The Alan Katz Health Care Reform Blog

Health Care Reform From One Person's Perspective

Archive for October, 2010

Addressing Medical Costs

Posted by Alan on October 26, 2010

The Patient Protection and Affordable Care Act has lots of what can objectively be called “patient protections” – at least if one defines “health insurance policyholders” as patients. There’s restrictions on rescissions, increased policy transparency, improved preventive coverage, etc. And there are provisions aimed at addressing the cost of coverage: the medical loss ratio requirement and a host of pilot projects (I’ve promised a list of these and I’ll deliver a post on these cost containment items when I have the time to dig into the deeper crevices of the legislation).  But most objective observers – and quite a few of the more biased ones – will agree that the PPACA focuses more on health insurance reform than health care reform.

Yet making health care (not just health insurance, but medical services) more affordable was a major impetus for reform. The failure to boldly and visibly address this issue is one reason so many Americans are disappointed with the new health care reform law. Not surprising then that the itch, having failed to be scratched, is gaining increased attention. Alex MacGillis, in an opinion piece in the Washington Post, discusses the perceived failure of the PPACA to address “the price problem. He describes how the law focused on reducing the amount of unnecessary care that is delivered as opposed to directly dealing with the price of medical services.  And ends with the thought that “there may be support for tougher action on high prices once the principle of universal health coverage is established.”

Meanwhile, at the Brookings Institute’s Engelberg Center for Health Reform, a report entitled “Bending the Curve Through Health Reform Implementation” has been released. The report was written by a bi-partisan group that includes former WellPoint CEO Leonard Schaeffer. They offered three opportunities created by the PPACA:

  1. Speed payment reforms away from tradition volume-based payment system to better align them with quality and efficiency.
  2. Implement the insurance reforms in the PPACA, including the exchanges, to reward Americans when they choose higher quality care at lower premiums
  3. Reform coverage to empower Americans to save money and obtain other benefits when they make decisions that improve their health and reduce costs.

The report analyzes which of the numerous actions they call for can be done administratively under the new health care reform law and which would require additional legislation. The recommendations contained in the report are important and useful. Even more important than the specifics, however, is the non-partisan context they create on the issue of restraining skyrocketing medical costs.

When a new Congress reconvenes there’s going to be an initial flurry of political maneuvering to repeal, refine and/or gut the Patient Protection and Affordable Care Act. As I wrote in my last post, this is both a necessary and inevitable process. The news shows, like moths, will be drawn to where the most light and heat exists. And there will be plenty of heat. Hopefully, while the partisan battle rages, a few lawmakers will find the space to focus on meaningful public policy to move forward with initiatives that have the potential to meaningfully reduce the cost of medical care.

One can only hope.


Posted in Health Care Reform, Healthcare Reform, medical cost containment, Patient Protection and Affordable Care Act, Politics, PPACA | Tagged: , | 4 Comments »

Coming Soon: The Inevitable Revision of the Patient Protection and Affordable Care Act

Posted by Alan on October 23, 2010

Health care reform legislation may have been signed into law on March 23, 2010, but the issue is not going away. Anyone watching the election campaigns playing out across the country can attest to that. Republicans have made the  “repeal and replace” of health care reform a key promise in their "A Pledge to America" campaign document. While some Democratic candidates are touting their support of the Patient Protection and Affordable Care Act, others are bragging about their opposition to it. And others, like West Virginia Governor and Senate candidate Joe Manchin have talked about “repealing the things that are bad in the bill.”

Then there’s the impact on polling. Now, some readers of this blog get vehemently angry that Congress and President Barack Obama would dare pass legislation opposed by the public. I disagree. Political leaders have a job to lead, to make tough choices, to examine the facts, their constituents’ interests and then to cast their votes in accordance with their beliefs and conscience. I do not think politicians who flip-flop in whatever direction the polls show is popular at the moment are worth a lot. If politicians are simply to reflect the majority of opinion we could replace Congress with online survey software and be done with it. Also, consider this: if politicians only voted as the polls dictate there would have been no Civil Rights Act in 1964. American troops would have been out of Iraq during the Bush Administration. Whether liberal or conservative, there are numerous examples of legislation passing in spite of polls showing a majority of Americans opposing the new law that you are likely to applaud – and decry.

