Thursday, November 14, 2013

“If you like your health care plan…..”

And other not-quite true tales from the Affordable Care Act ….


The hits just keep on coming. Despite being promised by President Obama that no one would lose their health plan if they liked it and wanted to keep it, millions are, in fact, losing their health care plans. Insurance companies are cancelling policies as of December 31, 2013 across the country. According to a recent article on Forbes.com, Florida Blue announced termination of 300,000 policies, constituting about 80 percent of its individual policies in the state.  California’s Kaiser Permanente reported cancellation of 160,000 policies, about half of its individual policies in the state.  Independence Blue Cross in Philadelphia will be dropping 45% of its individual policies.  CareFirst Blue Cross Blue Shield will terminate some 73,000 policies in  Maryland.  Highmark in Pittsburgh cancels 20% of its individual policies.

According to expert estimates, some 16 million individual policies will be terminated nationwide. That’s more than 80% of the total 19 million individual policies in the entire country. 

So, what happened? Stick with me, this gets a bit muddy.

The Affordable Care Act contains a provision (in section 1251) to allow plans that were in effect on March 23, 2010 (the date the ACA became law) to continue (be grandfathered), as long as the plans did not "substantially" change any cost-sharing or benefit levels. When the regulations to implement that portion of the law were written by Health & Human Services (HHS), they were made very strict. So much so, that few plans would be able to retain grandfathered status. In the individual market, plans change things like co-pays, co-insurance, deductibles, etc., regularly. In the group market (insurance through employers) these things can often change as well. As the cost of health care goes up every year, employers have to find ways to continue to provide coverage they and their employees can afford, and insurance companies have to continually amend plans and sell new plans that provide coverage and still allow them to stay in business. The regulations put a very low threshold on how much these items could be increased and still allow the plan to retain grandfathered status. (The actual cost to provide medical care (not the premium) continually goes up. The ACA does nothing to control the actual cost of health care; it only seeks to spread the cost of health insurance over more people, thus presumably reducing premium costs.)

The Washington Post ran an article that illustrates this very well. Here’s a summary from that article, describing the allowable amount that plan co-pays can be increased and have the plan still meet the criteria to be grandfathered. The calculations are based on the medical care component of the Consumer Price Index, and the difference in that number from March 23, 2010 and the current figure (current as in whenever the calculation is done):
 

So here is what it would look like for various levels of copays. If your plan had a:

$0 copay, any increase would be capped at $5.90
$5 copay, increase capped at $5.90
$10 copay, increase capped at $5.90
$15 copay, increase capped at $5.90
$20 copay, increase capped at $6.60
$25 copay, increase capped at $8.25
$30 copay, increase capped at $9.90

This is just one example. If deductibles or co-insurance are changed by more than $5.00 + 15% of medical inflation, that change will cause grandfathered status to be lost.

Now, keep in mind, the only plans (individual or group) that are eligible for grandfathered status are those that were in effect on March 23, 2010. Many, many individual plans and many group plans out there now were not in effect on that date, and therefore are not even eligible for grandfathered status, regardless of whether the plan changes cost-sharing. People with those plans are forced to purchase plans with the more comprehensive coverage and often higher premiums, whether they want it or not. This is also why President Obama’s recent apology and vow to do something to correct the situation will be difficult, if not impossible.
 
Keep in mind, HHS published a notice in the Federal Register on June 17, 2010 estimating that 66% of small employer plans and 45% of large employer plans (accounting for 51% of all employer provided health insurance) would have to be terminated under the ACA’s requirements by the end of 2013.  Together with the required individual cancellations, that adds up to terminated health insurance for some 93 million Americans.

On Aug. 24, 2009, Rep. Tom Price (R-Ga.), a doctor, made this point: "On the stump, the president regularly tells Americans that ‘if you like your plan, you can keep your plan.’  But if you read the bill, that just isn’t so.  For starters, within five years, every healthcare plan will have to meet a new federal definition for coverage — one that your plan might not meet, even if you like it." This is another point that is not understood or talked about: within a relatively short time, the grandfather option will go away.

