This is a copy of a response I posted at Forbes on Ms. Pipes latest work of semi fiction on ACA – “Higher Health Insurance Premiums This Year? Blame Obamacare” :
Ms. Pipes, It is amazing to me that you do not get tired of misrepresenting the truth about the ACA.
In fact you make it sound like the last 10 years increase somehow are the laws fault as well as well as the past projections predating the law that are major reasons health reform is needed.
As far as this year’s increases using the Kaiser study as one data point is fine but in their own notes they state that this years data set is different than last years and no one in America saw 3% increases last year.
If you look at data from industry leading benefits consultants Aon, Mercer or Segal or the mid market study from United Benefits Advisors, all of these sources reflect increases BEFORE benefits changes of 7-10% this year and in the past several years as well. Same with PWC and Towers Watson studies.
Most see this years increase as LESS than they had expected, sad but true at these levels.
You state that ACA is “piling mandates and required coverage benefits onto every single policy”:
In 2011 three minor changes went into effect were minimal in cost impact :
- Age 26 – Your so called “slacker mandate” comments are down right silly. “That cost impact is even more significant because most of those who seek coverage through their parents know that they’ll need care.
According to Kaiser 2.3 million young adults are covered thus far (not 1M).
“Even the feds admit that the mandate means that families will pay more. According to HHS, each new dependent will tack on an additional $3,380 to their parents’ insurance costs this year.”
FYI all the studies reflect a cost increase o .8-1% or <$150/year to add a young adult to a family coverage.
That whopping 1% to cover 2.3M new lives sure seems to contradict your assertion that This “adverse selection” issue results in a sicker — and thus costlier — overall insurance pool.”
- Ending Annual and lifetime maximums – (.4%) for improving coverage for all insureds and making sure no one will ever go bankrupt from poor coverage
- Preventive Care – (.5%) co pay free preventive care will help catch issues before they get serious and focus on wellness which many employers and plans already were. For most people these costs were out of pocket before and now can be paid pre tax via this slight increase so this may be a net decrease in total costs for alot of insured and their families
Your comment “Slathering federal mandates on top of existing state mandates will drive costs even higher — and thereby make coverage unaffordable for more people.” might be true if the “essential benefits program” that HHS is considering goes hog wild.
This week the recommendation for it from IOM was a plan like that of a typical small employer which is not laden in extra benefits and will be focused on affordability.
I trust you realize that the state exchange plans will NOT have to include the onerous state mandates you refer to and employers in the exchange in some states may actually save money. Self insured employers and those that are grandfathered will avoid any changes as well.
The real whopper of this post is: “CMS estimates the growth in health insurance costs will increase 10 extra percentage points in 2014 because of ObamaCare — a 14% increase, versus 3.5% without the law.”
Total expenditures are going up because more people will be insured this first year of the law but you make it sound like plans will cost 14% more which is factually wrong
What you intentionally leave out is what ACA accomplished this year for seniors:
- 20.2 million seniors have gotten free preventive care worth over $2B
- 1.2 million seniors have saved over $1B from the “donut hole” closing
- Per CMS Medicare inflation is the lowest ever at 3.2%, partly due to the above and more seniors being on an staying on their meds.
- Medicare Advantage premiums for 2012 are GOING DOWN 4%, even with the $500B subsidies being removed by ACA for the private insurers that were misrepresented repeatedly by you and others.
It is really a shame that a quality publication doesn’t fact check its guest columnists or offer a more balanced view of healthcare reform or at least one that uses facts to make its arguments.
God Bless Rep. Ryan. In his simplistic reform utopia all the kids could have ponies and all the adults Ferrari’s if only the market and consumerism were in play.
At 100,000 feet it is easy to say lets get rid of the employer tax deduction and give it to consumers who will be better spenders of their dollars. In a perfect market that would work but healthcare is not and never will be a perfect market and the fundamental changes required to get to this nirvana in human behavior and systemic transparency cannot happen overnight or even a few years.