Nonetheless, polls do and should be a factor in the deliberations of politicians. They indicate when problems have reached a critical point where a solution is demanded. And they can serve to help shape and influence the likely outcome. Some polls of late have shown that a plurality of Americans – and perhaps more important given that election day is near at hand, likely voters – have an unfavorable opinion of the PPACA. But if polling is to influence decision making, then it’s important to dive a bit deeper into the numbers.

A recent Associated Press-GfK poll shows why. This survey shows that only 15 percent of likely voters support leaving the new health care reform law as is while 85 percent want the PPACA changed in some manner. However, that 85 percent is far from monolithic. 37 percent of likely voters surveyed said they wanted to repeal the Patient Protection and Affordable Care Act completely. Another 10 percent wanted changes to the law that would narrow its scope, but did not call for repeal. And 36 percent, a nearly identical number to those supporting repeal, want the law expanded. I couldn’t find a copy of the poll itself, but I assume this latter group includes those who support a single payer system or at least a public option, who want greater regulation on insurance carriers and/or who want greater cost controls included in the legislation. However, one could easily assume a single payer advocate, for example, might simply state they want the new law repealed.

My point here is that advocates on the right and the left will be seeking changes to the PPACA. The basic law may have passed in 2010, but it will evolve over the next few years. Some of the likely battles:

  • Repealing the requirement that businesses issue 1099s to any corporation or individual to which they pay $600 in a year. Democrats and Republicans alike support changing this provision. Whether it’s repealed or greatly revised is the only open question. Similarly, requirements for including health insurance premiums paid on behalf of employees on W-2s (which is optional in 2011) create a burden on businesses, especially small ones, that will necessitate changes.
  • There will be an effort to revive the idea of creating public run health plans (the so-called “public option”). Given the firestorm of opposition to the federal government expanding its role in America’s health care system, however, I don’t see the votes being there for this approach – especially in a Congress with small majorities in each House.
  • I expect, although it may be more of a hope, that there will be a push to allow premium subsidies to Americans earning less than 400 percent of the Federal Poverty Level to use those subsidies outside the exchanges being set up under the PPACA. This would allow those receiving the premium support greater choice and force the exchanges to compete with the outside market on a more level playing field. The exchanges are unlikely to go away: both Democrats and Republicans support them. But taking away arbitrary advantages will result in greater and more fair competition in the marketplace. Let the best offerings win.
  • There will be proposals to do away with the mandate that all Americans obtain health care coverage. While there are law suits seeking this result, I personally don’t think they’ll prevail. But Republicans (and some Democrats) will see a benefit to championing the repeal of an individual mandate. Neither party, however, is likely to seek a repeal of the requirement that carriers accept all applicants, regardless of their health conditions. As I’ve written before, a mandate on carriers to sell health insurance absent a mandate on individuals to buy imposes a horrific surcharge on health insurance premiums. I would hope this effort fails, but fortunately, if it succeeds, there are other ways to reduce the inevitable adverse selection that would follow (impose limited open enrollment periods, increase premiums or impose pre-existing conditions when consumers buy coverage after going uninsured for a specified period of time, etc.)
  • And maybe Congress and the Administration will focus attention on the biggest driver of increasing medical insurance premiums – the skyrocketing cost of medical care. The PPACA has some meaningful cost containment ideas hidden away in its 300,000+ words, more than the new health care reform is given credit for  (the topic of a future post). But even so, there’s a lot more to do. Lawmakers know they need to confront this issue eventually. Eventually they will.

We all have a tendency to draw straight lines from current data. That’s how bubbles happen. Stocks are going up and they’ll continue to do so. Gold is at a record high it’ll continue going higher. Tulip prices are skyrocketing and they’ll do so forever.