What the previous two paragraphs tell us is that the Obama administration knew full well, in 2010 or before, that many people would be forced out of the plans they liked – they would lose their plan. What this tells me is that either President Obama doesn’t truly understand his own law; his administration has not accurately or adequately informed him of the effects of his law; or there has been a deliberate attempt to mislead the public. I’m not really sure which of those possibilities is most likely; although for all concerned, I would hope it’s that he truly doesn’t understand the regulations that were written to implement his law. I’m guessing ignorance may be better than deception.

What about the part of that promise that said you could keep your doctors? That hasn’t exactly been true, either. Many insurance companies that write individual health insurance policies have either opted out of selling individual policies, or have severely restricted the number of such plans they will sell on the exchanges. As a result, the choices of doctors, hospitals, etc. are now more limited than before the law was passed. Also, it’s now coming out that hospitals and physicians alike are choosing not to participate in the insurance plans offered on the exchanges because of the reimbursement rate from those plans.

Aetna, a fortune 100 company with $34.2 billion in revenue, has pulled out of the government-run exchanges in three states, including the state of Connecticut, where it is based. Founded in Hartford, Conn., in 1850, Aetna withdrew its application to participate in that state as reported by the Hartford Courant. The company said it was withdrawing from there and in Georgia and Maryland because the limitations those state governments would impose on their rates would not allow them to make money.

Aetna is not alone. United Healthcare, Humana, Coventry and some of the Blues have dropped out of various state exchanges. Aetna will be backing out of the individual market in California all together. Some state exchanges have only one or two insurance plans participating. Not much choice, another promise that hasn’t come to fruition.

Because of the real fear that not enough young, healthy people will sign up for insurance and thus spread the risk, companies are concerned they will lose money paying claims for older, less healthy people. For 2014, the penalty under the ACA for an individual who decides not to purchase health insurance is $95.00 – that’s it – and it won’t be imposed until that person files his/her taxes in 2015 – assuming a tax return is actually filed. That’s another little glitch no one’s talking much about.
 

You may not be able to keep your health plan, your doctor, or your hospital.

**UPDATE** Today, the President announced that he would allow insurance companies to continue offering the previously cancelled health plans for another year. However, the insurance industry is saying this "fix" could be disastrous. If all these relatively healthy people stay with their individual plans and don’t purchase a plan on the exchange, that will top load the exchange plans with people who were previously uninsured (and therefore more likely to be heavy users of medical care) thus raising costs for everyone after that year’s reprieve. And this doesn’t even begin to address the practical difficulties of reversing course on these cancelled plans with only about a month before the end of the year.

[Interesting fact: The ACA requires group health insurance plans to pay into a fund to help with "rate stabilization" in the individual market. The reinsurance fee is a transitional fee to stabilize the individual market. The fee funds a reinsurance program for high cost claimants in non-grandfathered individual market plans, both on and off the Exchange. So, if your group health insurance premiums are increasing, this is part of the reason, in addition to the mandated benefits that now must be a part of those plans.]

In an earlier post, I wrote about the trouble both the federal (Healthcare.gov) exchange and several state exchanges were having with their websites. Kathleen Sebelius later promised in congressional testimony that the website would be fixed by the end of November. Well, apparently, those that are supposed to be fixing it appear to be backing off that promise, as well. No small wonder. The Obama administration's HealthCare.gov adviser Jeffrey Zeints said on November 8th, that the website is "a long way from where it needs to be."

Also of note is that there are reports of security issues on Healthcare.gov, endangering enrollees’ personal information. While these concerns aren’t exactly new, they are becoming more public and prevalent.

If these weren’t such sad and hugely expensive problems, all of this might actually be funny. Come to think of it, I can’t help but be amused at the daily reports of yet more gaffes, screw-ups, failings and broken promises. It’s become a comedy of errors that has reached the absurd.

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