This was the McCain plan from 2008 & it would have covered nearly no one new and changed nothing about how insurance is sold. Like in his Medicare Voucher plan there is no mention of the insurance reform needed to allow consumers to buy on a level playing field without age, sex and underwriting discrimination.
He avoids the major issues in the PPACA law and market that need to be addressed to work:
1) Getting a “tax credit” is fine if you pay Federal tax but what about the 47% who pay little or none simply because they have incomes <$40K. How do we cover them and allow them choice”
2) Pre-existing conditions
3) Medical underwriting
4) Free riders – how to stop Limited policies that offer low coverages and then the rest of us pay the bills for these folks
5) Core benefits for catastrophic so that the rest of us do not foot the bill for the person who buys poor coverage (like uninsured motorist)
Most notably with no understanding of how the benefits marketplace works he fails to grasp that if tomorrow all group coverage ended and 260 million people bought their own coverage directly that the insurers are incapable of dealing with it on every level from marketing, sales, service, billing, claims,web services et al. What chaos!
The group model has distinct advantages of selling once for a large population and all admin is handled thru the employer including enrollment, communication, first level problem solving (with broker help)payroll deduction.
With 256 million individual consumers we would have a huge shortage of agents/brokers in the country to handle all the needed work the carriers cannot and do not do well. They are not consumer facing businesses as they nearly always sell and service thru 3rd parties like brokers.
This is already an issue with Medicare Advantage where carriers cannot handle the consumer without the broker’s help. Large numbers of options, even simply presented are still overwhelming to the buyer and a boon to good brokers.
Clearly consumerism and choice is a needed as is reform of how we all view health insurance, or non-insurance as it is quickly becoming with higher deductibles and out of pocket costs.
The real model is more like your auto insurance with catastrophic and a warranty for preventive coverage and then use the right service provider for the problem you have at a cost you want to pay.
Imagine what an oil change would cost if your auto insurer covered it in network, out of network etc? That $19.95 would be $99 in a heart beat?
Today we go to the doc for sniffles and cancer making as that is what we are accustomed to doing like a Pavlovian dog.When I was a kid we had major med and the rest my folks paid. A return to a 21st century variant on that is the answer.
Ryan’s naive and utopian view of change would be very hard to achieve and at the end still leave most people uninsured and allow all the option to be under-insured if they want to be.
His plan can get employers out of the healthcare business which any sane one wants in today’s world but the resulting “new world” would likely end up tilted heavily against the consumer.
Can you imagine Congress passing the laws necessary to make a truly open and transparent market possible? Look at the partisan wrangling over banking reform, consumer credit and yes PPACA and it will never happen.
One thing we all can agree upon is that medical costs continue to rise and is the single largest threat to the prosperity of the nation, employers and we as consumers. As the headlines told us this week you can now a new buy a car for the average cost of family coverage in the U.S.
Dealing with this was one of the major reasons PPACA was passed in the first place.
This week Kaiser came out with a study pointing to a supposed 9% increase in costs for 2012 after 3% last year both of which seem like anomalies.
This anomaly has created another PPACA wildfire that has taken on a life of its own with the anti reform Tea Party and Republican crowd. Why am I not surprised?
Lets try and ferret out the truth here on what really is happening.
Kaiser Study Conflicts with Other Major Studies They Aligned With Before
Clearly the headline grabber 9% increase is an anomaly and outlier as was last years’s 3%. I am in the business and no one saw 3% increases in 2010 esp, in the <50 life marker that makes up 80% of their sample.
Neither is close to in line with other major studies like Mercer whoses press release on their 2011 annual study reported that if:
“no changes to their current plans, employers reported an average increase of 7.1%. Over the past five years, this underlying health benefit cost trend has been running at about 9%.