The same phenomenon occurs in connection to laws and regulations. A law passes and humans have a tendency to accept that that’s that. Now that the law is in cement nothing will change. But laws evolve. They are molded by regulators. They are shaped by the people who live under them. And sooner or later they are revised by the legislative body that passed the new law in the first place.

When thinking about the Patient Protection and Affordable Care Act, intense revision was, and is, inevitable. No law seeking to reshape America’s health care system would get it right on the first try. Politicians may proclaim “Mission Accomplished” when speaking of legislation (and wars), but the reality is the goal is never achieved perfectly and refinement is always needed Usually there’s a passage of some time before the first attempt to address a problem and subsequent efforts. Changes to the Patient Protection and Affordable Care Act are likely to start much sooner. I’m thinking early January 2011.

Posted in Barack Obama, Health Care Reform, Healthcare Reform, medical cost containment, Patient Protection and Affordable Care Act, Politics, PPACA | Tagged: , , , , | 23 Comments »

Why Brokers Will Survive Health Care Reform’s MLR Provisions

Posted by Alan on October 22, 2010

Yesterday I wrote about the National Association of Insurance Commissioner’s decision not to exclude broker commissions from the calculations carriers will use to determine their medical loss ratio as required by the Patient Protection and Affordable Care Act. Some brokers have indicated, on this blog and elsewhere, that this result spells certain doom for brokers.

I respectfully disagree. And I had started to draft a post explaining why. The post was going to revisit an explanation I offered once of the math that will drive broker calculations. Then I was going to note that many carriers offering small group and individual coverage were already fairly close to meeting the PPACA’s medical loss ratio requirement. And finally I was going to highlight the expenses currently treated as “administrative” by carriers that will now be either excluded from the calculations (e.e., many taxes) or that will now be reclassified to the “claims” side of the calculation (e.g., quality improvement and disease management programs).

But then I read a comment to yesterday’s post submitted by Ann H. setting out her perspective on the impact of the NAIC’s decision on brokers. Knowing that not everyone visiting this blog reads the comments I wanted to give her statement the prominence it deserves. That this spares you from wading through my math calculations is an added benefit.

So here’s Ann’s comment. Other than correcting a spelling error or two, it’s presented as she wrote it.

I didn’t know about these facts, Alan, and thank-you for telling us. But even before I read this, I can tell you that I wasn’t overwhelmingly disappointed that broker commissions were not removed from the MLR.

I guess there are 2 reasons. First, I expected it, so I’ve already crossed the bridge of disappointment and even fear. On 3/23/2010 when President Obama signed the law, I realized that my commission would be squeezed, and my business would suffer in other ways including a reduction in the number of carriers, frustration of my clients, higher premiums that puts further pressure on my book of business and so forth. I guess I’ve already dealt with this emotionally and logically.

The second reason today’s news about broker commissions didn’t affect me much is because there are other factors involved. One of my carrier reps said this to me several months ago — he said, “Half of the commission rate on double the premium is still the same amount of income.” He also said, “half the commission rate on twice the clientele with half the work due to guaranteed issue is still the same income.” And he also told me that the insurance company he works for was planning to keep premiums and expenses at much the same rate as they had done before anyway. He said that once 2011 is over and the accounting is done, if they find that they must make rebates to customers, then they will rebate. But they aren’t going to freak out now.

I think, “don’t freak out yet” is a good idea. Another of my carriers told me that they aren’t going to make major changes in business practices until the election is over, and they’ve analyzed the result. And even then, they expect more modifications to the rules on the national and state level. They don’t want to make drastic changes now that affect their position in the market, their position with brokers, and their public relations. They said 90% of their business is driven by brokers, and they can’t afford to replace the workload brokers provide for that 90%. They would actually survive better by paying a rebate than by manning and maintaining workers to replace brokers, then watching their backside for loss of sales due to the deletion of sales brokers.

