation pass the bill with a simple majority (51 votes). 

The reconciliation strategy is a bad idea for everyone–including the democrats.  Reconciliation is typically used only for budget, spending, and debt-limit bills and was designed so that budgets would be easier to pass in order to keep the government rolling.  Reconciliation has been used in the past to pass contentious bills.  The difference today with this health care bill is that it will fundamentally change 17% of our economy and affect every American’s health care.  For a change of this magnitude reconciliation is a way to thwart the will of the people.  Since November of 2009 every major poll of Americans show that the majority do not support the current health care legislation by a margin of 10+ points.  Another point of concern is that the republicans have been shut out of the process.  Those republicans represent millions of Americans–so in essence those American’s views on health care have not been given their due representation. 

President Obama and the democrats seem willing to face an enormous political backlash by resorting to reconciliation–many will fall on the sword so to speak to do this.  Why?  Why would they do this?  My only explanation is that if they can get this passed–even though they will lose politically–they beleive it will fundamentally change America and will never be repealed (even if they lose control of congress). 

From what I know of the current House and Senate bills–they are not designed to reduce costs.  In fact Utahan’s will see anywhere from a 30% to 50% increase of the bat from this legislation.  Those increases will come from mandating that everyone buy health insurance, guaranteeing coverage without pre-existing conditions, and community rating (premiums of younger go up and subsidize premiums of the older); costs which I am opposed to because they are not good for my clients (this topic will be another blog post).  That increase in health insurance premiums does not include the already burdensome 10% to 15% renewal increases every year due to health care inflation and utilization.   No matter what the politicians say, this bill will not reduce health care or health insurance inflation; but rather, it will increase Federal Government control of your health care and health insurance, increase your taxes as you subsidize other’s costs (even more than you already do), and leave you with less choice as private insurance is regulated out of business. 

I agree that health care reform legislation should start over and focus on reducing the costs of health care, incentivize consumerism, and incentivize better quality rather than federal control of  health care. http://www.youtube.com/watch?v=LnpWEqhyaEM

Over the next few months I am going to be posting regularly about ideas I think are “good” for the health care and health insurance industry and above all good for all Americans. Let it be clear that I do not believe more State or Federal Government control of our health care/insurance is better. You may have a different opinion and that is fine with me.

This DC trip gives me an opportunity to be an ambassador of ideas. I invite all Utahns (that want to) to write me about their ideas for health care/insurance reform. Email them to me at expert@uthealthplans.com or comment on this blog. I promise that I will personally print the ideas and hand them to your Federal legislators in DC. I would really like to inundate them with ideas. All ideas are welcome (even ones I do not agree with). After all, these guys in DC represent everyone–not just me. When I get back, I also promise to report back to you all on this blog.

There are hundreds of reasons health insurance premiums increase year after year, so to simplify it I have narrowed them down to three: rise in the cost of health care delivery, high utilization, and artifically low Medicare reimbursements. 

First is is important to understand that health insurance premiums are a shadow of the costs associated with health care since health insurance is a payer of health care.  So when health care costs go up and people using the health insurance to pay for health care rises, so does your health insurance premiums.  It costs a lot to deliver health care and the cost keeps rising but only about 3 to 4% a year (much less than the 11% average health insurance premium increase).  These costs include a doctor’s overhead, malpractice insurance, investments in technology, and pro bono care.  Health care technology is getting better every day but with those advancements comes higher costs and those costs are passed on to me and you usually through health insurance premium increases. 

Utilization is a fancy word for using your health insurance.  It’s fine to use your health insurance–that’s what it is there for–however, many people do not use it wisely.  For example “over-utilization” is where consumers go to the doctor for every little cough or sniffle, choose not to get second opinions when recommended for a procedure, and other countless bad health care consumer situations.  Another problem is that doctors tend to practice defensive medicine–meaning the perform numerous unnecessary tests and procedures in order to cover their behinds in case of a lawsuit.  I have seen some studies that estimate that up to 50% of all tests and procedures are unnecessary.  This is a huge burden on the consumer and those paying health insurance premiums. 

Last but not least, artificially low Medicare reimbursements are a big problem.  The Federal Government (Medicare) sets the price that doctors get paid from Medicare insurance (insurance for the elderly and chronically disable).  Medicare has not increased what it pays to doctors to keep pace with doctor’s costs of doing business.  Many doctors have retired early because they can not stay in businesses with the Medicare reimbursements so low.  Other doctors will subsidize their loses from treating Medicare patients by negotiating higher reimbursements from privates insurance companies.  Sometimes these reimbursements are 25% or more than Medicare reimbursements.  So what does that mean to you?  Since you most likely pay health insurance premiums to a private insurance company your rate reflects a high premium due to the  cost shift from Medicare.  Simply, you are paying at least 25% more than you should be paying.  To fix this Medicare needs to increase their reimbursement to the docs that accept Medicare to the same levels private insurance pays.  This will better equalize the premiums and you will not be carrying more than your fair share. 

So how do we fix it so our premiums stop increasing?  I will give you my opinion to the question in another post.  Until then, do your best to be a good health care consumer and pray our system changes for the best.