So where did Kaiser get 3% last year and the headline grabbing, Obamacare bashing 9% this year? In 2007-2009 Kaiser’s numbers were very similar to Mercers in the 6-7 % range. Why the divergence in the last 2 years?
Something is clearly wrong here.
Large Scale Trends Show That Cost Inflation May Be Slowing
Medicare in 2011 is our first contradictory data point.
- Over 17.3 million got free preventive care this year (as of 6/30) and
- Medicare inflation is the lowest ever and
- Medicare Advantage premiums are the going DOWN 4%.
- Donut hole closing had saved seniors $468M thru June alone.
- Fraud investigations have saved 5.1B in 2011 and over 200 fraudsters prosecuted. Could this have a prevention or recidivist effect as well with the new FBI dedicated fraud unit in place?
The Federal health plan is another counterpoint that covers 8 million people, the largest in the nation:
- 3.5% average increase, the lowest ever, down from 7% in 2010 over the 210 plans offered. Some even decreased.
- NO major benefit changes are being made
- The plan too absorbed the age 26 and wellness coverage just like everyone else.
So the 2 largest plans in the nation saw real significant slowing in costs including the addition of preventive care and RX changes for medicare and young adults and preventive care in the Federal plan.
At a minimum this is an encouraging start to analyzing the outlook for 2012 insurance costs.
Kaiser’s Own Data Anomalies
Kaiser is the premier source for healthcare data but they have some real anomalies in their data and methodologies that they asterisk in the report. 2011 seems at odds with their own prior years surveys and other industry data.
So why is Kaiser a seeming outlier? Data assumption changes.
The major adjustment they made was supposedly using updated DOL numbers for the number of employers in the various size categories they use.
They reduced the number of large employers – over 1000 – from around 25K to 10,000. In reality the real number is around 17K from industry marketing databases built on DOL 5500 data and D&B, OneSource and other business data.
From 100-999 they also made changes that reduced the mid market employer numbers by another 20-30K again contrary to industry databases.
This means that in 2011 the impact of small employers, those that are insured and subject to the greatest rate changes in any market make up a larget part of the sample.
Here is the second anomaly and it is a big one. In 2010 Kaiser showed ESI jumping from 59% of companies to 69% and then this year back to 60%. That never happened especially in this major recession. NFIB has surveyed small employers for years and their 2011 report shows 42% of employers <50 offer ESI.
Why this huge difference? In their supplement explaining their methodology has none. The reason is that ESI has been dropping as we all know for the last five years at least.
So what is the botton line?
Kaiser’s headline grabbing 9% is only 7% in terms of apples to apples compared to past years. And that is further skewed by its data anomalies.
In fact Kaiser even contradicts itself in its analysis (per Merrill Goozner):
Drew Altman, head of KFF, suggested lower than expected utilization (by individuals trying to protect recession-ravaged household budgets — individual payments rose only 3.3 percent) and higher health care prices may also have accounted for some of the higher premiums. While both of those phenomena are happening, they would tend to offset each other.
Covering New People and Adding Coverage is NOT Increasing Total Costs
First lets simply address the ONLY parts of PPACA that have gone into effect – age 26 and preventive care inclusions in plans. These are NOT inflation increases but new people being covered and services now in premiums vs. from a person’s out of pocket costs.
Most states covered young adults in school already at varying levels from 23-25 so this no revolutionary change with no actuarial to support the real costs. For most insurers this was an administrative cost not a claims increaser.
2.3 million young people were covered at an average cost of about $150 each/year (1% of the $15K average family premium) and in reality employees with this age group paid an additional premium for the kids to be added in a new tier in their plans just like they do when they move from family to +1, +2 etc as they have children.
The same for the preventive care. Anyone who spent cash out of pocket for basic services and checkups saves cash but pays more premium and others who have foregone care now can get it. Over time this will yield lower costs to employer and families alike.