Cutting broker’s commissions is a balance walk. If one carrier cuts deeper than others, sales may severely diminish for that carrier. Carriers can’t afford to lose fresh input of new customers and be left with an aging risk pool!! I’m not saying broker commissions won’t suffer. They will. But to what extent they suffer is an important issue. And how long the commissions will be at the floor before economic realities make them rise is another issue. I remember when group commissions were cut from 10% level to the 4-6% they are now. It came at the same time as the HIPAA laws with Portability and Guaranteed Issue for groups. Premiums spiked, commission percentages decreased, but after the initial drastic dip it all equalized to be the same amount of income.

There are other balance walks insurers must make. If brokers go out of business, who will service the client? Some NAIC commissioners said they expect their consumer complaint departments to have triple the amount of work if brokers aren’t fielding questions and finding resolutions. That’s what the States think. How about insurers? What strain will there be on insurance company customer service departments if brokers leave the business? How will insurers pay for the administrative expense of those customer service departments when they must meet 80% MLR? Isn’t a larger customer service department just as expensive as broker commissions, and don’t they both affect the MLR? Another thing to think about is quality of service. If an insurer cannot compete based on underwriting, or creative benefit structures, or even premium outside a specified range controlled by the government, then competition on the basis of quality of service is paramount. The amount of money an insurer has to spend on it’s administration and customer service departments is squeezed by the MLR. Will our insurers’ service departments be manned in India or the Philippines? The need for brokers is actually larger now than ever. Maintaining Service Departments is a fixed expense of wages, benefits, office space, overhead and taxes. If insurers were able to replace us with in-house service departments they would have done it a long time ago, trust me. We are less expensive.

Granted, not every broker can survive the dip that will come until things equalize again. The dip may be drastic, especially in some markets. But if you can see past the temporary into the inevitable, you can see light. Some of the things in the PPACA are just not functionally possible. It’s inevitable that the functionally impossible will fail and a solution will rise.

My thanks to Ann H. for sharing her perspective and insight on this issue with readers of this blog.

Posted in Health Care Reform, Healthcare Reform, Insurance Agents, Patient Protection and Affordable Care Act, PPACA | Tagged: , | 26 Comments »

Commission Exemption Not in NAIC’s MLR Rules, But Issue is Still Open

Posted by Alan on October 21, 2010

The National Association of Insurance Commissioners approved rules defining how carriers will calculate their medical loss ratios as is required by the Patient Protection and Affordable Care Act. The NAIC’s proposal will now be considered by the Department of Health and Human Services which is expected to finish its review of the regulations in a few weeks. Which is a good thing considering the PPACA requires carrier to begin meeting the medical loss ratio targets established by the health care reform law (80 percent for individual and small group plans; 85 percent on coverage for groups of 100+) beginning January 1, 2011.

In approving the MLR regulations the NAIC rejected or tabled amendments put forward by insurers and brokers. One change some insurers sought was to allow carriers to calculate their medical loss ratios based on national business (the Commissioners are requiring the calculations to be based on a state-by-state spending). Another would change the “credibility adjustment” formula used in the calculation.  Apparently this would have made it easier for smaller carriers to meet the MLR target.

The amendment put forward by brokers to exclude commissions from medical loss ratio calculations was withdrawn and the issue was referred to a working group of the NAIC’s executive committee. While some interpret this as ending the issue, that is far from clear.

The National Association of Health Underwriters along with the National Association of Insurance and Financial Planners and the Independent Insurance Agents and Brokers of America were the advocates of the broker commission amendment. I attended a conference today at which NAHU’s CEO, Janet Trautwein spoke. I’ll do my best to summarize my understanding of the situation based on her talk bolstered with reporting by National Underwriter.

Apparently there were enough votes among Commissioners to pass the broker commission amendment. However, NAIC lawyers questioned the authority of the organization to promulgate such a rule and warned that it conflicted with other proposals submitted to HHS by the NAIC. This led to a concern that including the broker commission exemption would lead to HHS rejecting the NAIC rules altogether. At the very least, HHS was likely to strike the commission exemption.

To avoid this result  a compromise was brokered between HHS staff and supportive Insurance Commissioners. A joint NAIC executive committee/HHS working group will be created to address broker compensation and the medical loss ratio provisions of the health care reform law. The MLR amendment advocated by the agent associations will be the “starting point” for the working group’s deliberations. Aware of the need to resolve this issue quickly, the NAIC committed to convening the working group immediately (which, I assume, means in in a few weeks). The goal of the commissioners supporting this approach is to work with HHS to fashion a regulatory solution that ensures equitable compensation for brokers.

Ms. Trautwein noted the possibility that the working group approach could result in a better outcome for all parties (regulators, carriers and brokers) than if the amendment had been adopted by the NAIC. This would certainly be the case if exempting commissions was deemed, as the NAIC lawyers warned, to exceed the NAIC’s authority.

NAHU and its allies have certainly built a great deal of political support among Insurance Commissioners (both Democrats and Republicans) behind the need to preserve a role for professional brokers in the new health care reform system being created as a result of passage of the PPACA. They recognize the value brokers bring to the products they sell and, as importantly, service well beyond the initial purchase. They also recognize the heavy service load underfunded and ill-prepared state agencies would need to take on if producers are removed from the health insurance marketplace.

There are some, including commentators on this blog, who believe without the commission exemption brokers will be put out of business. I disagree and will explain why in a future post. What’s significant to note now is that the treatment of broker compensation under health care reform has yet to been finally resolved. And there are individuals of good faith from both parties seeking a workable solution. That doesn’t guarantee a positive result, but it certainly creates the possibility for one.

Posted in Health Care Reform, Healthcare Reform, Insurance Agents, Patient Protection and Affordable Care Act, PPACA | Tagged: , , , , , , , , , | 3 Comments »

Commissions: In or Out of MLR Calculation?

Posted by Alan on October 20, 2010

The National Association of Insurance Commissioners is meeting with the intent of finalizing rules surrounding the medical loss ration requirements contained in the Patient Protection and Affordable Care Act. The impact of their decision will be profound on consumers, employers, carriers and brokers. A final vote is scheduled for tomorrow (October 21st) by the full membership on the rules – and on amendments to those rules – which have been worked on for hundreds of hours by NAIC committees. Whatever emerges from the NAIC plenary session will be forwarded on to the Department of Health and Human Services. The Department may make amendments to the NAIC proposal, but The Hill has reported that HHS is reluctant to “override” the commissioners on NAIC medical loss ratio rules.

What this means is that a lot of issues surrounding the MLR provisions of the new health care reform law – provisions which take effect on January 1, 2011 – will come into clearer focus tomorrow. Again, HHS may still modify these rules, so these won’t be the final rules. And states are given some flexibility in applying the medical loss ratio regulations on carriers doing business within their boundaries, but there will be far greater clarity tomorrow than there is today.

Some of the issues being hashed out are esoteric (not to actuaries, but to the rest of us). But one issue that is of great concern to brokers is how commissions will be used in calculating a carrier’s MLR. As noted previously in this blog, the National Association of Health Underwriters and other agent organizations have been working hard to have broker commissions be removed from the medical loss ratio formula. The logic behind this is that carriers collect broker commissions as an administrative convenience to producers and their clients, passing 100% of these dollars along to independent third-parties. The carriers receive no benefit from this process, but the cost to brokers and policy holders, in the aggregate, is greatly reduced, lowering overall administrative costs.

Exempting this pass-through of commissions from the medical loss ratio calculations is not currently a part of the NAIC MLR regulations. However, I’ve been told that at least 10 Insurance Commissioners are co-sponsoring an amendment to create this pass-through exemption in the rules sent to Health and Human Services. And supporters believe they are closing in on the majority of the Commissioners needed to adopt this amendment.

Politico is reporting on the upcoming commission amendment, too. They note that “This could be a tough one for many commissioners who say that if agents/brokers go out of business – because their commissions would decrease – they’re going to get flooded with consumer inquiries and requests for help.”

Inclusion of the pass-through provision in the NAIC’s medical loss ratio rules would certainly decrease the pressure on carriers to dramatically reduce commissions. However, pressure on commissions will still continue. Tying broker commissions to a percentage of premium – premiums that increase based on medical cost inflation, not general inflation – is still likely to fall as carriers’ commission systems are refined to accommodate different calculations. And broker commissions will need to be disclosed to employers and consumers (carriers will need to separate broker fees from premium). In some states this is likely to result in downward pressure on commissions. And the guarantee issue provisions taking effect in 2014 will also tend to lead to lower commissions. On the positive side, the Insurance Commissioners’ recognition that brokers play an important role after the sale in counseling and advocating for their clients will tend to assure that brokers are compensated fairly.

Of course, all of this is moot unless the NAIC approves the amendment, HHS concurs with this provision and states don’t enact laws or regulations that run counter to it. We’re about to get some clarity. Certainty, however, is still to come.

Posted in Health Care Reform, Healthcare Reform, Insurance Agents, Patient Protection and Affordable Care Act, PPACA | Tagged: , , , , , , | 8 Comments »

Nominate Your Most Useful Health Care Reform Resources

Posted by Alan on October 11, 2010

Health care reform is a complicated business. It’s hard enough keeping track of all the explicit requirements and timelines let along understand the new laws nuances and subtleties. Brokers and their clients need tools and support to keep abreast, and to avoid running afoul, of all the law and regulations coming down the pike from Washington, DC and your local state capital.

One purpose of this blog is to provide a central place to find some of those resources while at the same time weeding out the ones that either fail to deliver on their promise or are so biased as to be less than useful. Links to useful sites and the like are scattered throughout various posts on this blog. However, to make them easier to find and use I’m planning to create a Resources page. The resources to be found on this site will be curated (meaning I’ll evaluate each of them) and categorized by type (e.g., timelines, educational tools, calculators) and topic (tax credits, exchanges, compliance).

While I come across a lot of useful information and tools, it’s a big Internet out there. So I’m asking for your help. Readers of this blog tend to be engaged and aware of health care reform and, I’m betting, about tools to help brokers and clients deal with the coming changes. So I’m asking you to nominate your favorite sites, blogs, tools, timelines and the like.

Nominating a resource is simple. Just “comment” on this posting with the name of a resource, a link to it and a sentence or three on why you think it’s helpful and worthwhile. The resources can come from any credible source: government agencies ( has plenty of information about the Patient Protection and Affordable Care Act – yes, it tends to take a rosy view of everything little thing about it, but it also provides links to actual regulations and does explain important aspects of the law in simple language); from non-profits (the Kaiser Family Foundation offers a short video explaining health care reform – to the  extent there’s a villain in the piece it’s the insurance carriers and there’s no mention of brokers, but it is helpful to anyone trying to offer a big picture explanation of what’s going on with health care reform, and why); or commercial (Anthem offers an easy-to-use tool that answers the question, “Should I grandfather my health plan or not? – and it’s devoid of explicit selling by Anthem other than the site branding). You’re even welcome to nominate other blogs, so long as their focus is on providing useful information and insight, not pushing a political agenda. Please indicate if the resource is for members or subscribers only. (Much of the terrific material NAHU offers is for members-only, but there’s still plenty of helpful information on their site accessible to all.

Please nominate only one resource per comment. The reason is that I’m also asking you to vote thumbs up or thumbs down on the usefulness and quality of the resources nominated by others. You can explain your vote by commenting on the comment, but what really matters is whether you consider the nominated resource to be useful and credible.

Again, the goal here is to provide in one place resources to brokers and their clients navigate the new health care reform law. The emphasize will be on material that educates and communicates what the law does, when it does it, and how to deal with it. They say there’s wisdom in crowds and I’m thinking the crowd who reads this blog is pretty wise. So we should be able to come up with a pretty good set of resources.

My hope is to get the page up before the end of the month. So please get your first nominees in by October 20th). Of course, I’ll be constantly updating the Resource page so please feel free to nominate any resource you come along when you come along it.

Thanks in advance for your help. Let the nominating begin: what resource would you recommend to fellow readers?

Please note, if you put more than one URL in your comment not only won’t others be able to vote for a partiulcar nominee, but WordPress will likely send your entire comment to their Spam folder. While I’ll be able to retrieve some, I won’t be able to catch them all, meaning none of your nominees will be noted. So please — one resource per comment.

Posted in Health Care Reform | 28 Comments »

Federal Judge Finds Individual Mandate Constitutional

Posted by Alan on October 7, 2010

Challenges to President Barack Obama’s health care reform legislation aren’t coming just from Republicans in Congress. Several law suits are challenging the constitutionality of the Patient Protection and Affordable Care Act, too. While various theories are being used to attack the legislation, most focus on the the individual mandate in the PPACA – a provision that requires all Americans to obtain health care coverage starting in 2014.

While the biggest case, brought by 20 states, is being heard in Florida, a Michigan Federal Court judge is the first to actually issue a decision on the merits of the new health care reform law. Judge George Steeh ruled against the plaintiffs, finding that the individual mandate did not exceed the federal government’s authority under the Constitution’s commerce clause. The plaintiffs in the case, who also claimed, among other complaints, that the penalty to be imposed under the law for failing to obtain health care coverage was an illegal tax, have vowed to appeal Judge Steeh’s ruling. Specifically, Judge Steeh denied the plaintiffs request for a preliminary injunction that would have stopped the reforms.

According to the Los Angeles Times, Judge Steeh cited the impact failing to be insured causes on the health care system as a whole. “Far from “inactivity,” by choosing to forgo insurance plaintiffs are making an economic decision to try to pay for health care services later, out of pocket, rather than now through the purchase of insurance, collectively shifting billions of dollars, $43 billion in 2008, onto other market participants….” He also noted that, in the context of a health care reform bill that requires carriers to accept all applicants regardless of their medical condition, an mandate on individuals to be insured would be undermine the nation’s health care system.

This argument, that forcing carriers to guarantee issue coverage without a balancing requirement for consumers to obtain coverage would lead to adverse selection leading to ever higher premiums, is frequently made by policy makers and others (including me) justifying an individual mandate. What’s different is that the judge defines the failure to obtain medical coverage as an economic action that, while locally made, impacts interstate commerce. “[P]laintiffs in this case are participants in the health care services market. They are not outside the market. While plaintiffs describe the Commerce Clause power as reaching economic activity, the government’s characterization of the Commerce Clause reaching economic decisions is more accurate.”

Judge Steeh’s decision is not binding on other courts, although it will no doubt be cited as precedent by the government in defending against the other law suits filed against the PPACA. Decisions in these cases will be coming relatively soon: a suit brought by the Virginia Attorney General is scheduled for a hearing on October 18th while a hearing on the suit in Florida is scheduled for December 16th.

Ultimately, the Supreme Court will no doubt determine the constitutionality of the Patient Protection and Affordable Care Act. Judge Steeh’s decision is simply the first of many court rulings to come.

Posted in Barack Obama, Health Care Reform, Healthcare Reform, Patient Protection and Affordable Care Act, PPACA | Tagged: , | 46 Comments »

Health Care Reform: Of Zombies and Absurdities

Posted by Alan on October 7, 2010

Republicans across the country are clamoring to “repeal and replace” one of President Barack Obama’s signature legislative accomplishments: the Patient Protection and Affordable Care Act. Besides the nifty alliteration, is there any substance to this promise? Can Republicans, even if they were to take control of both chambers of Congress fulfill this pledge? No.

Any bill seeking to repeal health care reform would be vetoed by President Obama. Overriding his veto would take a two-thirds majority in both the House and the Senate. Given that it’s hard to get a majority of either chamber to agree that the sun rises in the east (let alone that it sets in the west), this isn’t very likely. And as more provisions of the legislation are implemented, repealing the law becomes increasingly awkward. How many elected officials would vote to repeal the requirement that children up to age 26 may remain on their parent’s health insurance policy now that so many families have taken advantage of this part of reform? Repealing the PPACA would result in kids being subjected to pre-existing conditions again, tax credits vaporizing, coverage for those rejected by private carriers ending, and on and on. That’s a high political price for politicians to contemplate.

But there are other tactics available to a Congress (or even one chamber of Congress) opposed to President Obama’s health care reform plan. Henry Aaron, a Senior Fellow at the Brookings Institute, in an article published in the New England Journal of Medicine describes how Republicans could use Congress’ power over the federal government’s purse strings to eviscerate the health care reform legislation. The result would be what Mr. Aaron calls “zombie legislation, a program that lives on but works badly … lead(ing) to needless resentment and confusion, and mandates that are capriciously enforced.”

Mr. Aaron notes that the PPACA contains “64 specific authorizations to spend up to $105.6 billion and 51 general authorizations to spend ‘such sums as are necessary’ over the period between 2010 and 2019.” However, Congress must specifically appropriate these funds before they can be spent. A Republicans majority in either the House or the Senate (or even a Republican minority working in concert with like-minded Democrats) could withhold much of this funding. But they can do more. “They could bar the use of staff time for designing rules for implementation or for paying subsidies to support the purchase of insurance. They could even bar the DHHS from writing or issuing regulations or engaging in any other federal activity related to the creation of health insurance exchanges ….” Mr. Aaron writes.

Imagine the impact of such prohibitions on what is already a difficult law to implement (and to be fair, even the far less extensive proposals put forward by Republicans in the past couple of years would be harrowingly difficult to implement – we’re dealing with one-sixth of the nation’s economy here). The impact of zombie legislation would be in addition to the absurdity that already surrounds implementation of the PPACA, such as that involving enforcement of the health care reform law’s medical loss ratio provisions, scheduled to take effect January 1, 2011.

So we have Secretary Sebelius, one of health care reform’s staunchest advocates, coming to the aid of limited benefit plans that she would be expected to condemn as “phantom coverage” while forcing carriers offering more substantive plans to grope through fog of uncertainty – resulting in great inconvenience and possible expense to employers, insureds, brokers and the industry at large. There’s a certain Alice in Wonderland feel about the whole thing. Throw in the havoc Republicans are likely to cause as they strive to use health care reform as a stepping stone to the White House and Tim Burton will be feeling right at home.

Mr. Aaron, in his New England Journal of Medicine article sums up the situation. Concerning the zombie legislation that health care reform could become, he writes “Such an outcome would trouble ACA opponents: their goal is repeal. It would trouble ACA supporters: they want the law to work. But it should terrify everyone. The strategy of consciously undermining a law that has been enacted by Congress and signed by the president might conceivably be politically fruitful in the short term, but as a style of government it is a recipe for a dysfunctional and failed republic.”

What’s terrifying about this zombie tale is that serious problems still need to be addressed concerning America’s health care system. Although “Affordable Care” is part of the new health care reform’s official title, as I’ve noted frequently in the past, the health care reform legislation fails to address the underlying driver of skyrocketing health insurance premiums – the skyrocketing cost of medical care.

And some of the health care reforms Republicans are likely to push in the new Congress would only drive up insurance premiums without addressing medical spending (most dramatically, the GOP’s desire to require carriers to accept all applicants without imposing pre-existing condition exclusions, but eliminating the mandate that all Americans obtain health insurance coverage).

Given this situation, pessimism is a natural response. This results from the tendency to see current trends as continuing in a straight line. Fortunately, nature abhors straight lines nearly as much as it hates a vacuum. America has a history of overcoming the foolishness we, through our duly elected leaders, seem to bring down upon our ourselves. We’ll see a lot more absurdity in the months ahead concerning health care reform. We’ll see political battles that will be stunning in their demagoguery and mauling of the truth. We’ll see generally bad ideas emerge with awesome and frightening frequency. But we’ll also see the equal-and-opposite reaction these dynamics generate. And, I predict, we’ll see some meaningful and sensible changes made to the PPACA. As I’ve written before, in the end things will likely be worse than we hoped, but not as bad as we feared they would be.

Posted in Barack Obama, Health Care Reform, Healthcare Reform, Patient Protection and Affordable Care Act, Politics, PPACA | Tagged: , , , | 6 Comments »