Susan Connolly, a partner in Mercer’s Boston office, believes that slowing utilization may also be a sign that programs targeted at improving employee health – now the rule rather than the exception in employer benefit programs – are having a positive impact.
“Earlier risk identification and health education, along with improvements in drug therapies and medical technology, are keeping people with health risks and chronic conditions away from the emergency room,” Connolly said. “And consumers are more aware that overuse and misuse of health care services will directly impact their wallets as well as their employer’s budget.”
So for the Kaiser study did the overall spending on healthcare increase 2% or is it simply getting moved from one accounting bucket (out of pocket costs by the consumer) into tax deductible premium changes of the employer and employee (sec. 125) ?
Net/Net there is little to any real increase in overall healthcare spending due to these provisions and the investment in prevention will have real paybacks in healthier workers, less absenteeism, keeping people on their medication regime and early detection of all types.
What is the Insurer’s Spin on Healthcare Costs and Pricing?
Merrill Goozner at “Care and Cost” said this:
Insurers “have been conservative in their pricing, so they have overshot to some degree,” said Matthew Borsch, an analyst at Goldman Sachs. “You’ve seen that reflected in strong earnings they’ve been reporting.”
…Wall Street very happy indeed, as reflected in the breathtaking increase in the companies’ share prices over the past year. Since the end of July 2010, investors have bid up the stock by more than 50 percent at four of the big five. WellPoint, the laggard, saw its stock price increase by a still-impressive 35 percent.
One of the secrets to achieving these results is what the insurers euphemistically call “medical management.” That often translates into denied claims and denied coverage for doctor-ordered care. The fewer claims you pay and the more procedures you refuse to pay for, the more money is left over for investors to put in their pockets.
Another important way they’ve been able to sustain such a string of impressive earnings results is to shift more and more of the cost of care to their policyholders. An increasing percentage of these companies’ policyholders are enrolled in plans that require greater cost sharing. Those policyholders pay more for care out of their own pockets than ever before while their insurers are paying much less.
The insurers are loathe to admit this and have been making up a host of incredible excuses to explain why they are paying so much less for care than investors and analysts had expected and so much less on a percentage basis than in previous years.
At the end of 2010, executives told Wall Street that the “utilization” of medical services was lower than in 2009 because the flu season last year was less severe. They assured investors utilization would return to more normal levels during the first quarter of 2011.
When it didn’t, the bad winter weather was to blame. Insurance executives wanted us to believe that people were not getting the care they needed because it was colder and snowier than usual. They assured us that medical spending would jump again as soon as the weather improved and the ice and snow melted.
Surprise! It’s August and people are still not going to the doctor or picking up their prescriptions or checking into the hospital as much as they usually do. .
And what’s the excuse this time? It’s the economy, they say — even though the recession officially ended more than a year ago.
At least UnitedHealth’s executives ackowledged that, as AP reported, “health plans that make patients more aware of the cost of care may be having an impact.”
So has Obamacare raise healthcare inflation with these 2 provisions? NO!
Did it raise total dollars spent by employer premiums and consumers out of their pockets? Not really when you look at total costs for a consumer for uncovered out of pocket expenses and premiums paid to insurers.
Some may have gone down in total, and some may have gone up, but the system now covers 2.3 million more people, lowering uninsured rates 2% alone, with better care that will help improve overall health, one of the major goals of PPACA.
Medicare trend is lowest in over a decade and all of the above happened while over 17 million seniors took advantage of their new free preventive services and saved so far over $468B in drug cost with the donut hole closure.
The real headline with all the data points we used is that 2012 is seeing a bend in the cost curve of 15-20% year over year with more people covered and the entire insured nation getting preventive care.
- Is the economy the culprit with people putting off care?
- Is it “unsurance” with the higher deductibles etc reducing insurer liabilities?
- Or is there an early sign that Obamacare may work?
Wendell Potter sees it the same way:
What seems clear is that insurers decided last year to charge their customers considerably more than necessary this year to be able to meet Wall Street’s profit expectations; insurance companies are also concerned that such increases will be more difficult once health care reform is fully implemented in 2014.
I find it very hard to find blame with PPACA when the industry it affects behaves in such an obvious and deceitful fashion.
PPACA is far from perfect but the insurance industry proves once again why the law is needed to put some real regulation around their unfettered and multiple ways to justify premium increases.
There are 2 key areas that are showing how health care reform is actually working already as it relates to young adults and seniors.
The federal employee plan has over 1 million young adults added already and Mercer reported this recently from their mew employer survey:
As a result, employers say they have seen an average 2 percent increase in insurance enrollments, with some experiencing increases of 5 percent or more..
HHS Secretary Kathleen Sebelius said:
“The Affordable Care Act is delivering on its promise of better health care for people with Medicare. People with Medicare who hit the donut hole are paying less for their prescription drugs, 17 million Americans have received free preventive services and prescription drug premiums will remain low. These are important steps that are making a difference in the lives of millions of Americans right now.”
Those with Original Medicare are entitled to receive preventive benefits as well as a new annual wellness visit free of charge, as stipulated in the Affordable Care Act.
The HHS informs that the Affordable Care Act is closing the prescription drug donut hole by providing more discounts on medications in the donut hole. This year, the total number of individuals with Medicare benefiting from these improvements is rising:
- 51.5% of those with Original Medicare, a total of 17,336,421 people received at least one free preventive service during the first six months of this year.
- 1,061,780 people with Original Medicare have benefitted from Medicare’s new Annual Wellness Visit. In mid-June the number stood at 780,000.
- During the first six months of this year 899,000 Medicare beneficiaries have benefitted from the 50% discount on prescription brand name medications in the Medicare Part D donut hole.
- All this represents so far a saving of $461 million in out-of-pocket expenses during the first six months of this year.
The average Medicare prescription drug plan premium for next year will be approximately $30, down from $30.76 this year.
Donald M. Berwick, M.D., CMS Administrator, said:
“The Affordable Care Act continues to improve the value of the drug coverage people with Medicare will receive next year. Out-of- pocket costs will be lower thanks to discounts on brand name prescription drugs and increasing generic coverage for people in the donut hole. Beneficiaries should still carefully compare their current plan’s coverage and quality with what is being offered in 2012 when that information becomes available in the fall.”
The inclusion of preventive care services for women, including contraceptive, in health plans is set to go into effect after 8/31/12 for “new plans” – ie non Grandfathered plans.
PPACA and Medicare ( as of 1/1) provide for certain specified preventive care services for everyone without a deductible. That was a major part of the legislation.
This specifies the scope of preventive services unique to women so there is no “favortism”, simply a recognition of the different and more complex needs women have at various stages of their life.
This is a step to more to well care for 51% of the population from sick care which is why certain diseases wouldn’t get similar treatment
Some of these are things that some states cover today in whole or in part. For example 31 states cover HPV screening and 34 colorectal cancer screening today in the mish mosh of state mandates.
If you look at the nearly 2100 state level mandates there is plenty of politics in healthcare already and have been for years.
It was based on the IOM recommendations
Preventive Services Women 2011 Report Brief. – http://ow.ly/5TxD5
“…women particularly stand to benefit from additional preventive health services.
The inclusion of evidence-based screenings,counseling and procedures that address women’s greater need for services over the course of a lifetime may have a profound impact for individuals and the nation as a whole.”
Preventive services include:
- well-woman visits;
- screening for gestational diabetes;
- human papillomavirus (HPV) DNA testing for women 30 years and older (31)
- sexually-transmitted infection counseling;
- human immunodeficiency virus (HIV) screening and counseling;
- FDA-approved contraception methods and contraceptive counseling;
- breastfeeding support, supplies, and counseling; and
- domestic violence screening and counseling.
Sec. Sebelius talks about it here:
Chart outlining details is here: